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EPCOR POWER, L.P. $15.04 (Toronto symbol EP.UN; Shares outstanding: 53.9 million; Market cap: $810.7 million; SI Rating: Extra Risk) has interests in 25 power plants in Canada and the U.S. These generate a total of 1,400 megawatts. In the three months ended June 30, 2009, EPCOR’s revenue rose 14.8%, to $165.2 million from $143.9 million. Cash flow per unit rose 29.1%, to $0.71 from $0.55. The trust’s plants generated and sold more power, including output from the Morris cogeneration facility in Illinois, which EPCOR bought late last year for $72.2 million U.S. Despite the improved results, EPCOR was still paying out almost all of its cash flow to unitholders, so it cut its quarterly distribution by 30.2%, to $0.44 a unit from $0.63, with the June 2009 payment. At this rate, it will pay out roughly 75% of its cash flow. EPCOR believes it can sustain this rate regardless of whether it remains a trust or converts to a corporation in 2011, when Ottawa’s new income-trust tax takes effect. EPCOR now yields 11.2%....

Economic statistics are big news these days, but they have a weak link at best with the value of your investment portfolio. A surprisingly good economic statistic can make the stock market jump. But a bad surprise can come along and reverse that move the next day. In retrospect, it’s clear that economic turning points do have an impact on the market. But nobody can consistently predict these points. That’s also true of key economic factors like interest rates, oil and gold prices....

The price of natural gas has fallen to around $2.50 U.S. per thousand cubic feet, a seven-year low. The price decline has been driven by lower industry demand during the recession. As well, consumers have cut their air-conditioner use because of cooler-than-normal summer weather in central Canada and the northeastern U.S. Another major factor is a buildup in gas inventories, to the point that the North American industry is running out of storage. According to the U.S. Energy Information Administration (EIA), natural-gas inventories are at 3.204 trillion cubic feet. That’s 21.3% higher than a year ago....

With mortgage rates at historic lows, many investors, including some members of our Inner Circle service, are becoming more interested in Canadian real estate investing. A house is the biggest investment and consumer purchase most of us ever make. The house itself is the consumer purchase; the land underneath is the investment. Your house depreciates as surely as your car, but more slowly. Eventually, a house reaches the end of its economic life. But the land it sits on is as functional as ever. ...

When investors ask us about our conservative investing strategy, they often wonder when they should dump a weak stock from their portfolio and replace it with something new. Knowing when to sell is part of our conservative investing strategy that we cover in our new special report, Canadian Stock Market Basics: How to Trade Stocks and Make Good Investments in Canada. ...

Forecasts are now popping up regularly in the media predicting that the H1N1 virus (also known as “swine flu”) will flare up in North America when the flu season begins in just a few weeks. There is still a wide difference of opinion on the subject, and it’s far from certain that H1N1 will pose a significant threat. Nonetheless, health authorities around the world are mostly erring on the side of caution. In the United States, the Centers for Disease Control and Prevention (CDC) is working with federal and state agencies on an H1N1 vaccine-distribution effort that will include as many as 90,000 sites across the country. This massive H1N1 vaccination effort is benefitting McKesson Corp. (New York symbol MCK), one of the drug stocks we zero in on in the most recent issue of our Wall Street Stock Forecaster newsletter....

BROADRIDGE FINANCIAL SOLUTIONS INC. $20 (New York symbol BR; Aggressive Growth Portfolio, Finance sector; Shares outstanding: 139.3 million; Market cap: $2.8 billion; Price-to-sales ratio: 1.3; WSSF Rating: Extra Risk) provides communication, processing and other back-office services to the investment industry. By outsourcing these activities to Broadridge, its clients can focus on their main businesses. Its clients include 250 banks, 500 mutual-fund families and over 5,000 publicly listed companies. The stock began trading on April 2, 2007, after former parent Automatic Data Processing Inc. (Nasdaq symbol ADP) distributed Broadridge shares to its own shareholders as a special dividend. Since it became a public company, Broadridge’s annual revenue has hovered around $2.15 billion. Earnings fell from $1.42 a share (or a total of $197.1 million) in 2007 to $1.36 a share (or $192.2 million) in 2008. Broadridge’s fiscal year ends on June 30. In 2009, its earnings rose to $1.58 a share (or $223.3 million). If you disregard unusual items, including a gain on the early retirement of debt and a tax credit that lowered its effective income-tax rate, Broadridge’s earnings per share rose 6.3%, to $1.51 from $1.42. The improved earnings came despite difficult conditions in the financial sector....

HARTE-HANKS INC. $14 (New York symbol HHS; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 63.6 million; Market cap: $890.4 million; Price-to-sales ratio: 0.9; WSSF Rating: Average) gets roughly two-thirds of its revenue by selling direct-mail and other marketing services to clients in a wide variety of industries. These help them attract new customers, and sell more goods and services to existing ones. The remaining third of its revenue comes from publishing free “shopper” newspapers in Florida and California. These papers rely solely on advertising. Both of these are cyclical businesses, and they have suffered during the recession as advertisers look to conserve cash. In response, Harte-Hanks has consolidated printing plants and closed call centres. These moves helped cut Harte-Hanks’s operating expenses by $49.3 million in the three months ended June 30, 2009. Despite the lower costs, overall earnings in the quarter still fell 28.3%, to $13.1 million, or $0.20 a share, from $18.2 million, or $0.29 a share, a year earlier. Revenue fell 21.5%, to $215.7 million from $274.8 million....

DIEBOLD INC. $30 (New York symbol DBD; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 66.3 million; Market cap: $2 billion; Price-to-sales ratio: 0.6; WSSF Rating: Average) is one of the world’s leading makers of automated-teller machines (ATMs). The company also makes safes, vaults, building-security systems and electronic-voting machines. Banks have been spending less on new ATMs because of the financial crisis. As well, the recession has prompted many retailers to close stores. This has hurt demand for Diebold’s building-security products and services. The company has aggressively cut its costs in response, including moving most of its manufacturing to China and Hungary. It also sold its manufacturing operations in Argentina. In the three months ended June 30, 2009, Diebold earned $30.4 million, or $0.46 a share. That’s up 11.8% from $27.2 million, or $0.41 a share, a year earlier. If you exclude unusual costs, most of which were in the year-earlier period, earnings per share would have fallen 29.0%, to $0.49 from $0.69. Sales fell 8.9%, to $700.5 million from $768.7 million....

CINTAS CORP. $28 (Nasdaq symbol CTAS; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 152.8 million; Market cap: $4.3 billion; Price-to-sales ratio: 1.1; WSSF Rating: Average) provides a variety of products and services to over 800,000 businesses, mainly in North America. These include selling and renting uniforms, entrance mats, fire extinguishers, first-aid kits and cleaning products. The company also shreds documents. Many of its clients cancelled these services to cut costs during the recession. In response, Cintas closed some of its uniform-making plants in 2008. This has already saved it $60 million. Moreover, the company plans to lay off 1,200 of its 31,000 employees over the next year. It has set aside $59.1 million for severance and other costs. In the fiscal year ended May 31, 2009, Cintas earned $226.4 million, or $1.48 a share. If you exclude restructuring costs, it would have earned $1.83 a share. In the prior year, the company earned $335.4 million, or $2.15 a share. Revenue fell 4.1%, to $3.8 billion from $3.9 billion, mostly due to lower demand for uniforms and cleaning services. Cintas sells scrap paper from its shredding operations, and lower paper prices have also hurt its revenue....

TERADATA CORP. $27 (New York symbol TDC; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 171.8 million; Market cap: $4.6 billion; Price-to-sales ratio: 2.6; WSSF Rating: Average) makes computers and software that capture and store large amounts of a business’s data, including its sales and inventory. Teradata then analyzes this information and identifies buying habits and trends. This helps its clients make better decisions. In the three months ended June 30, 2009, Teradata’s earnings dropped 10.1%, to $62 million from $69 million a year earlier. Earnings per share fell 5.3%, to $0.36 from $0.38, on fewer outstanding shares. However, Teradata is selling more high-margin services. At the same time, it is cutting overhead and travel expenses. As a result, its gross margin (gross profits as a percentage of revenue) rose to 55.3% from 54.7%. Revenue fell 7.5%, to $421 million from $455 million. Teradata gets about half of its revenue from its international operations, and the higher U.S. dollar hurt the value of this contribution during the quarter....

XEROX CORP. $8.72 (New York symbol XRX; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 869.1 million; Market cap: $7.6 billion; Price-to-sales ratio: 0.5; WSSF Rating: Average) makes copiers, laser printers and other high-end publishing equipment. The company spends about 5% of its revenue on research. Over the past few years, this has let it develop new colour printers that have helped its customers cut their paper use. It has also produced other innovations, such as its proprietary solid-ink technology, which is less expensive on a per-page basis than traditional ink cartridges. The recession weighed on Xerox’s revenue and earnings in the latest quarter. In the three months ended June 30, 2009, Xerox earned $140 million, or $0.16 a share. That’s 34.9% less than the $215 million, or $0.24 a share, it earned a year earlier. Revenue fell 17.7%, to $3.7 billion from $4.5 billion....

ALCOA INC. $12 (New York symbol AA; Conservative Growth Portfolio, Resources sector; Shares outstanding: 974.4 million; Market cap: $11.7 billion; Price-to-sales ratio: 0.6; WSSF Rating: Average) is one of the world’s largest aluminum producers. Its customers are mainly in the aerospace, automotive and construction industries, all of which have struggled lately. Aluminum prices fell 49% in the second quarter of 2009 from a year earlier, but are 9% higher than they were in the first quarter. In response to the lower prices, The company will lay off 16% of its 87,000 employees by the end of this year. This should save it $2.4 billion a year. As well, Alcoa cut its quarterly dividend to $0.03 a share from $0.17. It now yields 1.0%. This will save an additional $430 million a year. Alcoa lost $256 million, or $0.26 a share, in the second quarter of 2009, excluding severance costs. A year earlier, it earned $553 million, or $0.67 a share. Revenue fell 41.4%, to $4.2 billion from $7.2 billion....

BHP BILLITON LTD. ADRs $63 (New York symbol BHP; Conservative Growth Portfolio, Resources sector; ADRs outstanding: 2.8 billion; Market cap: $176.4 billion; Price-to-sales ratio: 3.5; WSSF Rating: Average) is the world’s largest mining company, with major operations in Australia, South Africa, Chile and the U.K. It produces iron ore, coal, oil, aluminum, manganese, diamonds and titanium. In its latest fiscal year, which ended June 30, 2009, BHP’s revenue fell 15.6%, to $50.2 billion from $59.5 billion a year earlier. Lower resource prices were the main reason for the drop. Earnings before unusual items fell 30.2%, to $10.7 billion from $15.4 billion. Earnings per ADR fell 29.9%, to $3.85 from $5.50. (Each American Depositary Receipt represents two BHP common shares.) The stock has jumped by 70% since we first recommended it at $37 in our March 2009 issue. The gain was partly caused by BHP’s new agreement to merge its iron-ore mining operations in Western Australia with those of Rio Tinto Ltd. (New York symbol RTP) to form a new 50/50 joint venture. The deal should close in 2010, and save BHP $5 billion a year....

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But that’s just the beginning. Our glossary also lets you build your stock market education by instantly cross-referencing these definitions with our latest daily updates related to the term you’ve searched.

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TFSAs let you earn investment income — including interest, dividends and capital gains — tax free. You could only invest $5,000 this year to start your TFSA. However, you gain an additional $5,000 of contribution room (indexed to inflation and rounded to the nearest $500 on a yearly basis) every year, plus you get to carry forward unused contribution room from previous years. (So in 2010 you’ll have $10,000 of contribution room, $15,000 in 2011, and so on.) ...

Japan is heading into an election on August 30. Polls show the Democratic Party of Japan stands a good chance of defeating Prime Minister Taro Aso’s Liberal Democratic Party in the Japanese parliament’s lower house.

To spur economic activity, the Democratic Party of Japan plans to push for more aggressive stimulus spending, such as allowances for families with children, free public high-school education and cuts to the gasoline tax.

Government stimulus spending has already played a big role in the country’s recent turnaround. In the latest quarter, ended June 30, 2009, Japan’s economy posted an annualized growth rate of 3.7%. The turnaround comes after four quarters of steep contraction, and is one reason why investors are wondering if Japan is now a good place for offshore investing.

Under Prime Minister Aso, Japan’s government is spending 25 trillion yen ($284.6 billion Canadian) to help the economy grow. As in many other developed countries, this is taking the form of infrastructure spending, direct handouts to consumers and incentives for environmentally friendly products.

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Lowering the costs of investing has an immediate, obvious benefit: it leaves you with more money. But some cost-cutting investment techniques can wind up costing you money in the long run. For instance, participating in dividend reinvestment plans, or DRIPs, is a good idea if you only use it to cut commission costs on stocks you would have bought anyway. ...

Aggressive investors need to be more skeptical and discriminating than conservative investors, because they take on great risk. Conservative investors mainly buy well-established companies with a history of earnings and possibly dividends, and a secure hold on a growing, or at least stable, clientele. When an investment like that runs into problems, its stock price can fall — sometimes drastically. But it will usually survive. It can then go on to prosper all over again when good times return. When something goes wrong with an aggressive investing stock pick, there is far greater risk of serious, if not total, loss....

When you join my Inner Circle service, you get to ask me your own personal investment questions, plus you get to see what other Inner Circle members have asked. So you can see how the service works, and get a sense of how it might help you make good investments, I’d like to share just a couple of recent member questions with you. I hope you enjoy and profit from them. Q: A friend of mine recently purchased a “Trading Robot” to help him make good investments. He is ecstatic because the robot can trade 24 hours a day with inputted instructions respecting trading. He is required to place his investment funds with a brokerage in Dubai, although he says he will set up a segregated account in the U.K. What is your opinion/experience with “Trading Robots”? Many thanks. A: Foreign exchange (“forex”) trading robots automatically place trades on your behalf using a complex formula....

An investor recently asked us a question that touches on several stock market investing concepts that we cover in our Canadian Wealth Advisor newsletter. He said, “Due to a corporate reorganization, I now have the option of cashing in $279,000 from insurance-company mutual funds, then transferring the money into my brokerage RRSP account. I prefer to invest the money directly in stocks you recommend, rather than hold mutual funds from my insurance company. However, the insurance company tells me that I have to cash in the funds first, then wait at least six weeks for the money to turn up in my brokerage RRSP account. I’m concerned that the market will turn up while the money is in transit and I’ll wind up missing out. What should I do?”...

Perhaps the most fundamental piece of investment advice you will ever receive is to make sure you carefully read a contract and get clarification of anything you don’t understand before you sign. Most investors are familiar with this investment advice, of course, but it’s important to keep in mind, especially when doing things like opening an investment account, or transferring investments from one brokerage to another. It’s something we take very seriously when we manage the portfolios of clients of our Successful Investor Wealth Management service. When we fill out account transfer forms, we make sure that each form is checked and double-checked by two different people in our office, to avoid costly mistakes....

We recently read the Yahoo news story of Ddalgi (Korean for “Strawberry”), a five-year-old parrot from Papua, New Guinea, who competed with 10 human investors in a stock-picking contest in South Korea. Strawberry’s stock market picks reportedly posted a 13.7% return. While not good enough for first, the result put her in a respectable third place. Her human competitors, on the other hand, posted an average loss of 4.6%. (The story reminded me of a Globe and Mail stock-picking contest in which I was pitted against eight other human competitors and a plastic Santa. More on that in a moment...) Stories like these are not uncommon, and are not limited to stock-picking contests. You may have heard of Maggie the Monkey, who makes yearly hockey playoff picks that routinely beat those of human analysts....

It pays to be skeptical of growth stocks that rely too heavily on acquisitions. That’s because the buyer of something rarely knows as much about it as the seller. So it follows that if a company makes enough acquisitions, it might eventually buy something that has hidden problems. At some point, those problems will come out into the open and hurt the buyer’s earnings. Acquisitions, particularly big ones, can also push up debt, which leaves the buyer vulnerable to failure if it can’t meet the payments. They can also load the buyer’s balance sheet with goodwill, an intangible asset whose value can drop overnight if it turns out that the company made a bad acquisition. In that case the company has to write off all or part of the acquisition’s cost against current earnings. This can wipe out a year’s earnings for the growth stock and devastate its share price.

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Opening a brokerage account is often one of the first steps beginning investors take when they start investing in the stock market. You’ll first have to choose whether a full-service or discount broker is right for you. (This is one of the questions we help you answer in our new special report, “Canadian Stock Market Basics: How to Trade Stocks and Make Good Investments in Canada.”) If you choose to use a full-service broker for investing in the stock market, you’ll have to fill out an application form to set up your account. When you do, we think you should pay special attention to two sections: “risk level” and “investment objectives.” (You don’t need to fill these out with a discount broker, but the answers are well worth thinking about nonetheless.)...