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PENN WEST ENERGY TRUST $14.88 (Toronto symbol PWT.UN; Units outstanding: 414.2 million; Market cap: $6.2 billion; SI Rating: Speculative) is the largest oil and gas trust in North America. In the first three months of 2009, lower oil and gas prices pushed down Penn West’s revenue by 47.7%, to $625 million from $1.2 billion. Cash flow per unit fell 50.6%, to $0.87 from $1.76. The trust’s $4.1-billion long-term debt is 66% of its market cap, but just 3.1 times its annual cash flow. Penn West has average daily production of 180,096 barrels of oil equivalent (weighted 41% to natural gas and 59% to oil). The units yield 11.8%. Penn West pays out around 60% of its cash flow as distributions. It trades at 4.1 times its estimated 2009 cash flow of $3.60 per unit....

ISHARES CANADIAN SHORT BOND INDEX FUND $29.34 (CWA Rating: Income) (Toronto symbol XSB; buy or sell through a broker) mirrors the performance of the DEX Short-Term Bond Index. This index consists of a wide range of investment-grade federal, provincial, municipal and corporate bonds with between one- and five-year terms to maturity. The iShares Canadian Short Bond Index Fund currently holds 152 bonds with an average term to maturity of 2.9 years. Top issuers include the Government of Canada, Canada Housing Trust, Bank of Nova Scotia, the Province of Ontario and the Province of Quebec. The bonds in the index are 68.4% government and 31.6% corporate....

ISHARES CANADIAN BOND INDEX FUND $29.23 (CWA Rating: Income) (Toronto symbol XBB; buy or sell through a broker) mirrors the performance of the DEX Universe Bond Index. This index consists of a wide range of investment-grade Canadian government and corporate bonds with terms to maturity of more than one year. The 221 bonds in the fund’s portfolio have an average term to maturity of 8.7 years. The bonds in the index are 71.2% government and 28.8% corporate. The fund sticks with high-quality government bonds from issuers such as Canada Housing Trust, Government of Canada and Province of Ontario, plus high-quality corporate bonds from issuers such as Bank of Montreal, TransCanada Pipelines, Bank of Nova Scotia, Great-West Lifeco and Bell Canada....

JAPAN EQUITY FUND $4.79 (New York symbol JEQ; CWA Rating: Aggressive) mostly invests in large-capitalization stocks on the Tokyo Stock Exchange. The fund’s top holdings include: Toyota Motor, Mitsubishi UFJ Financial Group, Honda Motor, Sony Corp., Sumitomo Corp....

JAPAN SMALLER CAP FUND $6.95 (New York symbol JOF; CWA Rating: Aggressive) mainly invests in less-widely followed Japanese over-the-counter stocks. The fund’s top holdings are: The Chiba Bank, Hitachi High-Technologies Corp., Moshi Moshi Hotline, Inc., Daibiru Corp., Fuyo General Lease Co. and Taiyo Yuden Co. The fund sells for a 13% discount to the value of its assets. Japan Smaller Cap Fund is a buy....

IVY GROWTH AND INCOME FUND $17.86 (CWA Rating: Conservative) (Mackenzie Financial Corp., 150 Bloor Street West, Toronto, Ontario M5S 3B5. 1-800-387-0780; Web site: www.mackenziefinancial.com. Load fund — available from brokers) is a balanced fund. As such, it holds a mix of stocks, bonds and cash. Ivy Growth and Income Fund has returned 2.9% annually for the 10 years ended April 30, 2009. Over the last year, the fund lost 16.6%. Its MER is 2.08%. The fund’s top stock holdings are: Thomson Reuters Corp., Shoppers Drug Mart, Imperial Oil, Tim Hortons, Bank of Nova Scotia, Becton Dickinson, Colgate-Palmolive, McDonald’s Corporation, Nestle SA and Reckitt Benckiser Group plc. The $1.8-billion Ivy Growth and Income Fund holds 25% of its assets in bonds. In Canada, interest rates on bonds are between 2% and 4% annually. That’s the total return that a bond can provide from today until the day it matures. However, bonds leave investors at the mercy of inflation, which shrinks the purchasing power of all fixed-return investments. In fact, an upsurge in inflation could wipe out all returns on bonds, as well as some of their principal....

IVY FOREIGN EQUITY FUND $25.26 (CWA Rating: Conservative) gained 2.1% over the past 10 years, which was better than 3.1% loss posted by the Morgan Stanley benchmark international index. Over the last year, Ivy Foreign Equity Fund lost 10.7%. The fund invests in companies based outside of Canada, but cuts its risk by avoiding direct investment in emerging markets. The $1.9-billion fund holds 52.8% of its assets in the U.S., 10.4% in France, 10.1% in Switzerland, 8.9% in the U.K., 3.2% in Sweden and 3.0% in Denmark. It holds 11% of its assets in cash. Ivy Foreign Equity is one of our top foreign-fund recommendations. Still, we think non-U.S. international funds should make up no more than 10% of a conservative investor’s portfolio....

IVY EUROPEAN FUND $11.87 (CWA Rating: Aggressive) holds mostly good-quality stocks. The fund has outperformed the longer-term benchmark Morgan Stanley index. Even so, we don’t see any reason to hold a mutual fund that focuses on Europe. If you want European exposure, consider the Ivy Foreign Equity Fund (see above), or the closed-end EUROPEAN EQUITY FUND $5.59. The European Equity Fund sells for a 16% discount on the current value of its assets. The fund is a buy. Ivy European Fund is a sell....

IVY CANADIAN FUND $20.80 (CWA Rating: Conservative) invests in high-quality, large-capitalization stocks. The $1.8-billion fund’s top holdings include: Thomson Reuters, Shoppers Drug Mart, Imperial Oil, Tim Hortons, Becton Dickinson & Co., McDonald’s, Colgate-Palmolive, Nestle SA, Bank of Nova Scotia and Reckitt Benckiser Group plc. Ivy Canadian’s breakdown by industry includes: consumer staples, 35.4%; consumer discretionary, 18.9%; energy, 9.2%; financials, 8.6%; health care, 6.2%; and industrials, 6.2%....

IVY ENTERPRISE FUND $3.73 invests in small-and medium-sized companies. The $108.5-million fund’s MER is 2.39%. The fund’s overall choice of stocks doesn’t inspire our confidence. Its top holdings are: Richie Brothers Auctioneers, National Instruments, CH Robinson Worldwide, Idexx Labs, Resources Connection, Astral Media, Daktronics, Henry Schein and Meridian Bioscience. The fund has lost 8.6% over the last year. We think investors can do better by buying some of the other small-cap funds we recommend in Canadian Wealth Advisor....

Some investment observations are so basic and indisputable that in my opinion they deserve to be referred to as “laws”. One good example is what I call “McKeough’s Law on New Issue Timing,” which is this: New issues come to market when it’s a good time for the company and/or its insiders to sell, but that’s not necessarily a good time for you to buy. We hardly ever recommend buying new issues when they are first sold to the public. For that matter, we generally stay away from new issues for months, if not years, after they first come to market. As a group, new issues underperform the market over long periods. In addition, their results are far more variable than those of well-established stocks, and they expose you to greater risk of major loss....

Buying Canadian penny stocks can pay off extremely well when it succeeds. But the odds against business success are high. That’s because Canadian penny stocks are usually involved in riskier ventures, such as finding mineral deposits that can be mined at a profit, commercializing unproven technologies or launching new software. In addition, it’s much easier to launch and promote a stock than it is to start a successful business. So Canadian penny stocks attract more than their share of unscrupulous operators and stock promoters. ...

Aggressive investing stock picks can give you bigger gains than conservative selections. But they can also give you bigger losses. Aggressive stocks are only suitable for investors who can accept substantial risk. You can be wrong on any of your stock picks, of course. But when you’re wrong on a speculative stock, losses are likely to be larger than with a well-established company. Here are three key ways to cut risk in your aggressive stock picks: ...

The Successful Investor value investing approach follows the basic model set by the old-fashioned Graham/Dodd approach. Basically, it tries to identify well-financed companies that are well-established in their businesses and have a history of earnings and dividends. They are likely to survive any economic setback that comes along, and thrive anew when prosperity returns, as it inevitably does.

When we recommend a stock as a buy, we first look to see if it meets these value-investing criteria. And a key component of our value-investing system is our ratings system, which identifies stocks with positive prospects and lower risk.

We have six Successful Investor ratings. The top rating is Highest Quality; next is Above Average; next is Average; below that, Extra Risk; below that, Speculative; and, at the bottom of the scale, our riskiest, lowest-quality rating of Start-Up.

We base our Successful Investor ratings on a system we’ve developed over the years. We use it to assign “quality points” based on nine key factors that successful investors use in value investing to determine a company’s ability to survive a business setback and go on to greater success when conditions improve.

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Wind power stocks include companies that make components for wind turbines and those that use wind turbines to generate power.

Although publicly traded wind companies are considered green stocks, wind power does draw some objections from environmental groups. It also faces some challenging technical problems.

One of the key problems with wind power is that varying wind speeds cause its electricity output to fluctuate. In many areas, the wind is stronger in the daytime, when demand is lower, and dies down in the evening, when consumers use more appliances. Also, electrical power can’t be stored efficiently, so to make economic sense, it must be used when it is produced. As a result, it can’t supply all electricity needs, and utilities must maintain back-up power capacity or costly storage that is equal to their reliance on wind power.

One way for wind power stocks to overcome some of these problems is to have a large number of wind turbines operating at the same time. But this raises another problem: although the space between the wind turbines can be used for agriculture, a wind farm dominates the landscape, making it unsuitable for tourist areas or nature reserves.

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MOLSON COORS BREWING CO. $44 (New York symbol TAP; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 184 million; Market cap: $8.1 billion; Price-to-sales ratio: 2.1; WSSF Rating: Average) is the world’s fifth-largest brewer by volume. Its major brands include Coors Light, Molson Canadian and Carling. Molson Coors was formed in February 2005, when Canadian brewer Molson Inc. merged with U.S.-based Adolph Coors Co. The merger let Molson Coors close plants and combine distribution networks in the face of growing competition. Canada is Molson Coors’largest market, accounting for 40% of its 2008 sales and 57% of its gross profit. The U.S. (32% of sales and 33% of profit) was its second largest, followed by the U.K. (28% of sales and 10% of profit). It exports its beers to other markets, such as Asia and Latin America, or licenses them to local brewers....

TEXAS INSTRUMENTS INC. $19 (New York symbol TXN; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 1.3 billion; Market cap: $24.7 billion; Price-to-sales ratio: 2.1; WSSF Rating: Average) makes chips for a wide variety of electronic devices, including cellphones, DVD players and digital cameras. It also makes handheld calculators. The company has over 80,000 customers, but cellphone maker Nokia Corp. (New York symbol NOK) accounted for 18% of its 2008 sales. Texas Instruments earned $17 million, or $0.01 a share, in the three months ended March 31, 2009. In the year-earlier quarter, it earned $662 million, or $0.49 a share. Sales fell 36.2%, to $2.1 billion from $3.3 billion. The company spends around 18% of its revenue on research. In response to slowing sales, Texas Instruments has cut 3,400 jobs (or 12% of its workforce). Severance and other payments will cost it $400 million (including $105 million in the latest quarter), but the layoffs should lower its annual expenses by $700 million when it completes these cuts later this year....

NVIDIA CORP. $10 (Nasdaq symbol NVDA; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 546.2 million; Market cap: $5.5 billion; Price-to-sales ratio: 2.0; WSSF Rating: Average) designs 3D-capable chips for computers, video-game consoles and other devices. The company outsources most of its production to chipmakers in Asia. The recession has hurt new-computer sales. In turn, computer makers are ordering fewer graphics chips from Nvidia. Computer makers are also switching to cheaper chips, particularly those that work well with “netbook” computers. Netbooks are small, inexpensive laptop computers whose processors are less powerful than those of traditional laptops. Because of their lower prices and portability, they are currently selling faster than desktops and laptops....

VERIGY LTD. $12 (Nasdaq symbol VRGY, Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 58.2 million; Market cap: $698.4 million; Price-to-sales ratio: 1.5; WSSF Rating: Extra Risk) designs and makes test systems that are used in the production of computer chips. Verigy’s products help chipmakers cut down on errors and improve the reliability of their products. The company has installed more than 4,500 of its systems worldwide. Aside from test systems, Verigy sells consulting and support services. These include start-up assistance, and system calibration and repair. These account for around 45% of Verigy’s revenue, and help lower the company’s reliance on sales of new systems, which have been slowed by the recession. Verigy lost $25 million, or $0.44 a share, in its second quarter, which ended April 30, 2009. Still, that was a lot better than analysts’ predictions of a loss of $0.65 a share. In the year-earlier quarter, Verigy earned $13 million, or $0.22 a share. These figures exclude non-recurring items, particularly costs related to an 18% cut to its workforce in 2008. The layoffs should lower Verigy’s annual expenses by $60 million. The company expects to complete the plan by the end of this year. Revenue dropped 56.2%, to $71 million from $162 million....

AMEREN CORP. $23 (New York symbol AEE; Income Portfolio, Utilities sector; Shares outstanding: 213.6 million; Market cap: $4.9 billion; Price-to-sales ratio: 0.6; WSSF Rating: Average) provides electricity and natural gas to 3.4 million customers in Illinois and Missouri. Ameren has faced a number of challenges recently. The recession has driven down electricity demand, and a warmer-than-usual winter hurt natural-gas sales. As well, a severe ice storm in January forced Ameren’s biggest power customer, an aluminum smelter in Missouri, to scale back its operations. As a result, Ameren’s earnings in the first quarter of 2009 fell 14.9%, to $114 million, or $0.54 a share. The company earned $134 million, or $0.64 a share, a year earlier. These figures exclude one-time items, including losses of $0.14 a share on futures contracts that Ameren uses to lock in its fuel costs. Revenue fell 7.9%, to $1.9 billion from $2.1 billion....

ALLIANT ENERGY CORP. $23 (New York symbol LNT; Income Portfolio, Utilities sector; Shares outstanding: 110.6 million; Market cap: $2.5 billion; Price-to-sales ratio: 0.7; WSSF Rating: Average) provides electricity and natural gas to 1.4 million customers in Wisconsin, Iowa, Minnesota and Illinois. Like Ameren, the recession and warmer-than-usual winter weather hurt Alliant’s first-quarter earnings. In the three months ended March 31, 2009, earnings rose 6.6% to $72.6 million, or $0.66 a share, from $68.1 million, or $0.62 a share, a year earlier. However, if you disregard a one-time income-tax gain, the company’s earnings fell to $0.30 a share. Revenue fell 4.2%, to $949.9 million from $992 million. Revenue at its regulated power plants rose 7%, but that was more than offset by a 14% drop in gas revenue. In light of the weak economy, Alliant will probably wait until next year before it asks power regulators for permission to raise rates. Meanwhile, it will look for ways to lower its costs. For instance, in March the company decided to cancel a new coal-fired power plant in Iowa. This should save it $1.2 billion over the next three years. Cancelling this plant also eliminates the need for Alliant to issue new shares, which could dilute the holdings of its existing shareholders....

A few years ago, many investors valued drug stocks the way they value the top software makers, bidding them up to 30 or more times earnings. However, drug stocks are riskier than investors generally realize. Because of that, while drug stocks can show fantastic profits, it might be more appropriate to value drug makers the way you value companies that are trying to bring new mineral discoveries into mines: at 10 times earnings or less. Drug buyers have no brand loyalty; when a better drug comes along, use of the old standby collapses overnight. Drug companies must invest large sums to bring new drugs to market, and there is great risk that their drugs will fail to clear all the necessary hurdles. If a drug does fail, it can leave the developer with a return of zero....

We’ve got four key Successful Investor investing for beginners tips that will help you profit from stock investing with less risk. No matter how widely or narrowly you cast your information net, some of your investments will disappoint you. But that won’t matter if you apply these three tips. That’s because your near-inevitable gains will overwhelm your all-but-unavoidable losses.
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We advise against a so-called “sector rotation” approach to investing; this is when you try to hop from sector to sector. We also advise against practicing a top-down sector rotation style; underweighting or overweighting sectors of the stock market depending on a forecast of the stage of the economic cycle, or other factors.

Few sector rotation strategies succeed over long periods, because they need to guess right twice. In other words, they have to pick the top sectors, and they need to pick the stocks to rise within those sectors. Consistently succeeding at both is extremely difficult.

There are many theories about which sectors will outperform at any given stage of the economic cycle. But trying to pick winning sectors — and staying out of other sectors — seldom works over long periods. Practitioners of sector rotation often wind up with heavy holdings in the worst-performing sectors. This can be devastating to your portfolio, even if you confine your investments to well-established companies.

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Rather than using sector rotation to try to beat the market, you should pick a good selection of stocks right from the outset. After you’ve decided what part of your savings to put in stocks, remember to spread it out across the five main economic sectors. This way, you avoid overloading yourself with stocks that are about to slump simply because of industry conditions or changes in investor opinion.

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Exchange Traded Funds, or ETFs, don’t load you up with heavy management fees, nor do they tie you down with heavy redemption charges if you decide to get out before six years have passed. Instead, they give you a lower-cost and more flexible and convenient alternative to mutual funds.

The problem is that ETFs are just as helpful for facilitating smart moves as they are for dumb ones. And there are all sorts of dumb moves that ETFs can facilitate.

ETFs are set up to mirror the performance of a stock market index or sub-index. They hold a more-or-less fixed selection of securities that are chosen to represent the holdings that go into the calculation of the index or sub-index.

This way, if you get an urge to invest in oil stocks, or gold stocks, or Swedish stocks, or wind-power stocks, or any of hundreds of other stock groups, you can act on that urge without doing any messy and time-consuming research on individual stocks.

In fact, since ETFs also trade on stock exchanges, you can buy or sell them any time the exchange is open. With conventional mutual funds, you can only buy or sell at the end of the day, at a price that reflects the value of the fund’s holdings at the close of trading.

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