Search

Gold stocks look attractive to many investors in a time of global turmoil in financial markets and stock markets. But our view all along has been that gold stocks are rarely if ever an attractive place to invest, compared to other resource-sector investments like oils and other mines, and there is no compelling reason to put up with the disadvantages of gold stocks today. Some enthusiasts of gold stocks feel it’s a travesty to lump gold in with mere industrial commodities. They put gold in a category of its own. Gold is different from other commodities, of course, due to its scarcity, its special physical characteristics like freedom from tarnishing and malleability, its unique suitability for use as a medium of exchange, and its place in the world’s financial history. But that specialness doesn’t make it an attractive investment. In fact, it detracts from gold’s investment appeal. Because of the strong attachment that gold enthusiasts feel to the metal, they bid up the price of gold stocks out of proportion to the profits those mines are likely to produce....

FORT CHICAGO ENERGY TRUST $8.68 (Toronto symbol FCE.UN; Shares outstanding: 134.1 million; Market cap: $1.2 billion; SI Rating: Extra Risk) owns 50% of the Alliance Pipeline, which runs 3,000 kilometres from Fort St. John, B.C., to Chicago. Enbridge Inc. owns the other 50% interest. The two partners also own 85.4% of the Aux Sable natural gas liquids plant. As well, Fort Chicago owns the 1,324-kilometre Alberta Ethane Gathering System. Fort Chicago has added to its power-plant interests over the last couple of years. It now owns natural gas-fired cogeneration facilities in Ontario and California, plus power generation systems in Ontario and Prince Edward Island. It recently bought the Brush II Cogeneration plant in Colorado for $32 million U.S. In the three months ended June 30, 2008, Fort Chicago’s revenue rose 31.4%, to $178.7 million from $135.9 million a year earlier. The higher revenue mainly resulted from Fort Chicago’s purchase of Countryside Canada Power in August 2007. Cash flow per unit rose 3.3% in the quarter, to $0.31 from $0.30....

SCOTIA CANADIAN GROWTH FUND $44.12 (CWA Rating: Conservative) (Scotia Securities, 40 King Street West, 6th Floor, Toronto, Ontario M5H 1H1. 1-800-268-9 269; Website: www.scotiabank.com. No load — deal directly with the company.) uses fundamental analysis to identify what the managers see as investments that have the potential for above-average growth. The $460.9 million Scotia Canadian Growth Fund’s largest stock holdings include Manulife Financial, Royal Bank, TD Bank, Research in Motion, Potash Corp., Canadian Natural Resources, Suncor Energy, Bank of Nova Scotia and EnCana Corp. Scotia Canadian Growth currently holds 39.9% of its portfolio in the Resources sector. Its next-largest holding is Financial services at 29.4%....

BMO EQUITY FUND $24.41 (BMO Mutual Funds, 77 King Street West, Suite 4200, Royal Trust Tower, Toronto, Ont., M5K 1J5, 1-800-665-7700; Web site: www.bmo.com. No load — deal directly with the bank) (CWA Rating: Conservative) generally invests mostly in ‘blue-chip” Canadian companies. These stocks are selected based on the manager’s outlook for the industry they operate in, the earnings record of each company, the strength of management and the potential for growth. BMO Equity Fund’s 10 largest holdings are Bank of Nova Scotia, Royal Bank of Canada, TD Bank, Canadian Natural Resources, Suncor Energy, EnCana Corporation, Potash Corp., Manulife Financial, CIBC and Research in Motion. The $1.8 billion fund currently holds 40.5% of its portfolio in the Resources sector. Its next-largest holding is Financial services at 26.1%....

CIBC CANADIAN EQUITY FUND $18.87 (CWA Rating: Conservative) (CIBC Securities, 5140 Yonge Street, Suite 900, Toronto, Ontario M2N 6X7. 1-800-631-7008; Website: www.cibc.com. No load — deal directly with the company.) uses a “bottom-up” approach (using fundamentals such as earnings, cash flow and low debt) to identify companies that trade at reasonable valuations and also have growth potential. The $450.5 million fund’s top holdings are Manulife Financial, EnCana, Research in Motion, Bank of Nova Scotia, TD Bank, Potash Corp., Suncor Energy, Canadian Natural Resources and CN Railway. The fund’s MER is 2.20%. CIBC Canadian Equity holds 38.8% of its portfolio in Resource sector stocks and 33.5% in Financial services stocks....

RBC CANADIAN EQUITY FUND $19.69 (CWA Rating: Conservative) (RBC Funds, P.O. Box 7500, Station A, Toronto, Ontario. M5W 1P9. 1-800-463-3863; Web site: www.royalbank.com. No load — deal directly with the bank) invests mostly in larger-capitalization stocks, but also looks for opportunities in small and mid-cap stocks. The fund’s 10 largest holdings are Royal Bank, Manulife, EnCana, TD Bank, Potash Corp., Bank of Nova Scotia, Canadian Natural Resources, Suncor Energy, Research in Motion and BCE Inc. The $4.2 billion fund holds 41.3% of its holdings in Resources stocks. It also holds 30.7% in Finance. Over the last ten years, RBC Canadian Equity posted a 9.5% annual rate of return. That’s just under the S&P/TSX’s gain of 9.7%. The fund lost 14.9% over the last year, compared to the loss of 14.4% for the S&P/TSX. The fund’s MER is 1.96%....

TD CANADIAN EQUITY FUND $19.01 (CWA Rating: Conservative) (TD Asset Management, P.O. Box 7500, Station A, Toronto, Ontario. M5W 1P9. 1-866-222-3456; Web site: www.tdcanadatrust.ca. No load — deal directly with the bank) uses a “bottom-up” approach (using fundamentals such as earnings, cash flow and low debt) to identify undervalued companies with strong growth potential. TD Canadian Equity Fund’s 10 largest holdings are Royal Bank, Brookfield Asset Management, TD Bank, Potash Corp., Crescent Point Energy Trust, Nexen Inc., Suncor Energy, Sun Life Financial, Manulife Financial and Research in Motion. The $2.6 billion fund currently holds about 47.6% of its portfolio in Resources shares. It also has a bias towards Financial services stocks at 28.2%....

NEW IRELAND FUND $9.20 (New York symbol IRL; Shares outstanding: 5.1 million; Market cap: $47.2 million; CWA Rating: Aggressive) invests in Irish companies. The fund’s manager is the Bank of Ireland, which dates back to 1783. The Irish economy has slowed along with lower housing prices in the country, plus a slowdown in exports. Longer term, the country’s openness to foreign investment will continue to pay off. Ireland is part of the Euro currency system. It has also invested heavily in education and worker training. The New Ireland Fund’s top holdings at last report were: CRH plc (building materials), 25.6%; Ryanair Holdings (airline), 11.4%; Allied Irish Banks at 8.9%; DCC (distribution), 6.1%; Aryzta plc (agriculture & food), 5.8%; Elan Corp. (Healthcare services), 5.6%,– Kerry Group (food products), 5.4%; United Drug plc (Healthcare services), 3.4%; Origin Enterprises (agriculture), 2.7%; and Norkom Group (financial crime detection), 2.6%....

INDIA FUND $19.58 (New York symbol IFN; Shares outstanding: 42.5 million; Market cap: $832.5 million; CWA Rating: Aggressive) invests mainly in large-capitalization Indian stocks. The manager of the fund is the Blackstone Group. India’s growth has exceeded 9% annually over the last few years. The global slowdown and credit problems will hurt the Indian economy, but growth could still be as high as 7% in 2009. India Fund’s top holdings are: Reliance Industries (conglomerate) at 13.1%; Bharti AirTel (telecom), 7.1%; Infosys Technologies (software), 6.9%; Housing Development Finance (finance), 4.5%; Oil & Natural Gas Corp., 4.0%; Hindustan Unilever (consumer products), 3.4%; State Bank of India, 2.9%; and Reliance Communications (telecom), 2.6%....

SINGAPORE FUND $8.19 (New York symbol SGF; Shares outstanding: 9.4 million; Market cap: $76.7 million; CWA Rating: Aggressive) is fully invested in Singapore stocks. The manager is the Development Bank of Singapore. Singapore’s economy is dependent on exports to major markets such as the U.S., China and Japan. It should prosper anew when these market recover. The Singapore Fund’s top holdings are: United Overseas Bank, 11.8%; Overseas-Chinese Banking 9.6%; Singapore Telecom, 9.3%; Keppel Corp. (varied industries), 5.4%; Capitaland (property), 4.4%; Hongkong Land Holdings, 4.1%; SMRT Corp. (Singapore public transit), 3.8%; Sembcorp Marine (shipbuilding), 3.8%: Singapore Petroleum, 3.0%; and Ascendas REIT (commercial real estate), 3.0%....

SWISS HELVETIA FUND $11.39 (New York symbol SWZ; Shares outstanding: 33.2 million; Market cap: $378.6 million; CWA Rating: Conservative) invests mainly in large-capitalization Swiss stocks. The fund’s manager is Hottinger Group, which, as Banque Hottinger, dates back to 1786. The Swiss government has moved quickly to restore confidence in its banking system. This includes taking a 9% interest in banking giant UBS AG. Renewed global growth will help the export oriented Swiss economy. The $594.4 million fund’s top holdings are Nestle SA (food & beverages), 17.0%; Roche Holdings (pharmaceuticals) at 12.2%; Novartis AG (health care and pharmaceuticals), 9.2%; Zurich Financial Services (insurance), 5.4%; Syngenta AG (agribusiness), 4.9%; Basilea Pharmaceutica AG (Swiss biopharma), 3.8%; Atel Holding AG (Swiss energy), 3.5%; UBS AG (banking), 2.6%; Addex Pharmaceuticals, 2.6%; and BKW FMB Energie AG (Swiss power), 2.1%....

TELUS CORP. $40.47 (Toronto symbol T.A; Shares outstanding: 335.6 million; Market cap: $13.6 billion; SI Rating: Above average) provides local and long distance telephone service in B.C., Alberta and parts of Quebec, and wireless service across Canada. In the three months ended June 30, 2008, Telus’s earnings per share excluding unusual items rose 13.7%, to $0.83 from $0.73 a year earlier. Revenue rose 7.7%, to $2.4 billion from $2.2 billion. Strong gains at its wireless and high-speed Internet operations offset lower local and long-distance revenues. Telus’s shares yield 4.5%. Recent auctions of new radio frequencies (or wireless spectrum) will let new cell phone firms enter the market. These include Quebecor, European and Egyptian-backed Globalive and Data & Audio-Visual Enterprises Wireless, a firm controlled by Canadian businessman John Bitove. Just 60% of Canadians use a cellphone, so there’s still room for growth in the industry. As well, Telus’s strong reputation for customer service and its focus on more affluent users and long-term customers should help it expand its wireless profits....

RBC CANADIAN EQUITY FUND $19.69 (CWA Rating: Conservative) (RBC Mutual Funds, P.O. Box 7500, Station A, Toronto, Ontario. M5W 1P9. 1-800-463-3863; Web site: www.royalbank.com. No load — deal directly with the bank) invests mostly in larger-capitalization stocks, but also looks for opportunities in small- and mid-cap stocks. The fund’s 10 largest holdings are Royal Bank, Manulife, EnCana, TD Bank, Potash Corp., Bank of Nova Scotia, Canadian Natural Resources, Suncor Energy, Research in Motion and BCE Inc. The $4.2-billion fund holds 41.3% of its holdings in resource stocks. It also holds 30.7% in finance. Over the last ten years, RBC Canadian Equity posted a 9.5% annual rate of return. That’s just under the S&P/TSX’s gain of 9.7%. The fund lost 14.9% over the last year, compared to the loss of 14.4% for the S&P/TSX. The fund’s MER is 1.96%....

FEDEX CORP. $58 (New York symbol FDX; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 311.2 million; Market cap: $18.0 billion; WSSF Rating: Average) provides door-to-door delivery of packages and documents in the United States and to over 220 other countries. The slowing economy has hurt demand for FedEx’s domestic delivery services. As well, customers are switching from overnight delivery to FedEx’s slower and less expensive ground service. However, international volumes continue to grow. In its first fiscal quarter ended August 31, 2008, FedEx’s revenue rose 8.4%, to $10.0 billion from $9.2 billion a year earlier....

THE STANLEY WORKS $33 (New York symbol SWK; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 78.6 million; Market cap: $2.6 billion; WSSF Rating: Average) makes a wide variety of hand and power tools for consumer and industrial users. The tool business exposes Stanley to the cyclical home construction, renovation and automotive repair industries. However, the company is successfully expanding its building security operations, which now account for 35% of its revenue and 45% of earnings. Steady revenue streams from the security business should let Stanley keep paying its $1.28 dividend, which yields 3.9%. In July, 2008, Stanley acquired Canadian-based Xmark Corp. for $48 million. Xmark makes radio frequency tags that help locate people and property. The company also paid $278 million for Sonitrol Corp., which provides security monitoring services to businesses in North America. These purchases should add $140 million to Stanley’s annual revenue....

SNAP-ON INC. $37 (New York symbol SNA; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 57.4 million; Market cap: $2.1 billion; WSSF Rating: Average) makes hand and power tools for auto mechanics. Like Genuine Parts, Snap-On should benefit from slowing new car sales and rising demand for repair and maintenance services. It also sells its products through a fleet of franchised vans that visit garages. This way, dealers can form long-term relationships with their customers. That gives it an advantage over competitors, and should help it keep paying its $1.20 dividend (3.2% yield). Snap-On is also expanding overseas, which cuts its exposure to a slowing North American economy. It recently paid $15.1 million for 60% of a Chinese company that makes hand tools. Foreign operations now supply roughly 40% of Snap-On’s revenue....

GENUINE PARTS CO. $35 (New York symbol GPC; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 161.8 million; Market cap: $5.7 billion; WSSF Rating: Average) distributes automotive replacement parts to over 4,800 independent outlets in North America. It also operates over 1,100 auto parts stores under the NAPA banner. As well, the company distributes industrial parts, office furniture and electrical equipment. Genuine Parts has increased its dividend for 52 consecutive years. The current rate of $1.56 a share yields 4.5%. The stock has moved down from $50 in November, 2007. That’s partly due to its exposure to the slowing automotive industry, which accounts for half of its revenue and earnings. However, a drop in new car sales is good news for Genuine Parts. As more drivers choose to maintain their current vehicles instead of buying new ones, demand for replacement parts is likely to rise....

BRIGGS & STRATTON CORP. $14 (New York symbol BGG; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 49.8 million; Market cap: $697.2 million; WSSF Rating: Above average) is the world’s largest maker of engines for lawnmowers. It also makes other home and garden equipment such as pressure washers and snow blowers. Rising costs for gasoline and food have cut consumer spending on discretionary items such as gardening equipment. A colder-than-usual spring season also hurt sales. However, the company is doing a good job controlling costs as it cuts production to meet demand. As well, Hurricanes Gustav and Ike prompted increased sales of portable generators. Briggs should be able to keep paying its $0.88 dividend, which now yields 6.3%. Meanwhile, Briggs reported a loss for its first fiscal year ended September 30, 2008 of $0.04 a share (total $2.0 million). That’s a big improvement over the $0.42 a share ($20.8 million) it lost in the year-earlier quarter. Due to the seasonal nature of its lawnmower and gardening equipment businesses, Briggs usually loses money in its first quarter....

QUAKER CHEMICAL CORP. $17 (New York symbol KWR; Income Portfolio, Manufacturing & Industry sector; Shares outstanding: 10.6 million; Market cap: $180.2 million; WSSF Rating: Average) makes lubricants and specialty chemicals that protect industrial machinery from corrosion. The company recently raised its quarterly dividend for the first time since 2004, from $0.215 a share to $0.23. The new annual rate of $0.92 yields 5.4%. Quaker uses oil to make its products, so it gains from the recent drop in prices. However, the company’s prominent share of the narrow market it operates in makes it easier for it to pass along higher raw material costs to its customers. That should also help Quaker maintain the current dividend rate....

WELLS FARGO & CO. $31 (New York symbol WFC; Conservative Growth Portfolio, Finance sector; Shares outstanding: 3.3 billion; Market cap: $102.3 billion; WSSF Rating: Average) provides a wide variety of financial services to nearly eight million customers through roughly 6,000 branches and offices in 23 states. Internationally, it operates in Canada, the Caribbean and Central America. Warren Buffett’s Berkshire Hathaway holding company owns 9% of Wells Fargo’s shares. The company has now agreed to acquire WACHOVIA CORP. $5.71 (New York symbol WB, Conservative Growth Portfolio, Finance sector; Shares outstanding: 2.2 billion; Market cap: $12.6 billion; WSSF Rating: Extra risk). Wachovia stockholders will receive 0.1991 of a Wells Fargo common share for each Wachovia share they hold. The merger will make Wells Fargo one of the largest banks in the United States, with over 10,000 branches in 39 states and $713 billion in U.S. deposits ($787 billion in total deposits). It also gives Wells Fargo its first operations in the Atlantic Seaboard and southeastern U.S....

SHAWCOR LTD. $17 (Toronto symbol SCL.A; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 71.0 million; Market cap: $1.2 billion; SI Rating: Average) makes sealants and coatings that protect onshore and offshore oil and natural gas pipelines from corrosion. Thanks to high oil prices and a surge in new pipeline construction, ShawCor’s stock jumped to $40 in October, 2007. However, the stock has moved down since then, partly due to the rise in the Canadian dollar. Overseas markets account for about 75% of ShawCor’s revenue, and a strong dollar hurts the contribution of these foreign operations to the company’s overall earnings. As well, rising raw material and labour costs have also weighed on its profit growth. In the second quarter of 2008, earnings fell 24.4%, to $0.31 a share (total $22.2 million) from $0.41 a share ($30.3 million) a year earlier. Revenue rose 6.8%, to $295.1 million from $276.4 million. The higher Canadian dollar cut revenue in the latest quarter by $12.9 million....

SNC-LAVALIN GROUP INC. $33 (Toronto symbol SNC; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 151.0 million; Market cap: $5.0 billion; SI Rating: Average) is a leading engineering and construction company. North America supplies 60% of its revenue. SNC’s stock hit a new peak of $62 in June, 2008. That was partly due to its strong second-quarter earnings. In the three months ended June 30, 2008, SNC’s earnings jumped 83.3%, to $75.4 million from $41.1 million a year earlier. Earnings per share rose 81.5%, to $0.49 from $0.27. However, the big increase was mainly due to the costly bankruptcy of a key supplier to its power plant operations in the year-earlier quarter. Revenue crept up to $1.70 billion from $1.69 billion. The company’s expertise is helping it win new contracts, particularly in overseas markets. For example, SNC has agreed to build a new airport in Libya’s second-largest city for $500 million. It’s also expanding its overseas operations through acquisitions of small engineering firms. SNC recently paid an undisclosed sum for two Romanian engineering companies that specialize in industrial and public infrastructure projects....

LINAMAR CORP. $9.00 (Toronto symbol LNR; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 67.1 million; Market cap: $603.9 million; SI Rating: Extra risk) is Canada’s second-largest maker of automobile parts after Magna International Inc. It specializes in precision-machined components, assemblies and systems for the North American and European car and truck markets. The stock has dropped from $17 in June, mainly due to slowing North American car and truck sales. That has hurt demand for its transmissions and other auto parts, which provide about 85% of its sales. However, the company’s recent expansion in China and Europe helps cut its exposure to the North American auto industry. For example, Linamar recently paid an undisclosed sum for a plant in Wales. This is the company’s 38th plant, and first in the UK....

GENNUM CORP. $6.65 (Toronto symbol GND; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 35.6 million; Market cap: $236.7 million; SI Rating: Above average) makes equipment that lets broadcasters store, manipulate and transport video signals without losing picture quality. This business accounts for 80% of Gennum’s total sales. The remaining 20% comes from making chips that improve the speed and reliability of transmissions in computer networks. The company continues to enjoy the benefits of its recent restructuring, which included selling its slow-growing hearing aid and headset businesses. In its third fiscal quarter ended August 31, 2008, it earned $0.18 a share (total $6.4 million) compared to a loss of $0.04 a share ($1.5 million) a year earlier (all amounts except share price and market cap in U.S. dollars). However, the year-earlier quarter included a $0.04 a share ($6.8 million) loss from discontinued operations. Sales in the quarter rose 31.4%, to $33.5 million from $25.5 million, partly due to an acquisition. Gennum also continues to successfully launch new products. Research spending in the latest quarter rose to 28.1% of sales, up from 22.4% a year earlier....

TRANSCANADA CORP. $36 (Toronto symbol TRP; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 578.0 million; Market cap: $20.8 billion; SI Rating: Above average) operates over 59,000 km of pipelines that transport natural gas, mainly from Alberta to markets in central and eastern Canada. The company also operates gas pipelines in the United States and Mexico. This business supplies 55% of TransCanada’s total revenue. The remaining 45% comes from its electrical power operations. TransCanada owns or holds interests in over 20 power plants in Canada and the United States. TransCanada continues to expand its power business. This includes its investment in the partnership that runs Ontario’s Bruce nuclear power plant. TransCanada owns 31.6% of the Bruce B complex, which consists of four working reactors....