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LEGACY HOTELS REAL ESTATE TRUST $9.39 (Toronto symbol LGY.UN; Aggressive Growth Portfolio, Manufacturing & Industry sector; SI Rating: Extra risk) owns 23 luxury hotels in Canada, including the Fairmont Royal York in Toronto and the Fairmont Queen Elizabeth in Montreal. It also owns two U.S. hotels. In the third quarter of 2006, Legacy earned $19.8 million, up 15.1% from $17.2 million a year earlier. However, per-unit profits rose just 5.3%, to $0.20 from $0.19. That’s because the conversion of a Legacy debenture increased the number of units outstanding by 11%. Revenue crept up to $223.0 million from $221.6 million, as higher room rates offset a drop in occupancy. Legacy’s Canadian hotels get about a third of their revenue from U.S. tourists. Proposed new rules that would force U.S. travelers to carry a passport could hurt its revenue. However, a drop in the Canadian dollar would offset the passport requirement. Meanwhile, the trust should generate enough cash to maintain its $0.32 distribution, which yields 3.4%. Legacy may also profit by converting some hotels to condominiums....

RIOCAN REAL ESTATE INVESTMENT TRUST $25 (Toronto symbol REI.UN; Aggressive Growth Portfolio, Manufacturing & Industry sector; SI Rating: Average) owns all or part of 203 large, outdoor suburban malls across Canada. In the three months ended September 30, 2006, RioCan earned $0.21 a unit from continuing operations, down slightly from $0.22 a year earlier, mainly due to higher interest and amortization expenses. However, cash flow per share rose 29.0%, to $0.40 from $0.31, while revenue grew 7.3%, to $160.7 million from $149.8 million. Demand by retailers for space in RioCan’s malls remains strong. In fact, the occupancy rate rose to 97.5% in the most recent quarter — a new record. National chains such as Wal-Mart and Loblaw account for 83% of RioCan’s rental revenue, which cuts RioCan’s risk....

PETRO-CANADA $50 (Toronto symbol PCA; Conservative Growth Portfolio, Resources sector; SI Rating: Average) operates major oil and natural gas projects in Western Canada and Newfoundland. Canada accounts for 75% of its total production. Petro-Canada has expanded its international presence in the past few years, and now gets 25% of its production from the North Sea, Algeria and Libya. Oil accounts for roughly two-thirds of total production, and natural gas accounts for the remaining third. It also operates refineries, and a nationwide chain of over 1,300 retail gas stations. In the third quarter of 2006, earnings before unusual items fell 8.1%, to $1.13 a share (total $564 million) from $1.23 a share ($638 million) a year earlier. The company had to shut down its Terra Nova offshore oil platform near Newfoundland for repairs, and production in the latest quarter fell 6%. (Petro-Canada owns 34% of Terra Nova and operates it.) However, higher oil prices raised cash flow per share 12.4%, to $2.17 from $1.93. Revenue grew 10.6%, to $5.2 billion from $4.7 billion....

ENCANA CORP. $57 (Toronto symbol ECA; Conservative Growth Portfolio, Resources sector; SI Rating: Average) produces oil and natural gas, mostly in the western part of North America. Natural gas accounts for three-quarters of its production. In the past few years, the company has focused on unconventional gas reserves in the Rocky Mountains. These discoveries initially cost more to develop than conventional reserves. But they could last decades longer, particularly as new technology helps EnCana extract more gas. In fact, EnCana estimates that its unbooked reserves are 1.3 times the size of its proved reserves. The company also wants to expand its oil sands production 10-fold over the next decade, and a new partnership with U.S.-based ConocoPhillips should help it reach this goal with much less risk....

IMPERIAL OIL LTD. $42 (Toronto symbol IMO; Conservative Growth Portfolio, Resources sector; SI Rating: Average) is Canada’s largest oil company, with major operations in Alberta and the Northwest Territories. Oil accounts for over 70% of its production, while natural gas supplies the other 30%. Imperial also refines crude oil into gasoline and other petrochemicals, and operates over 2,000 gas stations under the “Esso” banner. ExxonMobil Corp. owns 69.6% of the stock. In the three months ended September 30, 2006, Imperial’s revenue fell 13.6% to $6.65 billion from $7.7 billion a year earlier. Overall oil production grew 12% due to rising output at its oil sands facilities, but conventional oil and natural gas volumes fell. Despite the lower revenue, income rose 31.3%, to $0.84 a share (total $822 million) from $0.64 a share ($652 million). That’s because the company earned higher profits from heavy oil and chemicals than from conventional oil and gas. Cash flow per share rose 60.9%, to $1.11 from $0.69. Imperial is Canada’s largest oil sands operator. It owns 25% of the massive Syncrude joint venture, and runs it. It also owns its own oil sands project at Cold Lake, Alberta. These operations accounted for 71% of its third quarter crude oil production....

MOLSON COORS CANADA INC. (Toronto symbols TPX.A $78 and TPX.B $81; Conservative Growth Portfolio, Consumer sector; SI Rating: Average) is a wholly owned subsidiary of Molson Coors Brewing Company (New York symbol TAP), which was formed in February 2005 through the merger of Molson Inc. and Adolph Coors Co. Its exchangeable shares are equivalent to common shares of the parent company. The families of the two founding companies control roughly 79% of the votes. Molson Coors is the world’s fifth-largest brewer by volume. Major brands include Molson Canadian, Coors Light and Carling. It sells its products in four of the world’s top eight beer markets: North America, Europe, Latin America and Asia. The main reason for the merger was economies of scale in an increasingly competitive industry. The new company set a goal to cut its annual costs by $175 million in the first three years (all amounts except share price in U.S. dollars). In 2005, it realized $59 million in savings, which exceeded its $50 million target....

BECKMAN COULTER INC. $59 (New York symbol BEC; Conservative Growth Portfolio, Manufacturing & Industry sector; WSSF Rating: Average) makes equipment that hospitals and clinics use to detect substances in blood and other bodily fluids. These machines help doctors diagnose patients for cancer, strep and other diseases. Beckman has installed more than 200,000 of its systems in about 130 countries. Overseas customers account for about half of its sales. Beckman’s revenue rose steadily, from $2.0 billion in 2001 to $2.4 billion in 2005. Profits grew from $2.21 a share (total $141.5 million) in 2001 to $3.21 a share ($210.9 million) in 2004....

LIZ CLAIBORNE INC. $42 (New York symbol LIZ; Aggressive Growth Portfolio, Consumer sector; WSSF Rating: Average) designs and markets women’s clothing and accessories under numerous brands, including Liz Claiborne, Mexx and Ellen Tracy. It sells its products through major department stores as well as roughly 660 company-owned specialty stores. It also makes men’s clothing, and licenses its many brands to non-apparel manufacturers. The company’s revenue grew from $3.45 billion in 2001 to $4.85 billion in 2005, partly due to acquisitions. Earnings rose from $1.92 a share (total $201.7 million) in 2001 to $2.94 a share ($317.4 million) in 2005....

LIMITED BRANDS INC. $29 (New York symbol LTD; Aggressive Growth Portfolio, Consumer sector; WSSF Rating: Average) operates about 3,600 stores under three main retail chains: Limited Brands (20% of revenue) sells men’s and women’s casual clothing; Victoria’s Secret (50%) sells lingerie; and Bath & Body Works (20%) sells personal care products such as soaps and fragrances. The remaining 10% comes from non-core businesses and other investments. A wide variety of apparel and products helps shield Limited Brands from unpredictable fashion trends and tastes. It large size also gives it clout when dealing with suppliers and mall owners. Limited’s revenue fell from $9.4 billion in 2001 to $8.4 billion in 2002, but rose to $9.7 billion in 2005. Profits grew from $0.87 a share (total $378.0 million) in 2001 to $1.35 a share ($638.0 million) in 2004, but fell to $1.29 a share ($559.7 million) in 2005....

JONES APPAREL GROUP INC. $32 (New York symbol JNY; Aggressive Growth Portfolio, Consumer sector; WSSF Rating: Average) designs and markets a wide variety of men’s and women’s clothing and footwear. Major brands include Jones New York, Gloria Vanderbilt and Nine West. Sales through department stores and specialty stores account for about two-thirds of Jones’s total revenue. The remaining third comes from its own retail operations of roughly 1,070 stores. Jones’s revenues rose steadily, from $4.1 billion in 2001 to $5.1 billion in 2005. Profits grew from $2.31 a share (total $236.0 million) in 2001 to $2.84 a share ($385.2 million) in 2002....

MANITOBA TELECOM SERVICES INC. $49 (Toronto symbol MBT; Conservative Growth Portfolio, Utilities sector; SI Rating: Average) is the leading provider of telecom services in Manitoba, with 1.8 million customers. It also provides telecom services to businesses across Canada through its MTS Allstream division. Manitoba Tel acquired Allstream in 2004 as way to cut its reliance on residential customers in a single province. However, the business telecom market is extremely competitive, and Allstream has not been as profitable as the company hoped. Based on the favourable reaction to BCE’s and Telus’s trust conversion plans, it’s more likely that Manitoba Tel will follow the same path. It would probably try to sell or spin off Allstream first, since the division’s uncertain cash flows would limit its appeal as a trust....

TELUS CORP. (Toronto symbols T $62 and T.A $62; Conservative Growth Portfolio, Utilities sector; SI Rating: Above average) is the main provider of telephone service in Alberta, British Columbia and parts of Quebec, with roughly 4.5 million customers. It also operates a national wireless service under the Telus Mobility banner. Back in October 2000, Telus acquired wireless provider Clearnet Communications Inc. This gave Telus an instant national network, and let it avoid having to build its own network from scratch. Demand for wireless services has soared since the acquisition, and now supplies half of Telus’s revenue and two-thirds of its cash flow. Along with the Clearnet business, Telus acquired substantial tax loss carryforwards, which is could use to offset its taxable income. However, the company is now close to using up all of the tax loss carryforwards. Rather than let its tax rate shoot up, the company unveiled plans in September to convert itself into an income trust. The stock shot up on the news....

BCE INC. $33 (Toronto symbol BCE; Conservative Growth Portfolio, Utilities sector; SI Rating: Above average) is Canada’s largest provider of traditional telephone services, with over 12 million customers in Ontario and Quebec. It also provides Internet access (Sympatico), satellite TV (Bell ExpressVu) and wireless services (Bell Mobility). In the past few months, the company has moved to unlock some of its value. It recently sold most of its interest in Bell Globemedia, the private company that owns The Globe and Mail and CTV Television. BCE also plans to sell a minority stake in satellite operator Telesat to the public. In July 2006, BCE merged its rural telephone business with 53.2%-owned subsidiary Aliant Inc. into a new income trust called Bell Aliant Regional Communications Income Fund....

ENCANA CORP. $50 (Toronto symbol ECA; Conservative Growth Portfolio, Resources sector; SI Rating: Average) gets over 75% of its production from natural gas. The recent gas price drop has cut EnCana’s stock price from a peak of $65 in October 2005. Gas prices may move up again during the winter. EnCana’s deal to merge some of its oil sands assets with ConocoPhillips also cuts its risk. The stock is reasonably priced at 11 times earnings and 5 times cash flow....

AGRIUM INC. $30 (Toronto symbol AGU; Aggressive Growth Portfolio, Resources sector; SI Rating: Average) needs natural gas to make its fertilizers. Thanks partly to falling gas prices, the stock has gained 20% in 2006, and 70% since we made it our Stock of the Year in 2005. Agrium will probably earn $1.39 U.S. a share in 2006, and the stock trades at 19.0 times that figure. But earnings could reach $1.80 U.S. in 2007, which implies a more reasonable p/e of 14.7. Agrium is a buy.

THE STANLEY WORKS $50 (New York symbol SWK; Conservative Growth Portfolio, Manufacturing & Industry sector; WSSF Rating: Average) makes a wide variety of hand and power tools for professionals and consumers. In the past four years, Stanley has shifted its focus away from cyclical consumer products to industrial products and building security systems, which have steadier revenue streams. Consumer products now account for about 30% of its revenue and profit, down from 40% four years earlier. Focusing on industrial products also cuts Stanley’s reliance on big retail chains such as Home Depot....

SNAP-ON INC. $44 (New York symbol SNA; Conservative Growth Portfolio, Manufacturing & Industry sector; WSSF Rating: Average) makes and distributes hand tools to automotive mechanics, mainly through a fleet of franchised vans that visit garages. This business supplies about 45% of its revenue. The company also sells power tools and storage chests (45% of revenue) and provides financing to dealers (10% of revenue). Snap-On’s revenue grew at a compound annual rate of 3.4%, from $2.1 billion in 2001 to $2.4 billion in 2005. The slow economy cut profits from $1.84 a share (total $106.7 million) in 2001 to $1.35 a share ($78.7 million) in 2003. A successful restructuring plan raised earnings to $1.40 a share ($81.7 million) in 2004, and to $1.65 a share ($95.7 million) in 2005....

GENUINE PARTS CO. $43 (New York symbol GPC; Conservative Growth Portfolio, Manufacturing & Industry sector; WSSF Rating: Average) distributes over 320,000 automotive replacement parts through 1,200 company-owned stores and 4,800 independent dealers. It also distributes industrial parts, electronic equipment and office supplies. The automotive business supplies roughly half of its revenue and profit. Demand for replacement parts tends to be less cyclical than car sales, since it’s cheaper to repair an older vehicle than buy a new one. That helped the company’s revenue grow at a compound annual rate of 4.6%, from $8.2 billion in 2001 to $9.8 billion in 2005. Earnings before unusual items rose from $2.08 a share in 2001 (total $361.5 million) to $2.50 a share ($437.4 million) in 2005, or 4.7% compounded annually....

AGILENT TECHNOLOGIES INC. $32 (New York symbol A; Aggressive Growth Portfolio, Manufacturing & Industry sector; WSSF Rating: Average) is the world’s leading maker of testing and measurement equipment. Companies in telecommunications, electronics and medical sciences use Agilent’s equipment to improve the quality of their own products. Agilent gets about two-thirds of its revenue from customers outside of the United States. Revenue fell from $8.4 billion in 2001 (fiscal years end October 31) to $6.0 billion in 2002 after the company sold a division. The end of the tech boom also cut demand for its products. Revenue rose from $6.06 billion in 2003 to $7.2 billion in 2004, but slipped to $6.9 billion in 2005....

CHIPOTLE MEXICAN GRILL INC. $50 (New York symbol CMG) is an 50.8%-owned McDonald’s unit that operates 500 Mexican food restaurants in 23 states. This past January, Chipotle sold “A” shares (one vote per share) to the public at $22 each. McDonald’s offer lets its investors exchange all or some of their shares for Chipotle Class B common shares (10 votes per share; New York symbol CMG.B). The company will calculate the final exchange ratio before the offer expires on October 5, 2006. McDonald’s designed the offer so that its investors get to acquire Chipotle at a 10% discount. It feels the swap is tax-deferred, but the IRS has yet to issue a final ruling....

MCDONALD’S CORP. $40 (New York symbol MCD; Conservative Growth Portfolio, Consumer sector; WSSF Rating: Above average) is giving its stockholders an opportunity to exchange their McDonald’s stock for a holding in its Mexican food subsidiary.

GENNUM CORP. $11.50 (Toronto symbol GND; Aggressive Growth Portfolio, Manufacturing & Industry sector; SI Rating: Above average) is the highest rated stock in the bunch. It makes chips that enhance the quality of video signals, mostly for major TV display makers and broadcasters. This business supplies two-thirds of its revenue. Gennum also makes audio chips for hearing aids and headsets. Demand for high-definition TV sets is growing fast, and Gennum has won several new video chip contracts in the past year. The company’s new audio headsets, which help filter excess sounds in noisy environments, also have great potential. The company is free of long-term debt and has a healthy record of earnings. But its small size may make some investors wonder if it can live up to its potential....

NORTEL NETWORKS CORP. $2.60 (Toronto symbol NT; Aggressive Growth Portfolio, Manufacturing & Industry section; SI Rating: Speculative) is one of the world’s leading suppliers of telephone and computer network equipment to large telephone service providers and corporations. Nortel has completed its recent accounting review, and is now up to date with its earning filings. In the second quarter of 2006, it earned $0.08 a share (total $366 million), compared with a loss of $0.01 a share ($33 million) a year earlier. (All amounts except share price in U.S. dollars.) However, the latest results included a partial reversal of an earlier charge to settle a shareholder class-action lawsuit. That increased income in the latest quarter by $510 million, and offset $45 million in restructuring costs and a $10 million loss on the sale of assets. The loss in the year-earlier quarter included $92 million in restructuring costs and an $11 million loss on asset sales. Revenue in the quarter grew 4.6%, to $2.74 billion from $2.62 billion, mostly due to strong demand for wireless equipment....

THE WESTAIM CORP. $3.90 (Toronto symbol WED; Aggressive Growth Portfolio, Manufacturing & Industry sector; SI Rating: Speculative) is the riskiest of the three. It develops technologies through two subsidiaries: iFire Technology Corp. (wholly owned) and Nucryst Pharmaceutical Corp. (75.0%-owned, Toronto symbol NCS). Nucryst sold shares to the public late last year, and Westaim aims to eventually sell stock in iFire as well. iFire is currently developing a faster, cheaper way to make flat-panel displays that it hopes to license to TV manufacturers....

SLEEMAN BREWERIES LTD. $17.38 (Toronto symbol ALE; Aggressive Growth Portfolio, Consumer sector, SI Rating: Average) has accepted a friendly $17.50-a-share all-cash offer from Japan’s Sapporo Breweries Ltd. That’s a 150.0% gain over the $7 that we first recommend Sleeman at in our November 1999 issue. Two-thirds of Sleeman’s shareholders must approve the takeover at a special meeting in October 2006. We advise Sleeman investors to vote in favour of the deal, and tender their shares to get the full $17.50.