Search

MANULIFE FINANCIAL $73 (Toronto symbol MFC; SI Rating: Above-average) sells life and other forms of insurance, as well as mutual funds and investment management services. It operates in 19 countries and territories worldwide. Manulife has assets under administration of $372.3 billion. Manulife acquired New York-listed John Hancock Financial Services in 2003 for $15 billion in shares. The merger was one of the largest ever in the life insurance industry, but the integration has gone smoothly. John Hancock continues to add to Manulife’s sales and profits in the U.S. In the three months ended December 31, 2005, Manulife’s earnings rose 18.3%, to $900 million or $1.14 a share, from $761 million or $0.93 a share a year earlier. Revenue rose 3.6%, to $8.20 billion from $7.92 billion. The shares yield 1.9%....

GREAT-WEST LIFECO $29 (Toronto symbol GWO; SI Rating: Above-average) is a leading Canadian insurance company, with $177.3 billion in assets under administration. The company also provides wealth management and other financial services. It also operates in the U.S. and Europe. Power Corp. of Canada controls about 75% of the company’s common stock. Great-West’s earnings in the three months ended December 31, 2005 rose 10.3%, to $469 million or $0.53 a share from $423 million or $0.48. Revenues rose 13.6%, to $6.52 billion from $5.74 billion. Earnings growth came from the company’s Canadian and European operations. Canada accounts for 38% of total revenues. Canadian earnings in the latest quarter rose 16.7%. European revenues comprise 45% of the total. Earnings in that region rose 9.9%....

GAMESTOP CORP. (New York symbols GME $41 and GME.B $37; WSSF Rating: Extra risk) operates over 4,400 stores in the United States and Europe that sell video game players and software. It also publishes a video game magazine. In October 2005, GameStop paid $1.44 billion (70% in cash and 30% in stock) for rival video game retailer Electronics Boutique. That’s a huge investment for the company, which earned $1.17 a share (total $67.7 million) in the fiscal year ended January 31, 2005. Thanks to the takeover, GameStop’s sales in the nine weeks ended December 31, 2005 rose 133% to $1.35 billion. However, if you assume that GameStop acquired Electronics Boutique a year earlier, pro forma same-store sales fell 1.5% due to shortages of Microsoft’s new Xbox 360 video game console....

BARNES & NOBLE INC. $43 (New York symbol BKS; WSSF Rating: Average) is the world’s largest bookseller, with 824 bookstores in 50 states. It also sells books and other products over the Internet. In November 2004, the company handed out its 63% stake in video game retailer GameStop Corp. to its own stockholders as a special dividend. The spin-off hurt Barnes & Noble’s short-term prospects. But it also let it focus on improving profitability at its less-risky book selling business. In the nine weeks ended December 31, 2005, sales at its Barnes & Noble superstores rose 5.2% to $1.1 billion from a year earlier. Same-store sales grew 2.3%. However, sales at its B. Dalton mall-based stores fell 18.4% to $41.3 million as the company continued to close unprofitable outlets. On a same-store basis, sales at this division grew 3.0%. Sales at the online operation rose 1.0%, to $106.1 million....

AMERIPRISE FINANCIAL INC. $45 (New York symbol AMP; WSSF Rating: Average) provides wealth management, brokerage and insurance services through a nationwide network of over 12,000 advisors. It currently owns, manages or administers assets worth $428.1 billion. In the three months ended December 31, 2005, Ameriprise’s income from continuing operations fell 52.2%, to $0.44 a share (total $111 million) from $0.92 a share ($226 million) a year earlier. If you disregard costs related to the separation from American Express and other one-time items, per-share profits fell 6.1%, to $0.77 from $0.82. Revenue crept up to $1.87 billion from $1.84 billion. However, excluding discontinued operations, revenue grew 5%. The company prefers to focus on wealthier individuals to whom it can market a variety of financial products. In the most recent quarter, 44% of the company’s clients paid fees to subscribe to an Ameriprise financial management plan, up from 42% a year earlier. These long-term plans give Ameriprise steadier revenue streams than one-time sales of insurance or other financial products....

AMERICAN EXPRESS CO. $55 (New York symbol AXP; WSSF Rating: Average) is one of the world’s largest financial services providers, with operations in over 130 countries. Its well-known credit card business accounts for roughly 90% of its revenue. The remaining 10% comes from its travel services business. In September 2005, Amex handed out all of its shares in subsidiary American Express Financial Advisors (now called Ameriprise Financial Inc.) to its stockholders as a tax-deferred dividend. As part of the spin-off, it restructured its remaining operations. These moves cut its pre-tax profits in the three months ended December 31, 2005 by $65 million. However, it also received a $60 million gain from a tax settlement. To put these figures in context, Amex earned $0.60 a share (total $751 million) from continuing operations in the fourth quarter of 2005, up 13.2% from $0.53 a share ($669 million) a year earlier. Revenue grew 8.5%, to $6.4 billion from $5.9 billion....

FREESCALE SEMICONDUCTOR INC. (New York symbols FSL $27 and FSL.B $27; WSSF Rating: Extra risk) makes chips for a wide variety of products such as automobiles, computer networking equipment and wireless communication equipment. Motorola accounts for 30% of its total sales. In the past few months, Freescale has done a good job of cutting its costs. That helps explain why its profit in the fourth quarter of 2005 jumped to $0.45 a share (total $192 million) from $0.01 a share ($5 million) a year earlier. The latest quarterly results included an $8 million reversal of a previous writedown, while the 2004 fourth quarter included $84 million in one-time charges related to the spin-off from Motorola. Revenue rose 3.5%, to $1.48 billion from $1.43 billion. Like most technology companies, Freescale spends heavily on research, typically around 20% of its revenue of $13.80 a share....

MOTOROLA INC. $22 (New York symbol MOT; WSSF Rating: Above average) is the world’s second-largest maker of mobile phones, after Nokia Corp. This business supplies about 55% of Motorola’s revenue. The company also supplies infrastructure equipment to wireless phone companies, and makes other communications gear such as two-way radios and high-speed Internet modems. In December 2004, Motorola handed out its remaining 68% stake in chip maker Freescale Semiconductor to its investors, as part of a broader restructuring. In the three months ended December 31, 2005, Motorola earned $0.47 a share from continuing operations, up 67.9% from $0.28 a share a year earlier. If you exclude unusual items, the company would have earned $0.35 a share in the most recent quarter. Revenue rose 18.2%, to $10.4 billion from $8.8 billion....

SONY CORP. $47 (New York symbol SNE; WSSF Rating: Above average) is one of the world’s largest makers of consumer electronic products such as TV sets, DVD players and stereo equipment. This business supplies two-thirds of its revenues. The remaining third comes from its PlayStation video game players, its film and TV studios, and its financial services division. In the past few years, Sony failed to anticipate the strong demand for big screen TV sets that use either plasma or LCD (liquid crystal display) technologies. That let other companies cut into its market share. Meanwhile, its famed Walkman portable music players lost market share, mainly to Apple’s iPod. Now, however, Sony is restructuring its TV business, to focus on new flat screens. This will cost roughly $900 million, but should cut way back on its operating costs, starting with a $50 million saving in fiscal 2007 (fiscal years end March 31)....

DUNDEE CORP. $33 (Toronto symbol DBC.SV.A; SI Rating: Average) holds equity interests in several businesses. Its main asset is its 63% stake in Dundee Wealth Management Inc., which sells investments, life insurance and other financial services through about 4,000 independent advisors across Canada. Through 86%-owned Dundee Realty Corp., Dundee invests in commercial and residential real estate developments in Canada and the United States. It also invests in junior resource companies. In the three months ended September 30, 2005, Dundee earned $0.24 a share (total $6.4 million), down 56.4% from $0.55 a share ($14.4 million) a year earlier. But the latest results included a $5.0 million pre-tax charge related to Dundee’s plan to upgrade the computer systems of its brokerage operations. Revenue fell 7.7%, to $205.7 million from $222.8 million, mostly due to lower revenue from its real estate division, following last year’s sale of a condominium project. Investors tend to avoid Dundee for several reasons, including its complex holding company structure and dual-class shares....

IGM FINANCIAL CORP. $46 (Toronto symbol IGM; SI Rating: Above average) sells mutual funds and other financial services through three main divisions: Investors Group, Mackenzie Financial and Investment Planning Council. IGM is currently Canada’s largest mutual fund company, with $94.1 billion in mutual fund assets under management. Power Financial Corp. owns 56% of IGM. In the third quarter of 2005, IGM earned $0.66 a share, up 13.8% from $0.58 a year earlier. Revenue grew 11.4%, to $587.0 million from $527.1 million, as improving equity markets fueled demand for mutual funds. Mutual fund sales should continue to rise in 2006, particularly during the busy RRSP season in the first two months of the year, which accounts for over half of the mutual fund industry’s annual sales....

GREAT-WEST LIFECO INC. $29 (Toronto symbol GWO; SI Rating: Above average) is Canada’s largest insurance company, with assets under administration of $174.1 billion. Power Financial Corp. owns 75% of the company’s stock. In the three months ended September 30, 2005, Great-West earned $421 million, up 1.7% from $414 million a year earlier. However, per-share income remained unchanged at $0.47 a share. If you exclude a restructuring charge and extra provisions for claims related to hurricanes in the United States, the company would have earned $0.51 a share in the most recent quarter. Revenue rose 5.1%, to $5.2 billion from $4.95 billion. Most of Great-West’s recent earnings growth comes from its Canadian operations (45% of revenue), mainly due to expense reductions following the acquisition of rival insurer Canada Life Financial in 2003. So far, Great-West has cut its annual costs by $407 million. That’s 23% ahead of its original target. It should finish absorbing these operations in early 2006, and ultimately save $420 million....

TD HEALTH SCIENCES FUND $16.09 (CWA Rating: Speculative) (TD Asset Management, P.O. Box 7500, Station A, Toronto, Ontario. M5W 1P9. 1-800-463-3863; Web site: www.tdcanadatrust.ca. No load — deal directly with the bank) invests mostly in U.S. companies with a mixture of large-capitalization stocks and earlier-stage biotechnology shares. The fund’s managers believe all these firms will profit from an aging population stimulating higher spending by governments and individuals on health care, drugs and research. The fund’s top holdings include WellPoint, Amgen, Sepracor, ImClone Systems, Genentech, Gilead Sciences, UnitedHealth Group, Wyeth, Community Health Systems and Cephalon. Its MER is 2.79%. The $286.4 million fund’s manager is well-known U.S. fund manager T. Rowe Price Associates. TD Health Sciences gained 6.6% over the last year....

UNIVERSAL FUTURE FUND $18.38 (CWA Rating: Aggressive) has about half of its holdings invested in technology or information-related firms. However, it cuts risk by picking large-capitalization, well-established companies in those fields. As well, the rest of Universal Future Fund’s portfolio is invested in high-quality, conservative stocks. The top holdings of this $567 million fund are Research in Motion, Texas Instruments, Rogers Commmunications, Cognos Inc., Sun Life Financial, SAP AG, Shoppers Drug Mart, Workbrain Corp., eBay and Celestica Inc. Universal Future Fund’s one-year gain is 5.6%. The Nasdaq composite index (in Canadian dollars) lost 1.8% over the same period. The fund has an MER of 2.47%....

UNIVERSAL CANADIAN GROWTH FUND $20.66 (CWA Rating: Conservative) (Mackenzie Financial Corp., 150 Bloor St. West, Toronto, Ont. M5S 3B5. Web site: www.mackenziefinancial.com. 1-800-387-0780; Load fund — available from brokers) holds companies with strong management and sound business prospects. The fund holds fewer than 40 stocks at all times. Top holdings include Bank of Montreal, Manulife Financial, Finning International, Avid Technology, Shoppers Drug Mart, Corus Entertainment, Industrial- Alliance Life Insurance, Edwards Lifesciences, Biosite Inc. and BCE Inc. The fund’s breakdown by economic sector is as follows: 19.3% in Financials, 17.9% in Information technology, 16.1% in Consumer discretionary, 9.2% in Health Care, 9.4% in Industrials, 5.7% in Energy, 6.0% in Consumer staples, 3.7% in Telecommunications and 2.1% in Materials....

LIMITED BRANDS, INC. $23 (New York symbol LTD; WSSF Rating: Average) operates three main retail chains: Limited Brands sells men’s and women’s casual clothing; Victoria’s Secret sells lingerie; and Bath & Body Works sells personal care products such as soaps and fragrances. The company’s move to reposition its Express chain of clothing stores to appeal to younger shoppers seems to be working. In December 2005, same-store sales rose 7% compared with an 18% drop a year earlier. Despite weakness at the Victoria’s Secret and Bath & Body Works chains, overall same-store sales improved by 3%, up from 2%. However, that’s still less than an earlier forecast of 3.4%. Limited Brands is also doing a good job of selling its products though catalogs and the Internet. Its biggest Internet operation is Victoria’s Secret Direct, whose sales in December 2005 rose 17%, compared with a 12% gain a year earlier....

LIZ CLAIBORNE, INC. $34 (New York symbol LIZ; WSSF Rating: Average) designs and markets clothing and accessories for women under roughly 40 labels, including Liz Claiborne, Ellen Tracy and Mexx. It sells these products through major department stores, and over 640 company-owned specialty stores and clearance outlets. It also makes men’s clothing, and licenses its brands to non-apparel manufacturers. Warren Buffett’s Berkshire Hathaway owns 9% of the stock. The company has used acquisitions to spur its growth in the past few years. This has helped it diversify into faster-growing segments of the apparel market, and cut its reliance on products aimed at businesswomen and other professionals. Liz Claiborne is now trying to buy The J. Jill Group, Inc., which sells upscale clothing to women age 35 and older through 175 stores in 34 states. The offer is about 7% more than the $2.84 a share (total $313.6 million) that Liz Claiborne earned in 2004....

JONES APPAREL GROUP, INC. $31 (New York symbol JNY; WSSF Rating: Average) designs and markets men’s, women’s and children’s clothing, footwear and accessories. Major brands include Jones New York, Gloria Vanderbilt and Nine West. Jones hires independent manufacturers to produce these products. It sells through big department stores, and through its own chain of roughly 1,050 retail outlets. To cut costs, Jones has consolidated its denim operations in Mexico into one plant, and closed a distribution center in Pennsylvania. It is also streamlining its production cycles and cutting administrative costs. These changes will cost Jones between $70 million and $80 million. But they should cut its annual costs by $100 million within three years. To put these figures in context, Jones probably earned $2.37 a share (total $276 million) in 2005. The stock now trades at 13.1 times that estimate. The $0.48 dividend yields 1.5%....

MOLSON COORS BREWING CO. $63 (New York symbol TAP; WSSF Rating: Average) has agreed to sell 68% of Kaiser, its money-losing brewery in Brazil, for $68 million in cash. The buyer has also agreed to assume $60 million of Kaiser’s debt. To put these figures in perspective, the company earned $112.6 million or $1.44 a share in the nine months ended September 25, 2005. Following the sale, Molson Coors will still own 15% of Kaiser. That will help make it easier for the company to someday launch its Coors Light brand in Brazil. The stock recently fell $6 after the company said that strong competition from low-priced beers and rising energy and other costs will cut Molson Coors profits in the fourth quarter of 2005, and possibly part of 2006....

AVAYA INC. $10 (New York symbol AV; WSSF Rating: Average) makes telecommunications equipment that helps over one million businesses and government agencies manage their phone and data networks. Avaya was a division of Lucent Technologies Inc. until September 30, 2000, when Lucent handed out its Avaya shares to its investors. Selling equipment accounts for about 47% of Avaya’s total revenue. The remaining 53% comes from equipment rentals, plus maintenance and other services. Overseas markets account for 40% of its revenue. The company’s expertise with traditional phone systems puts it in position to profit from the spread of VoIP technology. Many businesses are now upgrading their systems to handle VoIP, since it can greatly cut their long distance bills. Many Avaya customers are likely to stick with it when they migrate to VoIP, instead of trusting their phones to an untested equipment supplier....

THE PROCTER & GAMBLE CO. $58 (New York symbol PG; WSSF Rating: Above average) is one the world’s largest makers of beauty, personal care and household products. It currently has 22 brands that each generate over $1 billion a year in sales. North American accounts for half of its sales. In October 2005, Procter acquired The Gillette Company, which makes a variety of consumer products such as razors, dental products and batteries. These products nicely complement Procter’s brands, and tend to earn higher profit margins. Procter paid $57 billion in stock for Gillette. But an aggressive stock buyback plan means it really financed 40% of the deal with cash....

VERIZON COMMUNICATIONS INC. $31 (New York symbol VZ; WSSF Rating: Average) provides local and long distance phone service to 145 million customers in 29 states. Through 55%-owned Verizon Wireless, it offers wireless service to 49 million customers across the United States. It also provides Internet access to homes and businesses, and publishes telephone directories. In January 2006, Verizon acquired long distance provider MCI, Inc. for $8.5 billion in cash and stock. The company hopes that MCI’s large corporate client base and fiber optic network will help it keep up with its main rivals, who are using acquisitions to expand market share. MCI will add about $15 billion to Verizon’s annual revenues of about $75 billion. However, integration costs may hurt Verizon’s earnings growth in the next two to three years. Verizon probably earned $2.55 a share (total $7 billion) in 2005....

FEDERATED DEPARTMENT STORES, INC. $71 (New York symbol FD; WSSF Rating: Average) operates around 990 department stores in 45 states. In August 2005, Federated paid $11.7 billion in cash and stock for rival May Department Stores Co. Thanks to the merger, Federated’s sales rose 65.7% in its third fiscal quarter ended October 29, 2005, to $5.8 billion from $3.5 billion. On a same-store basis (excluding the May stores), Federated’s third quarter sales grew just 0.6%. Federated had to borrow the cash to buy May. That increased its long-term debt from 0.4 times equity at the end of fiscal 2005 to 0.7 times....

ARKANSAS BEST CORP. $44 (Nasdaq symbol ABFS; WSSF Rating: Average) specializes in long-haul, less-than-truckload (LTL) shipping services, which combine freight from several different customers into a single truckload. LTL accounts for roughly 90% of Arkansas Best’s revenue. Freight carried by the company includes food, textiles, apparel and furniture. Arkansas Best’s fleet services customers in all 50 states, as well as parts of Canada and Mexico. The company also provides full-truckload shipping services, and transports cargo containers over long distances using trucks and railroads. It also provides logistical services, which help its customers better manage their shipping needs....

We created our Wall Street Stock Forecaster Hotline to keep you up-to-date on our recommendations, and tell you when they change. Now we’ve made our Hotlines available to you on the Internet, so you’ll never need to worry about missing a Hotline. As a subscriber, you can receive our Wall Street Stock Forecaster Hotline every week (44 or more times per year) by phone or email....