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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....

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PENGROWTH ENERGY TRUST (Toronto symbols PGF.A $28 and PGF.B $23; SI Rating: Average) owns all or part of several oil and gas properties in Alberta and B.C. Properties that Pengrowth operates account for 55% of its production. The remaining 45% comes from minority investments in other energy projects, including an 8.4% interest in the Sable Offshore Energy Project south of Nova Scotia. Pengrowth prefers to focus on proven properties with sizeable reserves. It also sticks mainly to conventional oil and gas properties, instead of more risky types of investments like oil sands. Conventional assets supply 80% of Pengrowth’s production, while heavy oil and natural gas liquids supply the other 20%. That gives it more stable cash flows, and keeps its operating costs down. Due to bad weather and a shortage of drilling equipment, Pengrowth’s capital spending in 2005 fell slightly, to around $1.15 a unit. Since Pengrowth will shift most of this work to 2006, capital spending will likely rise to roughly $1.45 a unit....

LEGACY HOTELS REAL ESTATE TRUST $8.05 (Toronto symbol LGY.UN; SI Rating: Extra risk) owns 24 luxury hotels with over 10,000 guestrooms in Canada and the United States, including The Fairmont Royal York in Toronto and the Fairmont Le Château Frontenac in Quebec City. Fairmont Hotels & Resorts Inc. (see box) owns roughly 24% of Legacy, and manages all of Legacy’s hotels. In the third quarter of 2005, Legacy earned $0.19 a unit, up 46.2% from $0.13 a year earlier, while cash flow per unit rose 26.8%, to $0.38 from $0.30. Revenue grew 5.9%, to $221.6 million from $209.3 million, as a 3.6% rise in occupancy offset a slight drop in the average daily room rate. Legacy’s Canadian hotels get about a third of their revenue from foreign travelers, mainly from the United States. The 8% rise in the Canadian dollar against the U.S. dollar in the first nine months of 2005 has hurt the flow of U.S. tourists to Legacy’s hotels, and cut into its revenue....

RIOCAN REAL ESTATE INVESTMENT TRUST $23 (Toronto symbol REI.UN; SI Rating: Average) owns or invests in over 200 retail properties in Canada, mainly large, outdoor suburban malls. Ontario and Quebec account for roughly 80% of its revenue. In the three months ended September 30, 2005, RioCan earned $0.22 a unit (total $41.8 million) from continuing operations, up 4.8% from $0.21 a unit ($39.1 million) a year earlier. Cash flow rose 2.6%, to $56.1 million from $54.7 million. But cash flow per unit fell to $0.29 from $0.30 due to more units outstanding. Revenue grew 8.6%, to $149.8 million from $138.0 million. In the past few years, RioCan has steadily sold older or smaller properties so it can focus on properties with greater earning potential, such as “Big Box"-style stores. Thanks to this strategy, the trust has leased nearly 97% of its available space. National chains like Loblaw, Wal-Mart and Canadian Tire accounted for 81.5% of RioCan’s rental revenue at September 30, 2005, up from 80.7% at the end of 2004....

CANADIAN PACIFIC RAILWAY LTD. $48 (Toronto symbol CP; SI Rating: Above average) transports freight such as grain, coal, and industrial products over a 14,000-mile rail network in Canada and the United States. Alliances with other rail companies extend CP’s operations to Mexico. In the three months ended September 30, 2005, CP earned $1.27 a share (total $204 million), up 14.4% from $1.11 a share ($177 million) a year earlier. If you exclude several unusual items, per-share profit rose 29.2%, to $0.84 from $0.65. Higher freight rates and the expansion of CP’s rail network in Western Canada offset higher fuel and labour costs. Consequently, CP’s operating ratio fell to 77.4% from 77.9%. Revenue rose 11.1%, to $1.1 billion from $989.7 million. CP rose to $52 in December 2005. It moved down after Fording Canadian Coal Trust cut its 2006 production estimate. Fording, CP’s biggest customer, accounts for about 15% of its total revenue. However, this will cut CP’s 2006 profits by just $0.10 a share, as rising volumes for grain and industrial goods should offset lower coal shipments....

CANADIAN NATIONAL RAILWAY CO. $92 (Toronto symbol CNR; SI Rating: Average) is Canada’s largest railway, with 19,300 miles of track in Canada and the United States. Goods shipped include forest products, petroleum and chemicals, and grain and fertilizers. In the third quarter of 2005, CN earned $1.47 a share (total $411 million), up 23.5% from $1.19 a share ($346 million) a year earlier. Most of the gain came from higher freight rates to offset rising fuel costs. Revenue rose 5.9%, to $1.8 billion from $1.7 billion. The company is still the most efficient railroad in North America. Its operating ratio (regular operating expenses divided by revenue — the lower, the better) fell to 63.3% in the most recent quarter, from 65.4% a year earlier....

ENCANA CORP. $53 (Toronto symbol ECA; SI Rating: Average) is one of North America’s largest independent natural gas producers. In the past two years, EnCana has sold most of its conventional properties to focus on early-stage assets, particularly natural gas deposits. These properties are usually located in remote, mountainous areas of North America, which makes them more expensive to operate. However, these new deposits are much larger than conventional gas fields. EnCana feels that these assets will last decades longer than its older properties. That extra cash flow should more than offset the higher costs, particularly as production from conventional sources of gas starts to fall....

PETRO-CANADA $49 (Toronto symbol PCA; SI Rating: Average) is Canada’s second-largest oil company, with major production areas in Western Canada and off the coast of Newfoundland. It also sells gasoline through over 1,400 retail stations. In the third quarter of 2005, the company’s production fell 3% from a year earlier due to shutdowns for maintenance and lower output at it older properties. However, higher oil prices offset the lower production. Petro-Canada should start to realize the benefits of several major projects in the next few years. Production should rise between 4% and 7% by 2008 thanks to higher production at Syncrude (Petro- Canada has a 12% interest) and the start-up of the new White Rose offshore oil platform near Newfoundland....

IMPERIAL OIL LTD. $119 (Toronto symbol IMO; SI Rating: Average) is Canada’s biggest producer of oil and natural gas. It also operates a nationwide chain of retail gasoline stations under the “Esso” banner. U.S.-based ExxonMobil Corp. owns 69.9% of Imperial. Production at many of Imperial’s mature properties in Western Canada is dropping, so it’s investing heavily in new sources of oil. It owns 25% of the massive Syncrude oil sands joint venture in Northern Alberta. Syncrude is now expanding and it’s hard to predict costs in complex projects like this. For instance, Syncrude’s latest upgrades will cost twice their original forecast. Imperial is also building its own oil sands project at Kearl Lake for $6.5 billion, although ExxonMobil will share some of the cost. That’s more than three times the $2.05 billion or $5.74 a share that Imperial earned in 2004. The company aims to start work on the project in 2007, and begin production in 2010....

CANADIAN TIRE CORP., LTD. $69 (Toronto symbol CTR.NV; SI Rating: Above average) is best known for its 459 Canadian Tire retail stores, which carry a unique mix of automotive, home improvement and sporting goods. The company also sells its goods over the Internet. Other operations include Canada’s largest independent chain of gasoline stations, consisting of 253 gas bars, 242 convenience stores and kiosks and 65 car washes, plus the Mark’s Work Wearhouse chain of 335 casual clothing stores. In 1994, Canadian Tire began replacing its traditional stores with “New-Format” stores, which are bigger and better lit. The company later refined this design into the “Concept 20/20" store, whose more flexible layout lets stores carry more fast-selling merchandise. Concept 20/20 stores also feature other innovations, such as a central customer service counter and improved signage....

RBC CANADIAN EQUITY FUND $24.09 (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 TD Bank, Manulife Financial, Bank of Montreal, Bank of Nova Scotia, Royal Bank, EnCana Corporation, Petro- Canada, CN Railway, Suncor Energy and Manulife Financial. The $4.1 billion fund is reasonably well-balanced by industry sector. But it does hold a relatively high 31.7% of its holdings in Financial stocks. These stocks will benefit as the economy continues to recover, and it’s hard to match the big-five banks’ record of consistent earnings and dividend growth. But if you hold this fund, remember to adjust your overall portfolio to reflect the addition of a large Financial services component....

TD CANADIAN EQUITY FUND $29.13 (CWA Rating: Conservative) (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) 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 Manulife Financial, Suncor Energy, Royal Bank, EnCana, TD Bank, Petro-Canada, Rogers Communications, Bank of Nova Scotia, Falconbridge and Valero Energy.

The $2.4 billion fund currently holds about 31.8% of its portfolio in Financial services shares....

FIDELITY FOCUS TECHNOLOGY FUND $9.19 (CWA Rating: Aggressive) (Fidelity Investments Canada, 483 Bay St., Suite 200, Toronto, Ont. M5G 2N7. 1-800-263-407 7; Web site: www.fidelity.ca. Load fund — available from brokers) invests mainly in technology companies. This includes computer services, computer software, computer systems, communications systems, electronics, office equipment, scientific instruments and semiconductors (computer chips). The fund expanded in June, 2003 from primarily a U.S. focus to a global scope in its stock selections. Right now, it sees the most attractive opportunities for technology investing in the U.S., Japanese and South Korean markets. The fund looks for stocks with strong earnings growth that appear undervalued....

FIDELITY FOCUS FINANCIAL SERVICES FUND $21.51 (CWA Rating: Aggressive) invests mostly in financial services companies in brokerage and investment management, investment banking, life insurance, personal loans, property and casualty insurance, and savings and loans. Fidelity Focus Financial Services Fund now holds a higher percentage of international stocks than in the past. Geographically, its holdings are allocated: the U.S., 22.8%; the UK, 16.3%; Japan, 12.3%; Germany 7.7%; Bermuda, 6.5%; Italy, 6.0%; Hong Kong, 4.0%; Switzerland, 4.0%; South Korea, 3.5%; and Brazil, 2.1%. The top holdings of this $71.9 million fund are Deutsche Boerse AG, British Land Company plc, HSBC Holdings, Unicredito Italiano, JP Morgan Chase, Sumitomo Mitsui, State Bank of India, Kookmin Bank, Standard Chartered plc, and PartnerRe....

FIDELITY FOCUS CONSUMER INDUSTRIES FUND $15.82 (CWA Rating: Aggressive) (Fidelity Investments Canada, 483 Bay St., Suite 200, Toronto, Ont. M5G 2N7. 1-800-263-4077; Web site: www.fidelity.ca. Load fund — available from brokers) invests mainly in U.S. consumer goods and services companies. This includes appliances, cars, clothing, cosmetics, entertainment, food and beverages, homes, household products, leisure, personal computers, restaurants and travel. Consumer spending is a key part of the U.S. economy, accounting for approximately two-thirds of activity. The fund uses a “bottom-up” approach (using fundamentals such as earnings, cash flow and low debt) to identify undervalued companies....

SNAP-ON INC. $38 (New York symbol SNA; WSSF Rating: Average) makes and distributes tools and storage chests to mechanics, mainly through a fleet of franchised vans that visit automotive garages. This business supplies about half of its revenue. It also makes equipment and software that mechanics use to diagnose automotive problems, as well as a wide range of non-automotive tools. It gets over 40% of its revenue from overseas customers. In 2004, the company restructured its manufacturing and distribution. That helped it improve its profit margins, while speeding up deliveries. Faster delivery improves customer satisfaction, and cuts Snap-On’s inventory costs....

TENNANT COMPANY $52 (New York symbol TNC; WSSF Rating: Average) makes a wide variety of industrial floor cleaning equipment. It also makes outdoor street sweepers. Overseas markets account for a third of its sales. In the third quarter of 2005, Tennant’s earnings jumped to $0.69 a share (total $6.3 million) from $0.11 a share ($1.0 million) a year earlier. However, the year-earlier figure included a $0.20 a share restructuring charge. Sales grew 14.4%, to $137.8 million from $120.5 million. Tennant’s stock fell to $35 in May 2005, but has gained about 50% since as new industrial floor cleaners have expanded its market share. A new line of carpet cleaning products has also spurred sales....

GENUINE PARTS COMPANY $44 (New York symbol GPC; WSSF Rating: Average) distributes over 300,000 automotive replacement parts in the United States, Canada and Mexico, mainly through independent outlets. This business provides about half of its revenue. It also distributes industrial parts, office supplies and electrical equipment. In the three months ended September 30, 2005, earnings rose 12.5%, to $0.63 a share (total $110.9 million) from $0.56 a share ($97.9 million) a year earlier. Sales grew 10.6%, to $2.6 billion from $2.35 billion, mainly due to strong growth at all its divisions, particularly the industrial and automotive parts businesses. Earnings could suffer in the fourth quarter of 2005, as the full impact of Hurricane Katrina and higher gas prices could cut demand for auto parts. Rising costs for steel and other raw materials could also put pressure on Genuine Parts’ profit margins....

ALLIANT ENERGY CORP. $29 (New York symbol LNT; WSSF Rating: Average) provides electricity and gas to over 1.4 million customers in four Midwest states. The company is currently simplifying its operations as part of a broad restructuring plan. In 2005, Alliant sold its 41% interest in a Wisconsin nuclear power plant for $78.5 million. Alliant also agreed to sell its 70% stake in an Iowa nuclear power plant and related assets for $387 million. The company is also selling its money-losing overseas power plants. It will use the cash to pay down its $2.1 billion in long-term debt, (or 0.8 times equity)....

AMEREN CORP. $52 (New York symbol AEE; WSSF Rating: Average) has 2.3 million electric customers and 900,000 natural gas customers in Missouri and Illinois. The company aims to cut its operating costs over the next three years by $65 million, mainly by cutting finance and administrative staff. To put this target in context, Ameren earned $280 million in the three months ended September 30, 2005, up 20.7% from $232 million a year earlier. However, per-share profit grew just 14.2%, to $1.37 from $1.20, due to more shares outstanding. Revenue jumped 46.2%, to $1.9 billion from $1.3 billion, mainly due to last year’s acquisition of Illinois Power Company. Coal supplies about 85% of Ameren’s fuel needs, but rising prices and environmental concerns have prompted the company to consider building a second unit at its 21-year old nuclear power facility west of St. Louis. The project would cost at least $2 billion, and take at least 10 years to complete. Although companies often underestimate the cost of complex projects, Ameren did design the current plant to make it easier to add more units....