Search

AIC DIVERSIFIED CANADA FUND $44.29 (CWA Rating: Conservative) mainly holds shares of Canadian companies of average or above-average quality. It also holds stocks of some U.S. firms. The $1.9 billion fund’s 10 largest holdings are Power Financial, Canadian Oil Sands Trust, TD Bank, Shoppers Drug Mart, Loblaw, Thomson Corp., Brookfield Asset Management, Royal Bank, Sun Life Financial and Royal Bank of Scotland. The fund holds just 25 stocks. Its turnover was 9.1% in 2005. Turnover of 24.3% in 2004 was on the high side. The fund holds 46.7% of its assets in Financial services stocks. The rest of the portfolio breaks down as follows: Consumer staples, 19.7%; Energy, 10.2%; Consumer discretionary, 8.5%; Health care, 6.1%; and Information technology, 3.8%. Over the last year, the S&P/TSX Index gained 28.4%, mainly due to strength in Resource sector stocks. The fund made 17.0%. Its MER is 2.42%....

AIC AMERICAN ADVANTAGE FUND $7.30 (CWA Rating: Aggressive) (AIC Group of Funds, 1375 Kerns Road, Burlington, Ont., L7R 4X8, 1-800-263-2144; Web site: www.aicfunds.com. Buy or sell through brokers) invests mostly in U.S. stocks, with almost 97% of assets in the financial services area. This segment breaks down as follows: Property & casualty insurance companies, 15.2%; Investment banking & brokerage, 14.0%; Multi-line insurance, 12.6%; Life & health insurance, 12.4%; Commercial Banks, 11.8%; Regional Banks, 7.5%; Diversified financials, 7.3%; Insurance brokers, 7.0%; Wealth management, 6.2%; and Consumer finance, 4.1%. AIC American Advantage’s top 10 holdings are Progressive Corp., ING Canada, AFLAC, Morgan Stanley, Hartford Financial Services, Washington Mutual, Northern Trust, Merrill Lynch, JP Morgan Chase and Willis Group Holdings. This fund holds just 17 stocks. Turnover was just 19.1% in 2005, after a high 28.7% in 2004. AIC American Advantage made 13.3% over the last year, compared to a gain of 7.8% for the S&P 500 Index. Its MER is 2.65%....

RBC DIVIDEND FUND $44.90 (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) has 43.3% of its portfolio in Financial services stocks. It has a further 17.4% in Energy stocks. The $7.3 billion Royal Dividend Fund’s top stock holdings are Royal Bank, Bank of Nova Scotia, TD Bank, Manulife Financial, CIBC, TransCanada Corp., Bank of Montreal, Petro-Canada and Power Corp. Over the last five years, Royal Dividend Fund has posted a 13.2% annual rate of return. That’s better than the S&P/TSX 60’s gain of 11.2% over the same period. The fund gained 24.9% over the last year, compared to the S&P/TSX 60’s gain of 30.2%. Royal Dividend’s MER is 1.74%....

BMO DIVIDEND FUND $45.82 (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) currently holds about 53.1% of its portfolio in the Financial services industry. Its next-largest holding is Energy at 13.3%. BMO Dividend Fund’s largest holdings are Manulife Financial, Bank of Nova Scotia, CIBC, Royal Bank of Canada, Enbridge, Toronto-Dominion Bank, Canadian National Railway, TransCanada Corporation, Imperial Oil, Power Financial, Shell Canada and Sun Life Financial. Over the last five years, the $5 billion BMO Dividend Fund has posted a 13.3% annual rate of return. That’s much better than the S&P/TSX 60’s gain of 11.2%. The fund gained 24.1% over the last year, compared to a gain of 30.2% for the S&P/TSX 60. BMO Dividend’s MER is 1.75%....

ISHARES MCSI CANADA INDEX FUND $25 (American Exchange symbol EWC; buy or sell through brokers) invests in most of the stocks in the Morgan Stanley Capital International Canada Index. These stocks represent Canada’s largest and most-established public companies, accounting for about 60% of the market capitalization of all publicly traded stocks. These shares are managed by Barclays Global Investors. There are now 26 different MCSI index funds.

This fund has an MER of 0.59%. That’s a lot higher than the 0.17% MER on the S&P/TSE 60 units, also managed by Barclays. It’s also no better than most open-end index funds, which have MERs as low as 0.54%.

We think MCSI Canada’s high MER defeats the main advantage of index funds. The spread between iShares MCSI Canada’s high MER and that of a low-fee fund may not appear to make a lot of difference in a single year, but there is no point in paying more than you need to.

We don’t recommend iShares MCSI Canada Index Fund.

DIAMONDS TRUST SHARES $114 (American Exchange symbol DIA; buy or sell through brokers) hold the 30 stocks that make up the Dow Jones Industrial Average. Expenses are about 0.18% of assets. Currently, the fund’s top 10 holdings are IBM, 3M, Boeing Co., United Technologies, Caterpillar, Altria Group, American International Group, Johnson & Johnson, Procter & Gamble and Exxon Mobil....

S&P DEPOSITORY RECEIPTS $131 (American Exchange symbol SPY; buy or sell through brokers) are commonly called ‘Spiders’. The fund holds the stocks in the S&P 500 Index. This index is comprised of 500 major U.S. stocks chosen for market size, liquidity, and industry group representation....

NASDAQ-100 TRUST SHARES $41.49 (Nasdaq Exchange symbol QQQQ; buy or sell through brokers) or ‘Qubes’, hold the stocks that represent the Nasdaq-100 Index. This index is made up of the 100 largest and most heavily traded stocks on the Nasdaq Exchange. The index reflects firms across major industry groups including computer hardware and software, telecommunications, retail/wholesale trade and biotechnology. It does not contain financial companies. Expenses are about 0.20% of assets. At last report, the top 10 highest-weighted stocks were Qualcomm, Microsoft, Apple Computer, Google, Cisco, Intel, Amgen, eBay, Oracle and Starbucks. Nasdaq-100 Trust Shares are a buy for aggressive investors only.

ISHARES CDN LARGECAP 60 INDEX FUND $68.83 (Toronto symbol XIU; buy or sell through a broker) (formerly called iUnits S&P/TSX 60 Index Participation Fund) is a good low-fee way to buy the top stocks on the TSE. The units hold a basket of stocks that represent the S&P/TSX 60 Index. The index is made up of the 60 largest and most heavily traded stocks on the TSE. Most of the 60 stocks in the index are good quality companies. However, to meet the requirement that all sectors are represented, the index holds a few firms we wouldn’t include, such as Abitibi-Consolidated, Quebecor World and Rogers Communcations. The index’s top holdings are: Royal Bank, 6.4%; Manulife, 6.1%; EnCana Corporation, 5.2%; Bank of Nova Scotia, 4.8%; TD Bank, 4.8%; Suncor Energy, 4.8%; Canadian Natural Resources, 3.9%; Bank of Montreal, 3.4%; Barrick Gold, 3.2%; Petro-Canada, 3%; CIBC, 3%; Sun Life Financial, 2.9%; and Canadian National Railway, 2.9%....

TRIMARK CANADIAN RESOURCES FUND $18.17 (CWA Rating: Aggressive) (AIM Funds Management Inc., 5140 Yonge Street, Suite 900, Toronto, Ontario M2N 6X7. 1-800-631-7008; Website: www.aimfunds.ca. Buy or sell through brokers.) includes firms we’d rate as Speculative in its top picks. However, we like the fund’s value-seeking, conservative approach to picking stocks in the volatile resource sector. The $459.9 million fund’s MER is 2.47%. Over the last year, Trimark Canadian Resources made 34.7%. Its five-year record is 26.2% annually. The fund’s top holdings are West Fraser Timber, Kinross Gold Corporation, Barrick Gold, Inmet Mining, Mayr-Melnhof Karton AG (Austrian cardboard carton maker), Enerflex Systems, Inco Ltd., Labrador Iron Ore Royalty, Teck Cominco and Sherritt International....

TD RESOURCE FUND $31.13 (CWA Rating: Aggressive) (TD Asset Management, P.O. Box 7500, Station A, Toronto, Ontario. M5W 1P9. 1-800-463-3863; Web ite:www.tdcanadatrust.ca. No load — deal directly with the bank) invests in companies with superior asset bases, proven management and the ability to internally finance growth. The $240.5 million TD Resource Fund’s top holdings are mostly of ‘Average’ quality or higher. They include Suncor Energy, Alcan, EnCana, Talisman Energy, Cameco Corp., Shell Canada, Petro-Canada, Nexen and Western Oil Sands. The fund’s industry breakdown is: Energy, 48.6%; and Materials, 44%. Its MER is 2.45%. Over the past year the fund has made 45.1%. The fund’s five-year average is 24.0% annually. TD Resource Fund is a buy.

With their first budget, the Conservatives are increasing the federal dividend tax credit on Canadian dividend income. If fully matched by the provinces, this will lower taxes on dividends by about five percentage points for top income earners. That means you’ll pay less tax on dividend income than on capital gains. However, that would make it more advantageous for investors to seek less risky dividends in place of risker capital gains. Just as dividends are taxed at a lower rate than lower-risk interest income, it stands to reason that in a future budget, the Conservatives will introduce measures to lower taxes on capital gains. This could take the form of deferring the capital gains tax for individuals on the sale of assets when the proceeds are reinvested within six months, as proposed in the election campaign....

TOYOTA MOTOR CORP. ADRs $116 (New York symbol TM; WSSF Rating: Above average) is Japan’s largest automobile maker, and the world’s second-largest after General Motors. Sales outside of Japan account for 60% of the total. Toyota also makes industrial equipment such as forklifts, and pre-fabricated housing. Like most automakers, it offers vehicle loans through its financing division. Each Toyota ADR represents two of Toyota’s common shares. Japan imposes a 15% withholding tax on dividends paid to U.S. stockholders. Toyota’s sales grew from $106.4 billion in 2001 (fiscal years end March 31) to $172.7 billion in 2005. Profits slipped from $2.92 per ADR (total $5.4 billion) in 2001 to $2.28 per ADR ($4.2 billion) in 2002, but jumped to $6.66 per ADR ($10.9 billion) in 2005....

BAXTER INTERNATIONAL INC. $38 (New York symbol BAX; WSSF Rating: Average) makes medical equipment through three main divisions: Medication Delivery makes intravenous equipment and systems; the Renal unit makes dialysis equipment; and the BioScience division makes various drugs as well as equipment that separates blood plasma. In 2005, the company had to recall 250,000 of its Colleague infusion pumps, which provide intravenous drugs to patients. A potential defect in the pump’s battery and air detection system could cause it to shut down. Baxter is working with the Food and Drug Administration (FDA) to fix the problem. Baxter sold $85 million worth of these pumps in the first half of 2005....

C.R. BARD INC. $74 (New York symbol BCR; WSSF Rating: Average) makes medical equipment in four main fields: vascular products such as stents and catheters; urology products for incontinence and drainage; oncology products that detect and treat various types of cancer; and surgical tools. Each area supplies roughly a quarter of Bard’s total revenue. This broad product line cuts Bard’s reliance on any one product. Most of Bard’s products are also single-use devices, which hospitals and other customers must constantly replace. In the three months ended March 31, 2006, Bard’s earnings slipped to $81.1 million from $81.3 million a year earlier. Per-share earnings crept up to $0.76 from $0.75, because it had fewer shares outstanding....

INVACARE CORP. $31 (New York symbol IVC; WSSF Rating: Average) makes wheelchairs and other medical mobility aids. It sells its products through over 25,000 home health care and medical equipment distributors in the United States, Australia, Canada, Europe and New Zealand. The company also sells to government health agencies, including the Medicare and Medicaid programs. However, government cutbacks have hurt Invacare’s sales in the past two years, particularly for more expensive items such as power wheelchairs and oxygen equipment. Rising steel, energy and other costs have also squeezed its profit margins. Consequently, Invacare is taking steps to cut its costs, including shifting about half of its manufacturing operations to Asia over the next three to five years. This plan will cost Invacare $42 million (pre-tax). But it will ultimately cut the company’s annual pre-tax costs by $30 million. Making more of its products in Asia will also make it easier for Invacare to expand its market share in that region....

H.J. HEINZ COMPANY $40 (New York symbol HNZ; WSSF Rating: Above average) has sold its New Zealand poultry-processing business for $165 million, which is about 24% more than the $133.2 million or $0.39 a share that the company earned from continuing operations in its third fiscal quarter ended January 31, 2006. This is one of several sales of overseas assets that the company has carried out since last year. It wants to focus on the three businesses where it has a leading market position: ketchup and sauces; meals and snack foods; and infant foods. Heinz still has several smaller operations it wants to sell, but it has now completed most of its planned asset sales. It has also cut its manufacturing facilities by 15%, and shrunk the number of products it makes....

WAL-MART STORES, INC. $46 (New York symbol WMT; WSSF Rating: Above average) is the world’s largest retailer, with roughly 6,100 discount department stores in the United States, Canada, Latin America, Europe and Asia. Despite its worldwide presence, Wal-Mart still generates 80% of its sales and 85% of its profits in the United States. It has a great growth record and plenty of long-term growth potential, here and overseas. Yet it trades below the market’s average p/e ratio, now around 18.7 on the Standard & Poor’s 500. The company’s sales rose from $217.8 billion in 2002 (fiscal years end January 31) to $312.4 billion in 2006. Profits rose from $1.50 a share (total $6.7 billion) in 2002 to $2.68 a share ($11.2 billion) in 2006....

VERSACOLD INCOME FUND $8.85 (Toronto symbol ICE.UN; SI Rating: Extra risk) paid $396.7 million in December 2005 for the public refrigerated warehouse business of Peninsular and Oriental Steam Navigation Co. That made Versacold the world’s second-largest operator of refrigerated warehouses, with 74 locations in Canada, the United States, Australia, New Zealand and Argentina. Thanks to the P&O acquisition, Versacold’s income in the three months ended December 31, 2005 rose 50.0%, to $0.18 a unit (total $4.5 million) from $0.12 a unit ($2.9 million) a year earlier. These figures exclude restructuring costs and other nonrecurring items. Revenue grew 52.6%, to $70.2 million from $46.0 million. The latest revenue figure included $20.8 million from the new assets....

SNC-LAVALIN GROUP INC. $32 (Toronto symbol SNC; SI Rating: Average) specializes in building large public works projects, such as water treatment plants, roads and bridges. It often buys small engineering firms to expand its share of the world engineering market. SNC also operates public facilities under long-term concession contracts. The largest of these is its 16.77% stake in Highway 407, a toll highway just north of Toronto that uses electronic tracking devices to toll vehicles automatically instead of traditional toll booths. The highway is still losing money, but losses shrank by 68% in 2005. This investment should soon earn a profit, particularly now that the highway’s owners and the Ontario government have settled their dispute over recent toll hikes....

SHAWCOR LTD. $19 (Toronto symbol SCL.SV.A; SI Rating: Average) makes sealants and coatings that protect oil and natural gas pipelines from corrosion. It also inspects pipelines for damage, and makes drilling and other equipment for the oil and gas industry. The company has used small acquisitions to enhance its market share in the past few years. For example, it recently launched a takeover offer for publicly traded Garneau Inc., which operates a pipeline coating plant in Alberta. ShawCor owns 19% of Garneau, and the Garneau family owns 45%. The Garneau family is negotiating with ShawCor to retain the manufacturing operations, which make equipment for oil and gas producers. The deal was to cost ShawCor $22.6 million, but that includes the manufacturing business. To put that figure in context, ShawCor earned $0.30 a share (total $21.8 million) from continuing operations in the three months ended December 31, 2005. That’s a big improvement over the $0.16 a share ($12.3 million) it made in the year-earlier quarter, when losses from its now-closed pipecoating facility in Alabama weighed on its earnings. Revenue rose 28.1%, to $291.7 million from $227.7 million....

SAPUTO INC. $33 (Toronto symbol SAP; SI Rating: Average) has made itself the top dairy producer in Canada in the past few years through acquisitions. However, heavy regulation limits Saputo’s growth in Canada. Consequently, the company is aggressively expanding outside Canada. It is targeting the United States where it’s now the fifth-largest cheese producer, and Argentina, where it’s the third-largest dairy company. Saputo earned $0.43 a share (total $45.0 million) in its third fiscal quarter ended December 31, 2005, down 21.8% from $0.55 a share ($58.3 million) a year earlier....

TELUS CORP. (Toronto symbols T $44 and T.NV $44; SI Rating: Above average) is Canada’s second-largest telecommunications provider, after BCE Inc. It provides local and long distance telephone services to roughly 5 million customers, mainly in Alberta, British Columbia and parts of Quebec. It also provides Internet access services to roughly 1 million subscribers. Telus’s revenue slipped from $7.1 billion in 2001 to $7.0 billion in 2002, but rose to $8.1 billion in 2005. It lost $0.51 a share (total $145.8 million) from continuing operations in 2001, as well as $0.75 a share ($235.8 million) in 2002, mainly due to restructuring costs following the Clearnet acquisition. However, earnings improved from $0.92 a share ($324.4 million) in 2003 to $1.94 a share ($700.3 million) in 2005. Most of Telus’s recent growth comes from its wireless division, which is Canada’s largest wireless service provider with 4.5 million customers (36% of the market). The company is also doing a good job of hanging on to its customers, and getting them to sign long-term service contracts....

ALTAMIRA SCIENCE & TECHNOLOGY FUND $8.45 (CWA Rating: Aggressive) (Altamira Investment Services, The Exchange Tower, 130 King St. West, Suite 900, Toronto, Ont. M5X 1K9. 1-800-263-2824; Web site: www.altamira.com. No load — deal directly with the company) invests in the telecommunications, biotechnology, environmental technology, health care and computer industries. The $72.9 million fund gained 1.1% over the last year, compared to the Nasdaq’s gain of 2.8%. Its MER is 2.68%. Top holdings include: Cisco, 6.2%; Microsoft, 4.4%; ASML Holding, 4.0%; Intel, 3.6%; Verisign, 3.5%; Yahoo!, 3.4%; Nokia, 3.3%; Samsung, 3.3%; Red Hat, 3.2%; and St. Jude Medical, 2.8%....

H&R BLOCK INC. $22 (New York symbol HRB; WSSF Rating: Above average) has attracted several class-action lawsuits in the past few years, mostly related to products and services it sells to its tax-preparation clients. It recently agreed to pay $62.5 million to settle four lawsuits that accused it of hiding the true interest rate on loans made to customers waiting for income tax refunds. Now it’s fighting charges that fees on a retirement savings plan account it offers exceed interest payments. However, H&R Block says that only happens to customers who make the minimum deposit, and not for those who use this account as intended, to build long-term retirement savings. The State of New York now wants H&R Block to refund about $360 million to these customers, and pay $250 million in fines. To put that in context, it earned $28.9 million or $0.09 a share in its third fiscal quarter ended January 31, 2006. These results included a $31.7 million or $0.10 a share charge for lawsuits....