acquisition strategy

AltaGas Ltd., $26.60, symbol ALA on Toronto (Shares outstanding: 81.9 million; Market cap: $2.2 billion; www.altagas.ca), mainly extracts, processes and distributes natural gas. It also processes natural-gas liquids and generates power in Alberta. AltaGas pays an $0.11 monthly dividend, which yields 5.0% on a yearly basis. The company gets most of its revenue under long-term contracts. These deals give it stable, predictable cash flow. AltaGas is trying to cut its reliance on the natural-gas business, but its growth-by-acquisition strategy, and investments in areas like wind and geothermal, add risk. However, power prices are rising in Alberta. That should push up the company’s cash flow....

TransForce Inc., $15.02, symbol TFI on Toronto (Shares outstanding: 95.9 million; Market cap: $1.4 billion; www.transforcecompany.com), provides a variety of trucking services across Canada. Its trucking fleet is the largest in the country, with 9,500 trucks and 11,100 trailers. The company also has exclusive partnerships that extend its reach into the U.S. Montreal-based TransForce was an income trust from September 2002 to May 2008. The company has four main divisions:...

AltaGas Ltd., $25.56, symbol ALA on Toronto (Shares outstanding: 83.0 million; Market cap: $2.1 billion; www.altagas.ca), mainly extracts, processes and distributes natural gas. It also processes natural-gas liquids and generates power in Alberta. AltaGas pays an $0.11 monthly dividend, which yields 5.2% on a yearly basis. The company gets most of its revenue under long-term contracts. These give it stable, predictable cash flow. AltaGas is trying to cut its reliance on the natural-gas business, but its growth-by-acquisition strategy, and investments in areas like wind and geothermal, add risk. However, power prices are rising in Alberta. That should increase the company’s cash flow....

CRITICALCONTROL SOLUTIONS CORP. $0.78 (Toronto symbol CCZ; TSINetwork Rating: Speculative) (1-877-215-5883; www.criticalcontrol.com; Shares outstanding: 46.6 million; Market cap: $36.4 million; No dividends) sells software and services that help businesses better manage, access and store their information. CriticalControl gets about 60% of its revenue from clients in the oil and gas industry, followed by government (20%), health care (10%) and finance and retail (10%). About 45% of Alberta’s provincial-government ministries are clients. The company estimates that 85% of western Canada’s oil and gas firms use its products. CriticalControl has two main divisions:...

When we’re picking stocks to recommend in our newsletters, including Wall Street Stock Forecaster, our publication for conservative investing in U.S. stocks, we like to see companies that benefit from steady revenue streams from high-quality assets, long-term contracts or other reliable sources. That’s because this type of revenue helps cut a stock’s risk. It also cuts its exposure to the ups and downs of the economic cycle.

Conservative investing: Shift toward services has helped this former “Stock of the Year”

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CML Healthcare Inc., $12.00, symbol CLC on Toronto (Shares outstanding: 89.7 million; Market cap: $1.1 billion; www.cmlhealthcare.com) was formerly CML Healthcare Income Fund before it converted to a corporation on January 4, 2011. CML (or Canadian Medical Laboratories) is one of Canada’s largest health-care diagnostic services providers. CML has two main business segments: Laboratory Services and Imaging Services. Laboratory Services accounts for 45% of CML’s revenue, and performs a wide range of medical tests through its Ontario laboratory network, which includes the company’s central laboratory in Mississauga and 120 specimen-collection centres. The size of CML’s lab network lets it take advantage of economies of scale that are not available to smaller labs. About 85% of the company’s lab revenues are fixed by an agreement with the Ontario Ministry of Health....

CGI GROUP INC. $18.09, Toronto symbol GIB.A, is our Stock of the Year for 2011. Next week, Stock Pickers Digest, our newsletter for aggressive investors, will reveal its #1 pick for 2011. If you’re not already a Stock Pickers Digest subscriber, click here to learn how you can get one month—including the Stock Pickers Digest Stock of the Year—FREE. CGI is Canada’s largest provider of computer-outsourcing services. The company’s services help its customers automate certain routine functions, such as accounting and buying supplies. That lets CGI’s clients focus on their main businesses, and improve their efficiency. CGI is more speculative than most of our other recommendations. It does not pay a dividend, and its major shareholders control the company through multiple-voting shares. Its aggressive growth-by-acquisition strategy also adds risk....

CGI Group is more speculative than most of our other recommendations. It does not pay a dividend, and its major shareholders control the company through multiple-voting shares. Its aggressive growth-by-acquisition strategy also adds risk. It’s true that each of these factors is something of a negative, but each is minor compared to CGI’s strong growth prospects. That’s why we picked CGI as our Stock of the Year in January 2010. The stock has gained 20.0% since then. We still feel CGI has years of growth ahead, particularly because its services help cash-strapped governments and businesses cut costs. It also trades at a low multiple to earnings. That’s why we are once again picking CGI as our Stock of the Year for 2011....

NorthWest HealthCare Properties REIT, $11.58, symbol NWH.UN on Toronto (Units outstanding: 25.2 million; Market cap: $292.3 million; www.nwhp.ca) owns 48 income-producing properties, with a focus on medical office buildings. The real estate investment trust (REIT) is Canada’s largest non-government owner and operator of medical office buildings. In all, NorthWest’s properties contain about 3.0 million square feet of leasable area. The REIT’s properties are located in B.C., Alberta, Ontario, Quebec, Nova Scotia and New Brunswick. NorthWest has a 90.3% occupancy rate. The REIT first sold units to the public for $10 each, and began trading on Toronto on March 25, 2010....

As part of our portfolio management strategy, we put a lot of importance on the amount of goodwill that a company carries as an asset on its balance sheet.

(We provide personal, in-depth portfolio management services to a small group of investors through Successful Investor Wealth Management....