acquisition
A big online gaming deal may pay off for NYX Gaming, but it still breaks many of our investment rules and remains a high risk investment.
In recent years, Great-West has bought companies in Ireland and the U.S. that have added new business lines and boosted its profits. Growth by acquisition can be risky, but Great-West’s large size lets it take advantage of opportunities with strong chances of success. GREAT-WEST LIFECO $36.57 (Toronto symbol GWO; Shares outstanding: 997.4 million; Market cap: $36.7 billion; TSINetwork Rating: Above Average; Yield: 3.6%; www.greatwestlifeco.com) is one of Canada’s largest insurance firms. It also offers mutual funds and wealth management. Power Financial owns 67.1% of Great-West. In the three months ended March 31, 2015, Great-West’s earnings per share rose 18.6%, to $0.70 from $0.59 a year earlier....
Meta Description: Thanks to a key European acquisition and new fleet of planes, FedEx maintains its position as one of our best stocks to buy in the U.S.
Our latest update on two Canadian bank stocks, both of which have seen their international expansion plans bear strong results.
Here’s the text of the quarterly letter I recently sent to our Portfolio Management clients:
“Most investors find they improve their investment results when they invest conservatively. Speculating can pay off from time to time. But the gains are generally too small and/or too rare to offset the losses, and still provide a reasonable rate of return. More often, investors find they have a net loss on their speculative activities over a period of years. However, it is possible to get lucky.
Mr. W., one of our portfolio-management clients, loves his job as a high-school guidance counselor. But he recognized early in his career that it was never going to finance the lifestyle he wanted to provide for his family. So for the first couple of decades of his investing career, he tried to make his fortune as a speculator. He tried buying penny stocks, selling short, options trading and futures trading. That worked out as it does for most investors. His gains were enough to keep him in the game, but too little to provide a worthwhile financial return, much less justify the time he spent.
In middle age, he quit speculating and began dabbling in various small business ventures. Gains were irregular here as well. Then he bought a downtown Toronto rooming house. A couple of years later, an offer from a property developer put a highly rewarding end to his sideline as a rooming house operator. He then hired us to build and manage a conservative investment portfolio for him.
Then lightning really struck. Mr. W. has just acquired a large holding in a well-known Canadian gold mining company. He got the stock as a result of the success of an investment he made in a grubstaking syndicate after he sold the rooming house. When added to his portfolio, the stock made up 20% of its total value. This left Mr. W. with a dilemma: Should he hold on to the stock, even though it left him with an inappropriate and risky portfolio balance? Or should he sell all or part of it, and pay capital-gains tax?
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“Most investors find they improve their investment results when they invest conservatively. Speculating can pay off from time to time. But the gains are generally too small and/or too rare to offset the losses, and still provide a reasonable rate of return. More often, investors find they have a net loss on their speculative activities over a period of years. However, it is possible to get lucky.
Mr. W., one of our portfolio-management clients, loves his job as a high-school guidance counselor. But he recognized early in his career that it was never going to finance the lifestyle he wanted to provide for his family. So for the first couple of decades of his investing career, he tried to make his fortune as a speculator. He tried buying penny stocks, selling short, options trading and futures trading. That worked out as it does for most investors. His gains were enough to keep him in the game, but too little to provide a worthwhile financial return, much less justify the time he spent.
In middle age, he quit speculating and began dabbling in various small business ventures. Gains were irregular here as well. Then he bought a downtown Toronto rooming house. A couple of years later, an offer from a property developer put a highly rewarding end to his sideline as a rooming house operator. He then hired us to build and manage a conservative investment portfolio for him.
Then lightning really struck. Mr. W. has just acquired a large holding in a well-known Canadian gold mining company. He got the stock as a result of the success of an investment he made in a grubstaking syndicate after he sold the rooming house. When added to his portfolio, the stock made up 20% of its total value. This left Mr. W. with a dilemma: Should he hold on to the stock, even though it left him with an inappropriate and risky portfolio balance? Or should he sell all or part of it, and pay capital-gains tax?
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Our take on how blue chip stock Fortis seeks to balance the risks and of growth by acquisition and keep its dividend rising.
ALIMENTATION COUCHE-TARD $57.58 (Toronto symbol ATD.B: TSINetwork Rating: Extra Risk) (1-800-361-2612; www.couchetard.com; Shares outstanding: 567.4 million; Market cap: $32.7 billion; Dividend yield: 0.4%) completed its $1.7-billion acquisition of The Pantry in March 2015. The move added 1,500 convenience stores in 13 southern U.S. states, bringing Couche-Tard’s total to 7,848 locations throughout North America.
In Europe, the company operates 2,230 stores across Scandinavia (Norway, Sweden and Denmark), Poland, the Baltic states (Estonia, Latvia and Lithuania) and Russia.
In the three months ended April 26, 2015, Couche-Tard’s sales fell 18.6%, to $7.29 billion from $8.95 billion a year earlier (all figures except share price in U.S. dollars).
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In Europe, the company operates 2,230 stores across Scandinavia (Norway, Sweden and Denmark), Poland, the Baltic states (Estonia, Latvia and Lithuania) and Russia.
In the three months ended April 26, 2015, Couche-Tard’s sales fell 18.6%, to $7.29 billion from $8.95 billion a year earlier (all figures except share price in U.S. dollars).
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WYNDHAM WORLDWIDE $87.29 (New York symbol WYN; TSINetwork Rating: Extra Risk) (973- 753-6000; www.wyndhamworldwide.com; Shares outstanding: 120.0 million; Market cap: $10.4 billion; Dividend yield: 1.9%) is one of the world’s largest hospitality companies, with 7,670 franchised hotels worldwide.
In addition to hotels, Wyndham manages vacation resorts, rental properties, luxury clubs and time-shares. This wide range of operations gives it more consistent cash flow than most of its competitors, which mainly focus on hotels.
Wyndham has just bought ResortQuest Whistler, which manages nearly 600 vacation properties at the popular ski resort, for an undisclosed amount. ResortQuest’s properties are fully furnished and offer amenities like full kitchens, fireplaces and large living areas. This is Wyndham’s first acquisition in Canada.
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In addition to hotels, Wyndham manages vacation resorts, rental properties, luxury clubs and time-shares. This wide range of operations gives it more consistent cash flow than most of its competitors, which mainly focus on hotels.
Wyndham has just bought ResortQuest Whistler, which manages nearly 600 vacation properties at the popular ski resort, for an undisclosed amount. ResortQuest’s properties are fully furnished and offer amenities like full kitchens, fireplaces and large living areas. This is Wyndham’s first acquisition in Canada.
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DirectCash Payments Inc., $12.76, symbol DCI on Toronto (Shares outstanding: 17.6 million; Market cap: $231.1 million; www.directcash.net), is the largest non-bank owner and operator of automated teller machines in Canada, Australia and New Zealand and the third-largest in the U.K. It also operates ATMs in Mexico. In addition, the company serves credit unions and other small financial institutions that outsource their ATM transactions. DirectCash now has 20,984 active ATMs, up 5.6% from 19,874 a year ago. Its machines processed 30.4 million transactions in the latest quarter, up 3.0% from 29.5 million....
MONSANTO CO., $105.21, New York symbol MON, develops and sells technology-based agricultural products, such as genetically modified seeds, to farmers, grain processors and food companies. It also sells weed- and pest-control products. The company reported better-than-expected quarterly earnings this week, but a weaker forecast for the full fiscal year caused the stock to fall 7%. In the third quarter of its 2015 fiscal year, which ended May 31, 2015, Monsanto earned $1.1 billion, up 33.0% from $858 million a year earlier. Earnings per share gained 47.5%, to $2.39 from $1.62, on fewer shares outstanding. That easily beat the consensus estimate of $2.07....