asset management

LOBLAW COMPANIES LTD., $47.01, Toronto symbol L, has received approval from competition regulators for its acquisition of Shoppers Drug Mart Corp. (Toronto symbol SC), which operates 1,253 drug stores across Canada. To win approval for the purchase, Loblaw has agreed to sell 18 stores and 9 pharmacies. It does not plan to close any of its 1,000 supermarkets. Loblaw will pay roughly $12.4 billion in cash and shares for Shoppers when the deal closes on March 28, 2014. The price is equal to 93% of its $13.3-billion market cap. After the deal closes, Shoppers shareholders will own 29% of the combined company....

BANK OF MONTREAL $70 (Toronto symbol BMO; Conservative Growth and Income Portfolios, Finance sector; Shares outstanding: 644.5 million; Market cap: $45.1 billion; Price-to-sales ratio: 2.2; Dividend yield: 4.2%; TSINetwork Rating: Above Average; www.bmo.com) is Canada’s fourth-largest bank, with $537.3 billion of assets. The bank is buying U.K.-based F&C Asset Management, which sells investment services to individuals and institutional clients, such as pension plans and insurance companies. F&C has $136 billion U.S. in assets under management, which will increase the assets that Bank of Montreal’s Global Asset Management division administers to $269 billion U.S. The purchase will also add many wealth management clients outside North America....

In addition to TD (see page 21), we also like the outlook for Canada’s other four big banks. Each has its particular risks, but all are good choices for long-term growth and income.

ROYAL BANK OF CANADA $71 (Toronto symbol RY; Conservative Growth and Income Portfolios, Finance sector; Shares outstanding: 1.4 billion; Market cap: $99.4 billion; Price-to-sales ratio: 2.7; Dividend yield: 3.8%; TSINetwork Rating: Above Average; www.rbc.com) is Canada’s second-largest bank, with $860.8 billion of assets.

Royal recently agreed to sell its 13 branches and related operations in Jamaica....

PLEASE NOTE: Next week, Canadian Wealth Advisor will reveal its “#1 Safety-Conscious Stock Pick for 2014.” One week from today, on February 7, 2014, shortly after the stock market closes at 4:00 p.m. Toronto time, we will reveal our our #1 Safety-Conscious Pick for 2014 to subscribers of Canadian Wealth Advisor. You can be among the first to hear about our #1 pick for 2014. Because you’re a loyal subscriber, we are happy to offer you a bargain-priced, no-risk introduction to Canadian Wealth Advisor. It gives you the first month—and the 2013 U.S. Stock of the Year—FREE. But you must act now. Click here. BANK OF MONTREAL, $68.06, Toronto symbol BMO, has agreed to buy U.K.-based wealth management firm F&C Asset Management. F&C sells a variety of investment services to individuals and institutional clients, such as pension plans and insurance companies. It has $136 billion U.S. in assets under management, which will increase the assets Bank of Montreal’s Global Asset Management division administers to $269 billion U.S. The purchase will also add many wealth management clients outside North America....

Western Forest Products, $1.58, symbol WEF on Toronto (Shares outstanding: 261.0 million; Market cap: $474.0 million; www.westernforest.com), is B.C.’s largest woodland operator and lumber producer, with an annual available harvest of about 6.4 million cubic metres of timber (of which roughly 6.2 million cubic metres is from Crown land). The company can produce over 1.1 billion board feet of lumber from eight sawmills and three plants. Its main activities include timber harvesting, reforestation, sawmilling logs into lumber and value-added manufacturing (including making mouldings, frames and panelling). Almost all of Western’s operations are in B.C.’s coastal region. Its products are sold in over 25 countries....

Pat McKeough responds to many requests from members of his Inner Circle for specific advice on stocks as well as questions on investment strategy and the economy. Every week, his comments and recommendations on the most intriguing questions of the past week go out to all Inner Circle members. And each week, we offer you one of the highlights from these Q&A sessions. While we reserve our buy-hold-sell advice for Inner Circle members, these excerpts provide a great deal of information and analysis on stocks we’ve covered for members of Pat’s Inner Circle....

Norbord Inc., $28.72, symbol NBD on Toronto (Shares outstanding: 53.3 million; Market cap: $1.6 billion; www.norbord.com), is one of the world’s largest producers of oriented strand board (OSB). The company can produce more than 5.1 billion square feet of OSB at 13 plants in North America and Europe. Brookfield Asset Management (Toronto symbol BAM) owns 52% of Norbord. OSB is an engineered wood-panel product that’s used as a plywood replacement in home construction and manufacturing. The company also produces particleboard, medium density fibreboard and other engineered wood products. In the three months ended June 30, 2013, Norbord’s revenue rose 34.2%, to $365 million from $272 million a year earlier. (All figures except share price and market cap in U.S. dollars.) Earnings jumped to $53 million, or $1.00 a share, from $6 million, or $0.14....

Pat McKeough responds to many requests from members of his Inner Circle for specific advice on stocks to buy as well as questions on investment strategy and the economy. Every week, his comments and recommendations on the most intriguing questions of the past week go out to all Inner Circle members. And each week, we offer you one of the highlights from these Q&A sessions. While we reserve our buy-hold-sell advice for Inner Circle members, these excerpts provide a great deal of information and analysis on stocks we’ve covered for members of Pat’s Inner Circle....

Acadian Timber, $12.40, symbol ADN on Toronto (Shares outstanding: 16.7 million; Market cap: $207.5 million; www.acadiantimber.com), supplies forest products in Eastern Canada and the northeastern U.S. Acadian owns and manages 1.1 million acres of timberlands in New Brunswick and Maine and provides management services for 1.3 million acres of Crown-licensed forests. With a total of 2.4 million acres under management, Acadian is the second-largest timberland operator in New Brunswick and Maine. It also owns and operates a forest nursery in Second Falls, New Brunswick. The company’s products include softwood and hardwood sawlogs, pulpwood and biomass (wood waste for burning in power plants). It sells these goods to over 100 regional customers....

BANK OF NOVA SCOTIA $56 (Toronto symbol BNS; Conservative Growth Portfolio, Finance sector; Shares outstanding: 1.2 billion; Market cap: $67.2 billion; Price-to-sales ratio: 2.4; Dividend yield: 4.3%; TSINetwork Rating: Above Average; www.scotiabank.com) is Canada’s third-largest bank, with assets of $754.2 billion.

The bank has recovered strongly from the 2008 financial crisis. Revenue rose 65.9%, from $11.9 billion in 2008 to $19.7 billion in 2012 (fiscal years end October 31). Earnings gained 98.6%, from $3.0 billion in 2008 to $6.0 billion in 2012. Due to more shares outstanding, earnings per share rose at a slower pace of 71.1%, from $3.05 to $5.22. Without a one-time gain on the sale of real estate, it would have earned $4.61 a share in 2012.

Much of this growth is due to acquisitions. In the past six years, Bank of Nova Scotia has spent over $14 billion buying smaller financial services firms. It purchased most of these assets from banks that wanted to exit certain markets, so it probably got many of them at bargain prices.

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