asset management

BROOKFIELD RENEWABLE ENERGY PARTNERS L.P. $28.50 (Toronto symbol BEP.UN; Units outstanding: 132.8 million; Market cap: $3.8 billion; TSINetwork Rating: Extra Risk; Dividend yield: 5.0%; www.brpfund.com) and a fund managed by Brookfield Asset Management (Toronto symbol BAM.A) have agreed to buy Alcoa’s 378- megawatt Tapoco hydroelectric project for $600 million U.S. Tapoco consists of four hydroelectric plants located on the Little Tennessee and Cheoah rivers in eastern Tennessee and western North Carolina. Brookfield Renewable will own 25% of Tapoco (at a cost of $150 million) and manage the plants. Brookfield Asset Management will own the remaining 75%....

CHESAPEAKE ENERGY $19.04 (New York symbol CHK; TSINetwork Rating: Extra Risk) (405-848 -8000; www.chkenergy.com; Shares outstanding: 662.3 million; Market cap: $12.6 billion; Dividend yield: 1.8%) has moved up from its low of $13.32 in mid-May. That’s mainly because activist investor Carl Icahn has gotten involved in the company’s restructuring. Icahn, who has a long history of pushing companies to make changes that increase shareholder value, has acquired a 7.6% stake in Chesapeake. Pressure from Icahn has already prompted Chesapeake to announce that it will replace four of its eight board members with nominees of its largest shareholders—Icahn and Southeastern Asset Management Inc., which holds a 13.6% stake. Icahn now plans to push for cost-cutting measures and a more conservative approach to spending. His proposals will likely include cutting drilling budgets and selling certain pipelines and gas-processing plants....

TEMPUR-PEDIC, $25.54, symbol TPX on New York, has cut its revenue and earnings forecasts for this year. That caused the stock to fall almost 42% this week. The company manufactures and distributes therapeutic mattresses and pillows made from its Tempur material. Tempur-Pedic now expects to report 2012 earnings of $2.70 a share on revenue of $1.43 billion. That’s down from its previous forecast of $3.80 to $3.95 a share in earnings on $1.6 billion to $1.65 billion of revenue. The consensus estimate was for full-year earnings of $3.93 a share on revenue of $1.64 billion....

CHESAPEAKE ENERGY $19.04 (New York symbol CHK; TSINetwork Rating: Extra Risk) (405-848 -8000; www.chkenergy.com; Shares outstanding: 662.3 million; Market cap: $12.6 billion; Dividend yield: 1.8%) has moved up from its low of $13.32 in mid-May. That’s mainly because activist investor Carl Icahn has gotten involved in the company’s restructuring. Icahn, who has a long history of pushing companies to make changes that increase shareholder value, has acquired a 7.6% stake in Chesapeake.

Pressure from Icahn has already prompted Chesapeake to announce that it will replace four of its eight board members with nominees of its largest shareholders—Icahn and Southeastern Asset Management Inc., which holds a 13.6% stake.

Icahn now plans to push for cost-cutting measures and a more conservative approach to spending. His proposals will likely include cutting drilling budgets and selling certain pipelines and gas-processing plants.

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We’ve often pointed out the drawbacks of putting your money in investment funds that charge performance fees. These fees don’t always backfire on investors, of course. But when they do, the damage can be horrendous. This is clear from a look at the record of Trapeze Asset Management, which became public after Trapeze agreed to pay just under $2 million to settle a complaint by the Ontario Securities Commission and another regulatory agency. Trapeze was an aggressive investment manager in the market boom of 2008 and earlier. It often traded in small cap and highly volatile stocks, at times generating some highly impressive profits. It also charged some highly impressive fees. In addition to an annual management fee of up to 2.5%, it also charged its clients a so-called performance fee equal to 20% of gains above 8% per year, after deducting all regular fees and costs. This worked reasonably well for investors while the bull market was underway. They didn’t mind the high fees so long as they were making above-average profits. But like most investors who agree to pay performance fees, Trapeze investors may not have realized how quickly small cap trading profits can turn into losses....

BROOKFIELD RENEWABLE ENERGY PARTNERS L.P. $26.32 (Toronto symbol BEP.UN; Units outstanding: 104.7 million; Market cap: $2.8 billion; TSINetwork Rating: Extra Risk; Dividend yield: 5.2%; www.brpfund.com) has finished merging its assets with the extensive hydroelectric and wind power holdings of Brookfield Asset Management (symbol BAM on Toronto).

Brookfield Renewable now owns 170 hydroelectric generating stations, three wind farms and two natural-gas-fired plants. It has 4,536 megawatts of generating capacity in total.

Roughly 40% of Brookfield Renewable’s generating capacity is in Canada, with another 40% in the U.S. and 20% in Brazil. The company sells virtually all of its power under agreements that are an average of 24 years in length.

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BROOKFIELD RENEWABLE ENERGY PARTNERS L.P. $26.32 (Toronto symbol BEP.UN; Units outstanding: 104.7 million; Market cap: $2.8 billion; TSINetwork Rating: Extra Risk; Dividend yield: 5.2%; www.brpfund.com) has finished merging its assets with the extensive hydroelectric and wind power holdings of Brookfield Asset Management (symbol BAM on Toronto). Brookfield Renewable now owns 170 hydroelectric generating stations, three wind farms and two natural-gas-fired plants. It has 4,536 megawatts of generating capacity in total. Roughly 40% of Brookfield Renewable’s generating capacity is in Canada, with another 40% in the U.S. and 20% in Brazil. The company sells virtually all of its power under agreements that are an average of 24 years in length....

Canada’s big five banks avoided the problems with subprime mortgages and European sovereign debt that have crippled many of the world’s largest financial firms. The big banks are now using their strong balance sheets to make acquisitions, often at bargain prices, and to upgrade their holdings. ROYAL BANK OF CANADA $45 (Toronto symbol RY; Conservative Growth Portfolio, Finance sector; Shares outstanding: 1.4 billion; Market cap: $63.0 billion; Price-to-sales ratio: 1.8; Dividend yield: 4.8%; TSINetwork Rating: Above Average; www.rbc.com) is Canada’s largest bank, with $730.6 billion of assets....

BROOKFIELD RENEWABLE POWER FUND $27.40 (Toronto symbol BRC.UN; Units outstanding: 104.7 million; Market cap: $2.9 billion; TSINetwork Rating: Extra Risk; Dividend yield: 4.7%; www.brpfund.com) plans to merge its assets with the extensive hydroelectric and wind power holdings of Brookfield Asset Management (symbol BAM on Toronto). Brookfield Renewable now owns interests in 42 hydroelectric generating stations on 16 river systems in Quebec, Ontario, B.C. and New England, as well as two wind farms. It has 1,700 megawatts of generating capacity in total. The combined entity, which will be called Brookfield Renewable Energy Partners L.P., will own 179 power plants generating 4,800 megawatts of electricity. Roughly 40% of its generating capacity will be in Canada, with another 40% in the U.S. and 20% in Brazil....

Enghouse Systems, $9.84, symbol ESL on Toronto (Shares outstanding: 25.6 million; Market cap: $251.9 million; www.enghouse.com), operates through two divisions: The interaction management division, which supplies 90% of the company’s revenue, sells software to manage call centres. The asset management business (10% of revenue) provides engineering software that is used by utilities, computer and telecommunications companies. In the three months ended July 31, 2011, revenue at Enghouse rose 22.2%, to $31.8 million from $26.0 million a year earlier. That’s mainly due to the company’s recent acquisitions. These include two firms acquired in April 2011: the Mettoni Group, a maker of call-centre software (purchased for $23 million U.S.), and CosmoCom, a seller of customer interaction management software ($20 million U.S.). Earnings per share rose 38.5%, to $0.18 from $0.13. The company’s balance sheet is strong. It holds cash of $88 million, or $3.49 a share, and has no debt....