asset management

ROYAL BANK OF CANADA $53 has invested $25 million U.S. for a 30% stake in a new joint venture that will offer asset management services in China. The amount is just 2% of its latest quarterly earnings. But the deal gives Royal a low-risk way to increase its exposure to a fast-growing market. Buy. EMERA INC. $22 earned $0.18 a share in the third quarter of 2006, up 28.6% from $0.14 a year earlier, due to higher electricity rates and profits from the resale of natural gas from the offshore project near Sable Island. Revenue fell 3.1%, to $272.4 million from $281.1 million, due to the temporary shutdown of a large industrial customer. This customer aims to re-start its operations in the fourth quarter. Best Buy. TRANSCANADA CORP. $38 continues to expand its electrical power operations, which have higher growth prospects than its gas pipeline business. Thanks mainly to higher profits at the power unit, earnings before unusual items in the most recent quarter rose 4.2%, to $0.50 a share from $0.48. Revenue grew 23.3%, to $1.85 billion from $1.5 billion. Best Buy.

TD CANADIAN EQUITY FUND $30.99 (CWA Rating: Conservative) (TD Asset Management, P.O. Box 7500, Station A, Toronto, Ontario. M5W 1P9. 1-800-463-3863; Web site: www.tdcanadatrust.ca. No load — deal directly with the bank) uses a “bottom-up” approach (using fundamentals such as earnings, cash flow and low debt) to identify undervalued companies with strong growth potential. TD Canadian Equity Fund’s 10 largest holdings are Manulife Financial, Suncor Energy, Royal Bank, TD Bank, Western Oil Sands, Canadian Oil Sands Trust, CN Railway, Inco, Falconbridge and Teck Cominco. The $2.6 billion fund currently holds about 28.6% of its portfolio in Financial services shares. It also has a bias towards Energy stocks, with 28.9% of its holdings in that sector....

Here are five large funds run by each of Canada’s big-five banks. Each holds the kind of conservative, well-balanced portfolios of high quality stocks we like. All five have a high weighting in Financial services and Energy stocks. However, they stick with high-quality issues with sound fundamentals, so these concentrations don’t add a lot of risk. Each has its quirks, but overall they are well positioned for low-risk returns. TD CANADIAN EQUITY FUND $30.99 (CWA Rating: Conservative) (TD Asset Management, P.O. Box 7500, Station A, Toronto, Ontario. M5W 1P9. 1-800-463-3863; Web site: www.tdcanadatrust.ca. No load — deal directly with the bank) uses a “bottom-up” approach (using fundamentals such as earnings, cash flow and low debt) to identify undervalued companies with strong growth potential. TD Canadian Equity Fund’s 10 largest holdings are Manulife Financial, Suncor Energy, Royal Bank, TD Bank, Western Oil Sands, Canadian Oil Sands Trust, CN Railway, Inco, Falconbridge and Teck Cominco....

EUROPEAN EQUITY FUND $10.64 (New York symbol EEA; CWA Fund Rating: Conservative) invests mainly in large-capitalization European stocks in the 12 countries that use the Euro currency. This includes Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal, and Spain. The fund’s manager is Deutsche Asset Management, owned by Deutsche Bank, one of the world’s largest banks. European Equity Fund can also invest up to 20% of its assets in major stocks in other European countries. The fund’s top holdings are: Total SA (French oil & gas), Societe Generale (French bank), E.ON (German utility), SAP (German software), Banca Intesa (Italian bank), DaimlerChrysler (German automaker), Siemens (German industrial conglomerate), Hypo Real Estate (German mortgage finance), AXA (French insurance) and Capitalia (Italian bank)....

TD SCIENCE & TECHNOLOGY FUND $12.96 (CWA Rating: Aggressive) (TD Asset Management, P.O. Box 7500, Station A, Toronto, Ontario. M5W1P9. 1-800-461-38 63; Web site: www.tdcanadatrust.com. No load — deal directly with the company) invests mostly in U.S. firms engaged in the research, development, production or distribution of products or services related to science and technology. The fund’s gain over the last year was 12.2%. The Nasdaq index rose 7.7%. The $145.8 million fund’s manager is well-respected U.S. mutual fund manager T. Rowe Price Associates. Its MER is 2.79% TD Science & Technology’s top holdings include: Microsoft, 7.1%; Samsung Electronics, 4.7%; Nokia, 3.1%; Juniper Networks, 2.3%; Yahoo!, 2.3%; Red Hat, 2.1%; Taiwan Semiconductor, 2.1%; Cisco Systems, 2%; CDNetworks, 2%; and Analog Devices, 2%....

Many tech stocks have moved down this year. The decline is largely due to investor uncertainty that corporations will spend heavily this year on new technology. Many companies are instead focusing on consolidating their existing technologies and cutting costs. On the other hand, spending by consumers on new technology remains steady. Despite lower stock prices, it would be a risky mistake to load up on tech stocks in your portfolio, since a major turnaround could take years to arrive. You also need to avoid junior techs that may have more conceptual than financial appeal. Many such stocks can make great scientific progress without making much if any money for investors. If you want to invest in tech funds, limit your investment to modest quantities. And these funds should only make up a portion of the manufacturing sector holdings in your portfolio. Above all, invest only in funds, like these two, that focus on established businesses rather than start-ups....

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%....

Here are two AIC funds that hold much of their portfolios in financial services stocks. We prefer diversified funds. But if you must focus on something, finance is a relatively stable sector. AIC Diversified Canada has underperformed lately, mainly because it holds fewer stocks that we see as buys. We don’t recommend it for new buying. However, it’s OK to hold, particularly if you’ve built up a big capital gain over the last few years. 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....

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.

Here are two Aggressive resource funds that take on two different levels of risk, measured by the stocks they hold. Both have done very well for us over the last few years. Still, we think they have further gains ahead. 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....