bce

ALCAN INC. $102 (Toronto symbol AL;Conservative Growth Portfolio,Resources sector; Shares outstanding: 369.7 million; Market cap: $37.7 billion; SI Rating: Average) is trading below Rio Tinto Ltd.'s takeover offer of $101 U.S. a share (about $105 Cdn.) That’s because of investor worries that Rio Tinto may have trouble completing the takeover, given recent turmoil in credit markets and falling aluminum prices. The difference between the current price and the offer may entice some investors to buy Alcan, hoping to lock in a quick profit before Rio Tinto’s offer expires on September 24. However, we don’t recommend buying Alcan now. The stock could drop 30% or more in the unlikely event that Rio Tinto pulls out, while the most it can gain is just 3%. Current Alcan holders should tender their shares....

TELUS CORP. $54.20 (Toronto symbol T.A; SI Rating: Above average) is the second-largest provider of telecommunication services in Canada, after BCE Inc. It has over 4.5 million regular telephone customers and 1.1 million Internet subscribers in British Columbia, Alberta and parts of Quebec. The company also has 5.1 million wireless customers nationwide. In the three months ended June 30, 2007, gains in Telus’s earnings per share excluding unusual items rose 5.8%, to $0.73 a share from $0.69 a year earlier. Revenue rose 4.4%, to $2.23 billion from $2.14 billion. Telus’s high exposure to wireless helps cut its reliance on its traditional phone business, which is facing growing competition from cable companies and Internet-based phone services....

ISHARES CDN LARGECAP 60 INDEX FUND $79.86 (Toronto symbol XIU; buy or sell through a broker) (formerly called iUnits S&P/TSX 60 Index Participation Fund) is a good low-fee way to buy the top stocks on the TSX. The units hold a basket of stocks that represent the S&P/TSX 60 Index. The index is made up of the 60 largest and most heavily traded stocks on the TSX. Expenses on the units are just 0.17% of assets. Most of the 60 stocks in the index are good quality companies. However, to meet the requirement that all sectors are represented, the index holds a few firms we wouldn’t include, such as Cott Corporation and Celestica. The index’s top holdings are: Royal Bank, 6.6%; Manulife, 5.8%; TD Bank, 4.7%; Bank of Nova Scotia, 4.7%; EnCana Corporation, 4.4%; Suncor Energy, 3.9%; Research in Motion, 3.7%; Canadian Natural Resources, 3.5%; Bank of Montreal, 3.1%; CIBC, 3.3%; BCE Inc., 2.6%; Barrick Gold, 2.8%; Sun Life Financial, 2.9%; and Potash Corp., 2.6%....

The best exchange-traded funds (ETFs) offer well-diversified, tax-efficient portfolios with very low management fees. Due to buyback and share issue arrangements, ETFs always trade close to their net asset value. Here are some of the best deals available in ETFs. We’ve also analysed one we don’t like. ISHARES CDN LARGECAP 60 INDEX FUND $79.86 (Toronto symbol XIU; buy or sell through a broker) (formerly called iUnits S&P/TSX 60 Index Participation Fund) is a good low-fee way to buy the top stocks on the TSX. The units hold a basket of stocks that represent the S&P/TSX 60 Index. The index is made up of the 60 largest and most heavily traded stocks on the TSX. Expenses on the units are just 0.17% of assets....

BCE INC. $40.46 (Toronto symbol BCE; SI Rating: Above-Average) earned $0.56 a share excluding one-time items in the three months ended June 30, 2007, up 3.7% from $0.54 a year earlier. Revenue rose 1.6%, to $4.44 billion from $4.37 billion. BCE has accepted a $42.75-a-share all-cash takeover offer from a group led by the Ontario Teachers’ Pension Plan. The difference between the takeover price and today’s trading price reflects the possibility that the deal could fall through. However, we see this as unlikely, since the Ontario Teachers’ group has secured financing commitments from several banks. So, despite rising interest rates, the group should be able to go through with the transaction, probably in the first quarter of 2008....

RBC CANADIAN DIVIDEND FUND $49.82 (RBC Funds, P.O. Box 7500, Station A, Toronto, Ontario. M5W 1P9. 1-800-463-3863; Web site: www.royalbank.com. No load — deal directly with the bank) has 43.8% of its portfolio in Financial services stocks. It has a further 16.9% in Energy stocks and 8.1% in Materials. The $8.9 billion RBC Canadian Dividend Fund’s top stock holdings are Royal Bank of Canada, Bank of Nova Scotia, Toronto-Dominion Bank, Manulife Financial, Canadian Imperial Bank of Commerce, TransCanada Corporation, Bank of Montreal, BCE Inc. and Suncor Energy. Over the last five years, RBC Canadian Dividend Fund has posted a 15.8% annual rate of return. That’s less than the S&P/TSX’s gain of 18.4% over the same period....

BMO DIVIDEND FUND $50.82 (BMO Mutual Funds, 77 King Street West, Suite 4200, Royal Trust Tower, Toronto, Ont., M5K 1J5, 1-800-665-7700; Web site: www.bmo.com. No load — deal directly with the bank) (CWA Rating: Conservative) currently holds about 57.3% of its portfolio in the Financial services industry. Its next-largest holdings are Energy at 13.3% and Consumer discretionary at 6.5%. BMO Dividend Fund’s largest holdings are Manulife Financial, Bank of Nova Scotia, CIBC, Royal Bank of Canada, Power Financial, Toronto-Dominion Bank, Canadian National Railway, TransCanada Corporation, Alcan, Imperial Oil, Brookfield Asset Management, Thomson Corporation, BCE Inc. and Sun Life Financial. Over the last five years, the $5.9 billion BMO Dividend Fund has posted a 15.3% annual rate of return. That’s under the S&P/TSX’s gain of 18.4%. However, the S&P/TSX index held a high 40% or so of its holdings in Resources shares. That’s been one of the best-performing, although riskiest, sectors. The fund gained 15.4% over the last year, compared to a gain of 20.1% for the S&P/TSX index. BMO Dividend’s MER is 1.73%....

BMO Dividend and RBC Canadian Dividend hold mostly high-quality stocks. These stocks sometimes run into trouble and go through lengthy struggles, just like lesser investments. Eventually, though, most solve their problems and go on to thrive anew. Both funds hold a high proportion of their assets in financial services stocks. However, if you must focus on something, finance is a relatively stable sector. If you do invest in these funds, be sure to adjust the rest of your portfolio so these funds won’t overly concentrate your holdings in the financial sector....

BCE INC. $39 (Toronto symbol BCE; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 804.7 million; Market cap; $31.4 billion; SI Rating: Above average) has moved down since it accepted a $42.75-a-share takeover offer from a private group led by the Ontario Teachers’ Pension Plan. That’s partly due to concerns that the group may have trouble borrowing the cash it needs for the purchase. However, the group has already secured financing deals with several banks. BCE has also suspended its stock buyback program, which has put pressure on the stock. Assuming shareholders accept the offer at a special meeting on September 21, 2007, and communication regulators also approve, the group aims to complete the transaction in early 2008. Meanwhile, BCE will continue to pay quarterly dividends of $0.365 a share (3.7% yield)....

UNIVERSAL CANADIAN GROWTH FUND $24 (CWA Rating: Conservative) (Mackenzie Financial Corp., 150 Bloor St. West, Toronto, Ont. M5S 3B5. Web site: www.mackenziefinancial.com. 1-800-387-0780; Load fund — available from brokers) holds companies with strong management and sound business prospects. The fund holds fewer than 40 stocks at all times. Top holdings include BCE Inc., Canadian National Railway, BorgWarner (U.S. auto parts & equipment) Industrial Alliance Insurance, Manulife Financial, Cognos Inc., Shoppers Drug Mart, EnCana Corporation, Martinrea International and Nova Chemicals. The fund’s breakdown by economic sector is as follows: 24.1% in Consumer discretionary, 15.3% in Financials, 11.9% in Industrials, 8.3% in Energy, 5.1% in Health Care, 4.9% in Telecommunications Services, 4.7% in Information technology and 4.6% in Consumer staples....