blue chip
One way to minimize your investment risk is to diversify. For example, you can spread your investments out across the five main economic sectors. This way, you minimize the chances of a big loss in your portfolio from a setback in any one sector. Another way to diversify is to invest a portion of your portfolio in international stocks. There is no one “world stock market”. Instead, there are many stock exchanges around the world, and investing in many of them entails considerable risk. However, one simple strategy to gain international exposure, yet at the same time cut risk, is to invest in U.S. stocks. Many blue-chip U.S. stocks have operations in multiple countries. This will let them benefit from a recovering global economy, as well as a return to prosperity in the U.S....
BMO EQUITY FUND $24.41 (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) generally invests mostly in ‘blue-chip” Canadian companies. These stocks are selected based on the manager’s outlook for the industry they operate in, the earnings record of each company, the strength of management and the potential for growth. BMO Equity Fund’s 10 largest holdings are Bank of Nova Scotia, Royal Bank of Canada, TD Bank, Canadian Natural Resources, Suncor Energy, EnCana Corporation, Potash Corp., Manulife Financial, CIBC and Research in Motion. The $1.8 billion fund currently holds 40.5% of its portfolio in the Resources sector. Its next-largest holding is Financial services at 26.1%....
The performance of these five large funds — one from each of Canada’s big-five banks — has suffered over the last year. That’s because they held high weightings in Financial services and Resources stocks. Financial services have dropped due to turmoil in credit markets. Resources have fallen along with commodity prices on fears that an economic slowdown will cut demand for resources. We still feel that the best way to profit in the stock market is to stick with high-quality, well-established companies, and to diversify among the five sectors, and within each sector. However, you won’t go too far wrong with these five funds. They continue to stick with high-quality issues with sound fundamentals, so their concentrations in certain sectors doesn’t add a lot of risk over the long term. Each has its quirks, but overall they are well positioned for low-risk returns....
GENERAL MILLS INC. $64 (New York symbol GIS; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 334.1 million; Market cap: $21.4 billion; WSSF Rating: Above average) is the second-largest cereal maker in the United States after Kellogg. Leading brands include Cheerios, Total and Wheaties. The company also makes a variety of other foods, including baking mixes (Betty Crocker), dinner mixes (Hamburger Helper), canned and frozen vegetables (Green Giant), and yogurt (Yoplait). Wal-Mart accounts for about 20% of its total sales. Rising prices for raw materials such as grains, corn and milk have dampened General Mills’ recent earnings growth along with those of other food stocks.
Hedges help food stocks control commodity costs
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BANK OF NOVA SCOTIA $44 (Toronto symbol BNS; Conservative Growth Portfolio, Finance sector; Shares outstanding: 990.0 million; Market cap: $43.6 billion; SI Rating: Above average) is taking advantage of the credit crisis to expand its wealth management operations. Sun Life Financial Inc. wants more flexibility to pursue acquisitions, so it has agreed to sell its 37% stake in CI Financial Income Fund (Toronto symbol CIX.UN) to Bank of Nova Scotia. CI Financial is Canada’s third-largest mutual fund company. Following the purchase, Bank of Nova Scotia will own 37.6% of CI Financial. The $2.3 billion purchase price is equal to 2.3 times the $1.0 billion or $0.98 a share that Bank of Nova Scotia earned in the three months ended July 31, 2008. The deal should be a good one for Bank of Nova Scotia. It’s paying $22 a unit for CI. That’s more than CI’s current price of $16.80, but 33% below its record high of $32.69 in August, 2006. As one of our recommended blue chip stocks, Bank of Nova Scotia is a buy....
3M COMPANY $69 (New York symbol MMM; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 669.0 million; Market cap: $46.2 billion; WSSF Rating: Above average) is one of the world’s largest industrial companies and is an example of the kind of blue chip stocks that can pay off for investors. It makes over 50,000 products in six main areas: Industrial and Transportation (30% of revenue); Health Care (16%); Display and Graphics (16%); Consumer and Office (14%); Safety, Security and Protection (13%); and Electro and Communications (11%). Major brands include Post-it notes, Scotch tape, Scotchguard protection and Thinsulate insulation. Like many of our favourite blue chip stocks, the company’s broad product base cuts its reliance on a single industry or customer. It also sells its products in over 60 countries, which limits its exposure to a single geographic area. Overseas sales now account for about two-thirds of 3M’s sales.
Cost savings help expand earnings
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BMO EQUITY FUND $33.80 (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) generally invests mostly in ‘blue-chip” Canadian companies. These stocks are selected based on the manager’s outlook for the industry they operate in, the earnings record of each company, the strength of management and the potential for growth. BMO Equity Fund’s 10 largest holdings are Potash Corp., Manulife Financial, EnCana Corporation, Suncor Energy, Royal Bank of Canada, TD Bank, Canadian Natural Resources, Bank of Nova Scotia, Sun Life Financial and Research in Motion. The $2.1 billion fund currently holds 43.6% of its portfolio in the Resources sector. Its next-largest holding is Financial services at 24.4%....
The performance of these five large funds run by each of Canada’s big-five banks has differed widely. That’s because they typically have high weightings in certain sectors — most recently Financial services and Resources stocks. Some, like TD Canadian Equity have benefited from a focus on Resources. Others, like CIBC Canadian Equity were hurt by a concentration in Finance shares. We still feel that the best way to profit in the stock market is to stick with high-quality, well-established companies, and to diversify among the five sectors, and within each sector. However, you won’t go too far wrong with these five funds. They stick with high-quality issues with sound fundamentals, so their concentrations in certain sectors don’t add a lot of risk over the long term. Each has its quirks, but overall they are well positioned for low-risk returns....
BMO EQUITY FUND $33.37 (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) generally invests mostly in ‘blue-chip” Canadian companies. These stocks are selected based on the manager’s outlook for the industry they operate in, the earnings record of each company, the strength of management and the potential for growth. BMO Equity Fund’s 10 largest holdings are Manulife Financial, Suncor Energy, Royal Bank of Canada, TD Bank, EnCana Corporation, Canadian Natural Resources, Rogers Communications, Potash Corporation of Saskatchewan, CIBC and Bank of Nova Scotia. The $2.3 billion fund currently holds 41.9% of its portfolio in the Resources sector. Its next-largest holding is Financial services at 28.4%....
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 recommend. 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 $32.56 (CWA Rating: Conservative) (TD Asset Management, P.O. Box 7500, Station A, Toronto, Ontario. M5W 1P9. 1-800-386-3757; 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 Royal Bank, Suncor Energy, TD Bank, Rogers Communications, Canadian Natural Resources, Canadian Oil Sands Trust, Research in Motion, Schlumberger, Manulife Financial and Freeport McMoran....