boeing

We still think high-quality mutual funds with a long-term focus will beat indexes over long periods. If funds invest as we advise — sticking with well-established companies and spreading their assets out across the five main economic sectors — they will tend to lose a lot less than the market indexes in periods when the indexes fall sharply. That’s because big market slides are particularly hard on the hottest, most popular stocks of the preceding market rise, and investing as we do leads you to avoid excessive investment in the hot stocks. Index funds, in contrast, do tend to load up on the hottest, most popular stocks as they rise. That’s because, as they rise, these stocks make up a rising proportion of the index. The most recent example is Potash Corporation of Saskatchewan., which now has the highest market cap on the Toronto exchange on the strength of soaring fertilizer and agriculture prices....

Watch Pat McKeough’s June 20 interview on the Business News Network “Market Call” program with Michael Hainsworth. Click on: http://watch.bnn.ca/market-call/june-2008/market-call-june-20-2008/#clip61441 to see the interview. Or, go to www.bnn.ca and you’ll find the link on the lower right side of the page....

BOMBARDIER INC. (Toronto symbols BBD.A $6.63 and BBD.B $6.67; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 1.7 billion; Market cap: $11.3 billion; SI Rating: Extra risk) is the world’s third-largest maker of passenger aircraft, after Boeing and Airbus. This division supplies 55% of total revenue, and 75% of earnings. The remainder comes from Bombardier’s transportation division, which makes passenger railcars. The company focuses on smaller planes, such as short-range regional and business jets. It’s now considering building bigger planes, such as the CSeries jet, which would seat between 110 and 130 passengers. That would put it in direct competition with Boeing and Airbus.

New plane has big potential

Demand for a plane like this could be huge, considering that the CSeries would consume 20% less fuel than current models. As well, many airlines will have to replace thousands of similar-size planes in the next few years....

CAE INC. $12 (Toronto symbol CAE; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 253.9 million; Market cap: $3.0 billion; SI Rating: Average) is a leading supplier of flight simulators to commercial airlines and the military forces of more than 35 countries. Through 24 training facilities equipped with over 115 flight simulators, CAE trains more than 50,000 pilots a year.

Diverse clientele tempers CAE’s risk

CAE’s exposure to the cyclical airline business adds risk. However, the company now gets about half of its revenue from commercial clients, and half from military customers. As well, training services give CAE steady, recurring revenues. That cuts its reliance on new products for growth. Services and products each account for roughly half of CAE’s total revenue. Revenue fell from $1.1 billion in fiscal 2003 (fiscal years end March 31) to $986.2 million in 2005 after CAE sold its non-aviation operations as part of major restructuring. Revenue grew to $1.25 billion in 2007, and should reach $1.4 billion in 2008. Earnings before restructuring costs fell from $0.60 a share (total $131.0 million) in fiscal 2003 to $0.19 a share ($46.9 million) in 2005. Earnings jumped to $0.52 a share ($129.1 million) in 2007....

THE BOEING CO. $76 (New York symbol BA; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 764.8 million; Market cap: $58.1 billion; WSSF Rating: Above average) is the world’s second-largest maker of commercial aircraft, behind Europe’s Airbus. Boeing is currently developing its new 787 Dreamliner passenger jet plane, which uses lightweight materials like titanium and carbon fiber. This makes the 787 about 20% more fuel-efficient than older models. The 787 will also use energy-efficient LED lighting inside the cabin, instead of fluorescent tubes. Thanks to its low fuel requirements, demand from cost-conscious airlines for the 787 has been strong. Since its launch in April 2004, Boeing has received nearly 900 orders for the 787, worth over $150 billion....

Growing interest in the environment continues to prompt changes in consumer spending habits. Here are five companies with the technology and size to profit from this trend. GENERAL ELECTRIC CO. $37 (New York symbol GE; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 10.0 billion; Market cap: $370.0 billion; WSSF Rating: Above average) is one of the world’s largest industrial corporations. GE’s products include major appliances; lighting products; medical imaging equipment; power generation and delivery products; and aircraft jet engines. It also owns 80% of media company NBC Universal, which operates the NBC television network, Universal Studios and several cable and Internet properties. GE sells a wide range of environmentally friendly consumer products, including low-wattage light bulbs and energy-efficient appliances. It also supplies wind turbines and solar panels to electrical utilities. As well, its expertise with nuclear power plants should help it profit from the construction of new plants around the world. Nuclear plants generate fewer emissions than gas and coalfired plants....

The markets rattled many investors this week with steep one-day drops. At times like this, it’s good to remember that even when a further decline lies ahead, high volatility generally signals that it’s “a good time to buy”, rather than “a good time to sell”. It’s also encouraging to see that despite the steep one-day drops, most major market indexes are still at or above the lows they hit in January. UNITED TECHNOLOGIES INC. $67.49, New York symbol UTX, has launched a hostile offer to buy DIEBOLD INC. $37.51, New York symbol DBD. United Technologies is offering $40.00 a share in cash, or roughly $3 billion in total. United had cash flow of $5.1 billion ($5.16 a share) in 2007, so it can comfortably afford this purchase. Diebold’s building security operations would be good fit with United Technologies elevator, ventilation and fire alarm businesses. Diebold also gets 60% of its revenue from automated teller machines (ATMs). While big writedowns of mortgages at banks have hurt demand for new ATMs, United Technologies feels its large international operations will help it expand ATM sales in fast-growing countries such as China and Russia....

DIAMONDS TRUST SHARES $124 (American Exchange symbol DIA; buy or sell through brokers) hold the 30 stocks that make up the Dow Jones Industrial Average. Currently, the fund’s top 10 holdings are IBM, 3M, Boeing Co., United Technologies, Caterpillar, Altria Group, Coca-Cola Co., Johnson & Johnson, Procter & Gamble and Exxon Mobil....

We think high-quality mutual funds with a long term focus will beat indexes over long periods. If funds invest as we advise — sticking with well established companies and spreading their assets out across the five main economic sectors — they will tend to lose a lot less than the market indexes in periods when the indexes fall sharply. That’s because big market slides are particularly hard on the hottest, most popular stocks of the preceding market rise, and investing as we do leads you to avoid excessive investment in the hot stocks. Index funds, in contrast, do tend to load up on the hottest, most popular stocks as they rise. That’s because, as they rise, these stocks make up a rising proportion of the index. Index funds are a better deal than the majority of funds now available, however. So if you merely want to equal the indexes, here are some of the best deals available in ETFs. We’ve also analysed one we don’t like....

Today many people seem sure that the subprime situation and associated problems will bring on a long-term market decline that could carry stock prices much lower. When conclusions like these become widespread, the conclusion or the timing or both are often wrong. Think back to how many people agreed with former Federal Reserve Board Chairman Alan Greenspan’s famous (or notorious) ‘irrational exuberance’ speech, in December, 1996. Yet nearly four years passed before the market hit its ultimate peak. In between the Greenspan speech and 2000 market peak, we went through a market setback in response to an economic crisis that started in Thailand in 1997....