Broadridge Financial Solutions

Broadridge is unique in the financial sector. For over 40 years, the company has built up its investor-communications business and now dominates this niche industry. Its securities-clearing division makes short-term loans to brokers, which exposes it to some credit risk. But these loans are safer than subprime mortgages or credit-card debt. The company should also continue to profit as more banks and brokers look to outsource their routine transaction-processing tasks to save money. Moreover, it gains from the ongoing drop in computer costs. The stock fell from $24 in late 2007 to a low of $9.21 last November, during the financial crisis. It has now recouped most of last year’s share-price decline. We feel it has more gains ahead. BROADRIDGE FINANCIAL SOLUTIONS INC. $20 (New York symbol BR; Aggressive Growth Portfolio, Finance sector; Shares outstanding: 139.3 million; Market cap: $2.8 billion; Price-to-sales ratio: 1.3; WSSF Rating: Extra Risk) provides communication, processing and other back-office services to the investment industry. By outsourcing these activities to Broadridge, its clients can focus on their main businesses. Its clients include 250 banks, 500 mutual-fund families and over 5,000 publicly listed companies....

FAIRFAX FINANCIAL HOLDINGS $364.55 (Toronto symbol FFH: SI Rating: Average) (416-367- 2612; www.fairfax.ca; Shares outstanding: 16.8 million; Market cap: $6.1 billion) is a financial-services holding company with assets of $27.9 billion. Fairfax engages in insurance, reinsurance and investment management. Prem Watsa is the company’s chairman and founder. Fairfax trades at a high price, but you can buy an odd lot of as few as 10 or so through any broker. Reinsurers sell insurance to insurers. Fairfax does this through two subsidiaries: OdysseyRe and Group Re. Crum & Forster is Fairfax’s main U.S. insurance subsidiary, and Northbridge Financial is its principal subsidiary in Canada. It also sells insurance in Asia. In the three months ended June 30, 2008, Fairfax’s earnings jumped to $275.4 million, or $15.65 a share, from $27.6 million, or $0.84. The latest quarter included $214.7 million of net gains on investments....

BROADRIDGE FINANCIAL SOLUTIONS INC., $20.30, New York symbol BR, reported this week that its earnings rose 16.2% in the fiscal year ended June 30, 2009, to $1.58 a share from $1.36 in the prior year. If you disregard unusual items, including a gain on the early retirement of debt and a tax credit that lowered its effective income-tax rate, Broadridge’s earnings per share rose 6.3%, to $1.51 from $1.42. The improved earnings came despite difficult conditions in the financial sector. Broadridge serves the investment industry in three main areas: investor communications; securities processing; and transaction clearing, trade settlements and other back-office operations. Its clients include 250 banks, 500 mutual-fund families and 5,000 publicly listed companies....

GREY ISLAND SYSTEMS INTERNATIONAL $0.36, symbol GIS on Toronto, has risen almost 30% over the last week. That’s after it received a friendly takeover offer from WebTech Wireless (symbol WEW on Toronto). Under the offer, Grey Island shareholders will receive 0.30 of a WebTech share for each Grey Island share they hold. Based on WebTech’s current trading price, that translates to $0.40 per Grey Island share. WebTech’s technology integrates the Global Positioning System (GPS), wireless communications and the Internet to provide fleet operators with real-time information about the location and status of their vehicles....

BROADRIDGE FINANCIAL SOLUTIONS $16.60 (New York symbol BR: SI Rating: Extra Risk) (201-714-3000; www.broadridge.com; Shares outstanding: 140.3 million; Market cap: $2.3 billion) has bought Access Data Corp. for an undisclosed amount. Access Data sells software and related services to financial firms. These include over 40 mutual fund companies that together manage a combined $3 trillion of mutual fund assets. Adding Access Data broadens Broadridge’s existing services and expands its customer base....

INTERNATIONAL ROAD DYNAMICS, $0.72, symbol IRD on Toronto, has resumed trading after the Toronto exchange lifted its cease-trading order. International Road has filed its financial statements for its fiscal year, which ended November 30, 2008. It has also filed its statements for the quarter ended February 28, 2009. In the latest quarter, revenue rose 58.7%, to $11 million from $6.9 million a year earlier. Saskatoon-based International Road has customers all over the world; the company reported higher sales in all regions, and across most of its product lines. Earnings were $0.02 a share, compared to a loss of $0.02. International Road makes products and systems that manage highway traffic. These include automated toll-road and weigh-station systems for trucks. International Road’s weigh-in-motion system weighs trucks while they’re moving, rather than at less-efficient roadside weigh stations. The company also makes advanced traffic control systems, driver-management systems and data-collection systems....

BREAKWATER RESOURCES, $0.26, symbol BWR on Toronto, reports that it lost $0.01 a share in the three months ended March 31, 2009, compared to a gain of $0.02 a share a year earlier. Cash flow per share was slightly positive, at $0.001 a share, compared to $0.005.

Breakwater is a Canadian-based company mining company focused on zinc production. It has mines in Canada, Chile and Honduras.

Despite the lower results in the latest quarter, Breakwater’s share price has almost doubled since the beginning of this month. That’s because the price of zinc has gone up, and the company has resolved its cash shortfall.

Last month, Breakwater issued 230 million units at $0.10 each, which raised a total of $23 million. Each unit included one common share and half of a warrant. Each whole warrant entitles the holder to buy one common share for $0.12 until April 9, 2014.

The new shares raised the number outstanding by 50%, or 230 million, bringing the total to799 million. Plus, another 115 million will be added if all of the warrants are exercised.

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VERIZON COMMUNICATIONS INC., $29.61, New York symbol VZ, plans to merge parts of its local-phone operations in 14 states with those of Frontier Communications Corp. (New York symbol FTR). As a result, Verizon shareholders will get one Frontier share for roughly every 4.2 Verizon shares. The company will finalize the exact exchange ratio just prior to the merger. This is a tax-deferred distribution, so investors will only be liable for capital-gains taxes on their new Frontier shares when they sell them. Verizon shareholders will control 68% of the new company. Verizon itself will get $3.3 billion in cash and debt securities. It will probably use the cash to pay down its $55.7-billion long-term debt, which is equal to 66% of its market cap. The assets that Verizon will spin off mainly consist of 4.8 million land lines in rural areas. As of March 31, Verizon had 35.2 million land lines in 25 states. The deal, which will probably close sometime next year, will make Frontier the fifth-largest local phone service provider in the U.S., with 7.1 million lines in 27 states....

BROADRIDGE FINANCIAL SOLUTIONS INC. $19 (New York symbol BR; Aggressive Growth Portfolio, Finance sector; Shares outstanding: 140.4 million; Market cap: $2.7 billion; Price-to-sales ratio: 1.2; WSSF Rating: Extra Risk) sells investor communications, securities-processing and transaction-clearing services to the investment industry. The company has launched a new web site (www.theinvestornetwork.com) that lets investors discuss a wide variety of topics, but they have to register through their broker to participate. This limits fraudulent posts aimed at inflating stock prices, the company says, but is also apt to please Broadridge’s broker-clients. Broadridge also plans to let companies use this site to supplement their annual meetings. This will help them cut their investor-relations costs. Broadridge is a buy....

BROADRIDGE FINANCIAL SOLUTIONS $19.17 (New York symbol BR: SI Rating: Extra Risk) (201-714-3000; www.broadridge.com; Shares outstanding: 140.4 million; Market cap: $2.7 billion) has expanded its securities-processing and transaction-clearing services to include Japanese equities, convertible bonds and subscription rights processed by Japanese broker-dealer operations. Through its new Japanese services, Broadridge can generate confirmations and processing reports in both English and Japanese. These services will further broaden its customer base; the Tokyo exchange is the world’s second-largest after New York. Broadridge is still a buy.