CAE Inc.

CANADIAN PACIFIC RAILWAY LTD., $218.78, Toronto symbol CP, has agreed to form a 50/50 joint venture with DREAM Unlimited Corp., Toronto symbol DRM. This new business—called DREAM Van Horne Properties—will redevelop several of CP’s real estate holdings, including surplus land near its rail lines in Toronto, Montreal, Edmonton and Chicago. This venture should help CP unlock some of these assets’ hidden value. Meanwhile, CP earned $460 million in the quarter ended December 31, 2014, up 36.1% from $338 million a year earlier. Earnings per share jumped 40.3%, to $2.68 from $1.91, on fewer shares outstanding. That beat the consensus estimate of $2.58....

CAE INC. $15 (Toronto symbol CAE; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 265.3 million; Market cap: $4.0 billion; Price-to-sales ratio: 1.8; Dividend yield: 1.9%; TSINetwork Rating: Average; www.cae.com) is the world’s leading maker of flight simulators, which help teach airline and military pilots how to take off, land and handle a variety of emergency situations.

Since it started up in 1947, CAE has sold over 1,500 simulators to 140 airlines. It currently controls 70% of the global flight simulator market.

To cut its reliance on simulator sales, which tend to rise and fall with the overall economy, CAE began instructing pilots in 2001. It now operates around 50 pilot-training centres in over 25 countries. These facilities also train cabin crews and maintenance personnel.

...

CAE INC., $14.64, Toronto symbol CAE, is our Stock of the Year for 2015. The stock has gained 3.8% since we made CAE our Stock of the Year for 2014. We feel it’s just getting started and has many years of growth ahead. That’s because the company is in a strong position to profit from several trends that are just beginning to take shape. For one, airlines will have to hire more pilots in the next few years as existing ones retire. As well, global air travel volumes should rise 5% annually for the next 20 years. Both of these developments should boost demand for new pilots and increase enrolment at CAE’s flight schools....

CAE is poised to gain from several trends that are just beginning to take shape. For one, airlines will have to hire more pilots in the next few years as existing ones retire. As well, global air travel volumes should rise 5% a year for the next 20 years. Both of these developments should boost demand for new pilots and increase enrolment at CAE’s flight schools. Meanwhile, airlines continue to replace aging planes: Boeing, Airbus and other manufacturers have orders for a record 13,600 aircraft, which will fuel demand for CAE’s pilot-training flight simulators. CAE also gains from the plunge in oil prices, because it gives airlines a lot more cash to spend on its products and services....

We looked at a wide range of stocks before settling on CAE as our #1 pick for 2015. Here are the top three runners-up. All are highly attractive buys, but we feel CAE offers a better mix of long-term potential and low risk. CANADIAN NATIONAL RAILWAY CO. $78 (Toronto symbol CNR; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 809.3 million; Market cap: $63.1 billion; Price-to-sales ratio: 5.5; Dividend yield: 1.3%; TSINetwork Rating: Above Average; www.cn.ca) has several key advantages that put it in a strong position to profit from an improving North American economy. For example, it’s the only railway that accesses all three coasts: Atlantic, Pacific and the Gulf of Mexico. As well, CN owns an exclusive line that lets it avoid major bottlenecks in the Chicago area....

FlightSafety International and CAE are the world’s two biggest aviation-training companies. CAE, $14.94, symbol CAE on Toronto, is a recommendation of The Successful Investor. While CAE is publicly traded, FlightSafety is a wholly owned subsidiary of Berkshire Hathaway, $147.64, symbol BRK.B on New York. Berkshire acquired the company in 1997 for $1.5 billion in cash and stock. In addition to training pilots, FlightSafety instructs flight attendants, dispatchers and maintenance technicians....

TIM HORTONS INC., $99.00, Toronto symbol THI, has completed its merger with U.S.-based BURGER KING WORLDWIDE INC., $35.50, New York symbol BKW.

On Monday, December 15, 2014, the combined company, called Restaurant Brands International Inc., will begin trading on the Toronto and New York exchanges under the QSR symbol.

Restaurant Brands is the world’s third-largest fast-food restaurant operator, after McDonald’s and Yum Brands, with 14,000 Burger King restaurants and 4,590 Tim Hortons outlets in 100 countries. In all, these locations have annual sales of over $23 billion U.S.

...

Every Tuesday we bring you “Best Canadian Stocks.” You get our specific recommendation on the stocks we profile, with a full explanation of how we arrived at our opinion. You’ll read about stocks making moves you should know about, from coverage in one of our three newsletters featuring Canadian stocks - The Successful Investor, Stock Pickers Digest and Canadian Wealth Advisor.

CAE INC. (Toronto symbol CAE; www.cae.com) gets 55% of its revenue by selling flight simulators and pilot-training services to commercial airlines. Another 40% comes from simulators and training for military clients, mainly in the U.S.

CAE gets the remaining 5% of its sales by making medical-simulation products, such as mannequins, for training nurses and medical students.

...

CAE INC. $15 (Toronto symbol CAE; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 265.3 million; Market cap: $4.0 billion; Price-to-sales ratio: 1.8; Dividend yield: 1.9%; TSINetwork Rating: Average; www.cae.com) gets 55% of its revenue by selling flight simulators and pilot-training services to commercial airlines. Another 40% comes from simulators and training for military clients, mainly in the U.S.

CAE gets the remaining 5% of its sales by making medical-simulation products, such as mannequins, for training nurses and medical students.

Steady growth in revenue, earnings

...

CAE INC., $14.58, Toronto symbol CAE, earned $42.0 million in its fiscal 2015 second quarter, which ended September 30, 2014. That’s up 9.9% from $38.2 million a year earlier. Per-share earnings rose at a slower rate of 6.7%, to $0.16 from $0.15, on more shares outstanding. These figures exclude earnings from CAE’s mining operations, which make simulators that train workers to operate underground trucks, loaders and drills. The company recently announced plans to sell this business, as weak commodity prices have prompted mining firms to cut spending on exploration and expansion projects. On this basis, the latest earnings matched the consensus estimate....