Cenovus Energy Inc.

Exchange traded funds (ETFs) may have a place in your portfolio. That’s because, unlike many other financial innovations, they don’t load you up with heavy management fees or tie you down with high redemption charges if you decide to get out of them. Instead, they give you a low-cost, flexible, convenient alternative to mutual funds. ETFs trade on stock exchanges, just like stocks. Prices are quoted in newspaper stock tables and online. You’ll have to pay brokerage commissions to buy and sell ETFs. However, ETFs’ low management fees still give them a cost advantage over most conventional mutual funds. As well, shares are only added or removed when the underlying index changes. As a result of this low turnover, you won’t incur the regular capital gains bills generated by the yearly distributions most conventional mutual funds pay out to unitholders....

CENOVUS ENERGY $34.33 (Toronto symbol CVE; Shares outstanding: 757.8 million; Market cap: $26.0 billion; TSINetwork Rating: Extra Risk; Dividend yield: 2.3%; www.cenovus.com) reported that its cash flow per share rose 54.4% in the third quarter of 2011, to $1.05 from $0.68 a year earlier. A 9.6% increase in oil prices was the main reason for the gain.

Cenovus continues to expand its Foster Creek and Christina Lake oil sands operations in Alberta. U.S.-based ConocoPhillips owns 50% of these properties. The company now plans to spend between $3.1 billion and $3.4 billion on these and other projects in 2012. That’s up 23% from its 2011 capital expenditures.

These investments will push up Cenovus’s production to between 155,000 and 171,000 barrels of oil equivalent per day (including natural gas), from 135,000 barrels in 2011.

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CANADIAN PACIFIC RAILWAY LTD., $70.77, Toronto symbol CP, is our “Stock of the Year” for 2012. Next week, Stock Pickers Digest, our newsletter for aggressive investors, will reveal its #1 pick for 2012. We’ve had great success with CP since we recommended it in the first issue of The Successful Investor in January 1995. In October 2001 the old CP broke up into five separate companies: CP Rail, CP Ships, Fording Coal, Pan Canadian and Fairmont Hotels. In 2002, PanCanadian merged with Alberta Energy to form EnCana, which broke up into Encana and Cenovus in December 2009. All of these mergers and breakups unlocked significant shareholder value. Railways are highly cyclical. Unpredictable factors, such as weather, also add risk: in 2011, avalanches in B.C. and spring floods in the Prairies delayed CP’s trains and hurt its earnings....

CENOVUS ENERGY $34.33 (Toronto symbol CVE; Shares outstanding: 757.8 million; Market cap: $26.0 billion; TSINetwork Rating: Extra Risk; Dividend yield: 2.3%; www.cenovus.com) reported that its cash flow per share rose 54.4% in the third quarter of 2011, to $1.05 from $0.68 a year earlier. A 9.6% increase in oil prices was the main reason for the gain. Cenovus continues to expand its Foster Creek and Christina Lake oil sands operations in Alberta. U.S.-based ConocoPhillips owns 50% of these properties. The company now plans to spend between $3.1 billion and $3.4 billion on these and other projects in 2012. That’s up 23% from its 2011 capital expenditures. These investments will push up Cenovus’s production to between 155,000 and 171,000 barrels of oil equivalent per day (including natural gas), from 135,000 barrels in 2011....

CENOVUS ENERGY INC. $34 (www.cenovus.com) reported that its cash flow per share rose 54.4% in the third quarter of 2011, to $1.05 from $0.68 a year earlier. A 9.6% increase in oil prices was the main reason for the gain....

BCE INC., $40.74, Toronto symbol BCE, is teaming up with Rogers Communications Inc. (Toronto symbol RCI.B) to buy 75% of Maple Leaf Sports and Entertainment (MLSE). This is the private company that owns several professional sports teams, including the Toronto Maple Leafs (hockey), Toronto Raptors (basketball) and Toronto FC (soccer). MLSE also owns the Air Canada Centre arena in downtown Toronto, as well as specialty TV channels such as Leafs TV. BCE, in combination with the trust fund that manages its employees’ pension plan, will pay a total of $533 million for 37.5% of MLSE. Rogers will also acquire 37.5%. A private investor will own the remaining 25%. The deal should close in mid-2012. Unlike most sports teams, MLSE is profitable. This investment will also guarantee BCE access to live games and other high-demand content for its TV channels, radio stations and web sites....

ROYAL BANK OF CANADA $50 (www.rbc.com) reported record earnings for fiscal 2011 due to strong growth at its Canadian banking, wealth management and insurance divisions. That’s helping it offset slower growth at its securities-trading operations. In the year ended October 31, 2011, earnings per share rose 16.5%, to $4.45 from $3.82 in 2010. As well, loan-loss provisions fell 21.4%, as more people are repaying their loans on time. Buy. CAE INC. $10 (www.cae.com) continues to benefit as airlines upgrade their fleets. It recently received an order from Emirates Airlines for two flight simulators. The $34-million value of this contract is equal to 2% of CAE’s annual revenue of $1.7 billion. Including these new orders, CAE has sold 21 flight simulators in its 2012 fiscal year, which ends March 31, 2012. It sold 29 simulators in fiscal 2011, up from 20 in 2010. Best Buy. CENOVUS ENERGY INC. $34 (www.cenovus.com) reported that its cash flow per share rose 54.4% in the third quarter of 2011, to $1.05 from $0.68 a year earlier. A 9.6% increase in oil prices was the main reason for the gain. The stock trades at 8.0 times Cenovus’s forecast 2011 cash flow of $4.27 a share. That’s a reasonable multiple in light of its high-quality reserves. Buy.

Encana (which focuses on natural gas) and Cenovus (which focuses on oil) took their present form in December 2009 following the breakup of the old EnCana Corp. New shale gas discoveries have pushed down gas prices. That has hurt the new Encana. Cenovus has fared better, due to stronger oil prices. We still see both as buys due to their their high-quality reserves and strong cash flows. ENCANA CORP. $18 (New York symbol ECA; Conservative Growth Portfolio, Resources sector; Shares outstanding: 735.4 million; Market cap: $13.2 billion; Price-to-sales ratio: 1.9; Dividend yield: 4.4%; TSINetwork Rating: Average; www.encana.com) has agreed to sell some of its natural gas properties in northern Texas for $975 million. The sale is part of the company’s ongoing plan to focus on its main properties in Alberta, B.C., Wyoming, Colorado and Louisiana. Including this sale, Encana will have sold $1.7 billion of properties in 2011. That’s within its original target of $1 billion to $2 billion....

ISHARES S&P/TSX 60 INDEX FUND $16.56 (Toronto symbol XIU; buy or sell through a broker; ca.ishares.com) is a good, low-fee way to buy the top stocks on the TSX. The units are made up of stocks that represent the S&P/TSX 60 Index, which consists of the 60 largest, most heavily traded stocks on the exchange. Expenses are just 0.17% of assets. Most of the stocks in the index are high-quality companies. However, as it must ensure that all sectors are represented, it holds a few we wouldn’t include. The index’s top holdings are Royal Bank, 6.7%; TD Bank, 6.4%; Bank of Nova Scotia, 5.5%; Barrick Gold, 4.8%; Suncor Energy, 4.1%; Potash Corp., 3.9%; Goldcorp, 3.8%; Bank of Montreal, 3.7%; Canadian Natural Resources, 3.2%; CN Railway, 3.2%; BCE Inc., 3.0%, TransCanada Corp., 2.9%, CIBC, 2.9%; Enbridge, 2.6%; Cenovus Energy, 2.3% and Manulife Financial, 2.1%....

Exchange-traded funds (ETFs) may have a place in your portfolio. That’s because, unlike many other financial innovations, they don’t load you up with heavy management fees, or tie you down with high redemption charges if you decide to get out of them. Instead, they give you a low-cost, flexible, convenient alternative to mutual funds. ETFs trade on stock exchanges, just like stocks. Prices are quoted in newspaper stock tables and online. You’ll have to pay brokerage commissions to buy and sell ETFs. However, ETFs’ low management fees still give them a cost advantage over most conventional mutual funds. As well, shares are only added or removed when the underlying index changes. As a result of this low turnover, you won’t incur the regular capital-gains bills generated by the yearly distributions most conventional mutual funds pay out to unitholders. Below, we update our advice on six ETFs — five buys and one we don’t recommend....