Cenovus Energy Inc.

BANK OF NOVA SCOTIA $51.74 (Toronto symbol BNS: Shares outstanding: 1.1 billion; Market cap: $55.5 billion; TSINetwork Rating: Above Average; Div. yield: 4.0%, www.scotiabank.com) continues to build up its operations in China. The bank recently agreed to buy 19.99% of the Bank of Guangzhou; the Chinese government owns the remaining 80.01%. This bank is the 29th largest in China, with 84 branches. Bank of Nova Scotia will pay $719 million when the deal closes in December 2011. To put that in context, it earned $1.2 billion, or $1.11 a share, in the three months ended July 31, 2011. The bank has operated in China for the past 29 years, and has the largest presence in that country among the big five Canadian banks. This experience cuts the risk of this latest investment. Bank of Nova Scotia’s expertise should also help Bank of Guangzhou increase its earnings and market share....

CAE INC. $10 (www.cae.com) has won $100 million of new contracts. That’s about 6% of CAE’s annual revenue of $1.6 billion. Under these deals, CAE will build and service flight simulators and other equipment for the U.S. and German air forces. Demand for CAE’s products should continue to rise, because it costs much less to train pilots on simulators than on actual aircraft. As well, the company gets half of its revenue from military clients. That cuts its exposure to the cyclical airline industry. Best Buy. CENOVUS ENERGY INC. $34 (www.cenovus.com) has started up the third phase of its 50%-owned Christina Lake oil-sands project in Alberta; ConocoPhillips owns the other 50%. When it reaches full production in 2012, this phase will add 40,000 barrels a day to Christina Lake’s current daily production of 16,000 barrels. Future phases will push up daily production to 218,000 barrels. Buy. MOLSON COORS CANADA INC. $43 (www.molsoncoors.com) plans to invest an extra $280 million in its U.K. breweries over the next five years (all amounts except share price in U.S. dollars). These upgrades will cut these breweries’ power and water use. To put the cost of this plan in context, Molson Coors earned $231.6 million, or $1.23 a share, in the quarter ended June 25, 2011. Buy.

Slowing economic growth and concerns about high U.S. and European debt continue to dampen prices for commodities, like oil, coal and copper. However, rising demand from fast-growing regions, such as Asia and Latin America, should help support resource prices over the long term. The best way to protect the Resources part of your portfolio from volatile commodity prices is with high-quality companies, such as these three. They also trade at attractive multiples to earnings and cash flow. CENOVUS ENERGY INC. $37 (Toronto symbol CVE; Conservative Growth Portfolio, Resources sector; Shares outstanding: 754.1 million; Market cap: $27.9 billion; Price-to-sales ratio: 1.8; Dividend yield: 2.6%; TSINetwork Rating: Extra Risk; www.cenovus.com) operates three oil-sands properties in Alberta and one in Saskatchewan. Cenovus ships the heavy bitumen from these projects to refineries in Illinois and Texas. ConocoPhillips (New York symbol COP) owns 50% of these refineries, as well as 50% of Cenovus’ two main oil-sands projects. Cenovus also owns conventional oil and natural gas properties....

IMPERIAL OIL $40.61 (Toronto symbol IMO; Shares outstanding: 854.2 million; Market cap: $34.6 billion; TSINetwork Rating: Average; Dividend yield: 1.1%; www.imperialoil.ca) is the largest investor in the Mackenzie pipeline project, which aims to pump natural gas from the Arctic to Alberta. The company owns 34.4% of this project. Recently, Royal Dutch Shell (New York symbol RDS.A) said it will sell its 11.4% stake in the proposed pipeline. That’s mainly because regulatory delays have doubled the project’s estimated costs, to around $16.2 billion. To put that in perspective, Imperial’s market cap is $37.6 billion. As well, new discoveries of shale gas in Canada and the U.S. have increased gas supply and depressed prices. Royal Dutch Shell aims to complete this sale by June 2012. That gives it plenty of time to find a buyer. Imperial and its remaining partners will make a final decision on the Mackenzie project in December 2013. If they decide to proceed, the new pipeline could begin operating in 2018....

ISHARES S&P/TSX 60 INDEX FUND $19.21 (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, such as Yellow Media Inc. The index’s top holdings are: Royal Bank, 6.9%; TD Bank, 6.3%; Bank of Nova Scotia, 5.4%; Suncor Energy, 5.2%; Potash Corp., 4.1%; Canadian Natural Resources, 3.9%; Barrick Gold, 3.9%; Goldcorp, 3.2%; CN Railway, 3.1%; Bank of Montreal, 3.1%; Manulife Financial, 2.6%; CIBC, 2.6%; BCE, 2.5%; TransCanada Corp., 2.5%; Cenovus Energy, 2.3%; and Teck Resources, 2.2%....

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....

PENGROWTH ENERGY $12.47 (Toronto symbol PGF; Shares outstanding: 303.2 million; Market cap: $4.0 billion; TSINetwork Rating: Average; Dividend yield: 6.7%; www.pengrowth.com) gets most of its oil from conventional sources with large reserves and predictable production rates. The company is also developing heavy-oil projects, particularly oil sands. Its biggest oil sands project is its Lindbergh property near Cold Lake, Alberta. Pengrowth estimates that Lindbergh’s reserves could equal 40% of the company’s current proven and probable reserves. Pengrowth expects to begin production in late 2013. Pengrowth is also developing its Bodo heavy-oil properties along the Alberta/Saskatchewan border. These wells could begin operating in late 2011....

TRANSCONTINENTAL INC., $14.65, Toronto symbol TCL.A, is the largest commercial printer in Canada and Mexico, and the fourth-largest in North America. It also publishes newspapers and magazines, and has over 300 web sites. The stock rose 3% after the company reported better-than-expected earnings this week. Transcontinental also raised its dividend for the second time in the past six months. In its 2011 second quarter, which ended April 30, 2011, Transcontinental’s revenue rose 0.9%, to $514.7 million from $510.0 a year earlier. Excluding unusual items, earnings rose 17.6%, to $40.1 million from $34.1 million a year earlier. Earnings per share rose 16.7%, to $0.49 from $0.42, on more shares outstanding. That beat the consensus estimate of $0.44 a share....

iShares S&P/TSX Capped Energy Index Fund, $21.11, symbol XEG on Toronto (Shares outstanding: 50.5 million; Market cap: $1.1 billion; ca.ishares.com) aims to mirror the performance of the S&P/TSX Capped Energy Index, which is made up of the largest-capitalization energy stocks on the Toronto exchange. The weight of any one company is capped at 25% of the index’s market capitalization. The fund’s MER is 0.55%. It yields 1.4%. iShares S&P/TSX Capped Energy Index Fund’s top 10 holdings are Suncor Energy, 18.5%; Canadian Natural Resources, 13.5%; Cenovus Energy, 7.5%; Encana Corp., 6.8%; Talisman Energy, 6.4%; Canadian Oil Sands Trust, 4.4%; Nexen, 3.7%; Imperial Oil, 3.5%; Crescent Point Energy, 3.4%; and Penn West Energy Trust, 3.3%. We continue to think most investors are better off investing in individual companies as part of a well-balanced and diversified portfolio, rather than in funds that focus on narrow market sectors. As well, indexes that cap their holdings at a certain level – 25% in the case of the iShares S&P/TSX Capped Energy Index Fund – can cut your return by reducing the contribution from top performers if they soar to make up more that the capped limit....

Three of Canada’s big-five banks, BANK OF NOVA SCOTIA, $58.49, Toronto symbol BNS, CANADIAN IMPERIAL BANK OF COMMERCE, $84.40, Toronto symbol CM, and TORONTO-DOMINION BANK, $84.15, Toronto symbol TD, have joined a new consortium called Maple Group Acquisition Corp. Other members of this group include National Bank and five major pension funds. Maple wants to buy a controlling interest in TMX Group Inc. (Toronto symbol X), which operates the Toronto Stock Exchange, the TSX Venture Exchange and the Montreal Exchange. In February 2011, TMX accepted a takeover offer from the London Stock Exchange Group. Under the terms of that offer, TMX shareholders would own 45% of the combined company, which would be the world’s second-largest stock exchange by market cap....