commodity

Not long ago, people still believed that growth in emerging markets would keep the world economy afloat, even if the developed countries stagnated. China fans took it for granted that China’s growth would stay above 7% a year. Events this past week rattled that view. Chinese stocks went through horrendous declines, continuing the plunge they began in the summer. Chinese leader Xi Jinping seems focused on shoring up the Communist party and the Chinese stock market, rather than strengthening the Chinese economy. Brazil officially entered a recession with news that its economy shrank in the second quarter this year, at a faster rate than in the first. Brazil’s per-capita income has been falling since last year, and the Brazilian real has lost a quarter of its value in the year to date....
BHP BILLITON LTD. ADRs, $36.69, New York symbol BHP, recently set up its aluminum, manganese, nickel and silver operations, as well as some coal mines, as a new firm called South32. The spinoff leaves BHP focused on four main commodities: iron ore, metallurgical coal, copper and petroleum, at properties in Australia, North America and South America. In its 2015 fiscal year, which ended June 30, 2015, BHP’s revenue fell 21.4%, to $44.6 billion from $56.8 billion in 2014. Earnings dropped 51.6%, to $6.4 billion, or $2.41 per ADR (each American depositary receipt represents two BHP common shares). In 2014, it earned $13.3 billion, or $4.99 per ADR....
Crius Energy Trust, $7.81, symbol KWH.UN on Toronto (Shares outstanding: 16.7 million; Market cap: $126.4 million; www.criusenergytrust.ca), owns 26.8% of Connecticut-based Crius Energy LLC. That company was formed when Regional Energy and Public Power merged in late 2012. Both of those firms started up in 2009 as energy retailers. Crius Energy LLC is one of the top energy retailers in the U.S., with about 800,000 customers. The company provides electricity and gas under variable and fixed-price supply contracts through a variety of sales channels. It operates through Viridian Energy, Cincinnati Bell Energy, FairPoint Energy, FTR Energy Services and Public Power....
Junior mining stocks Sherritt and Amerigo are adapting to lower commodity prices in different ways, but we see both as aggressive buys.
In a tough environment, our advice on resource service firms Wajax and McCoy: both are high-yielding value stocks with better days ahead.
SHERRITT INTERNATIONAL $1.62 (Toronto symbol S; TSINetwork Rating: Speculative) (1-800-704- 6698; www.sherritt.com; Shares outstanding: 293.6 million; Market cap: $472.6 million; Dividend yield: 2.5%) sold all of its coal interests for $793 million in cash in April 2014. The company is now focused on nickel production, with operations in Cuba and Canada. As well, it has a 40% interest in the Ambatovy nickel mine on the island nation of Madagascar, off Africa’s east coast. Sherritt also produces oil and gas in Cuba, Spain and Pakistan and manages 506 megawatts of power generation capacity in Cuba. In the three months ended March 31, 2015, the company’s revenue fell 31.4%, to $82.9 million from $120.9 million a year earlier, mostly due to lower oil and gas prices. Cash flow per share declined 32.0%, to $0.17 from $0.25....
WAJAX CORP. $20.60 (Toronto symbol WJX; TSINetwork Rating: Extra Risk) (905-212-3300; www.wajax.ca; Shares outstanding:20.0 million; Market cap: $414.1 million; Dividend yield: 4.9%) sells and services cranes, forklifts and other heavy equipment. It also provides related parts (such as bearings, motors, hoses and fittings) and power systems (including diesel engines and transmissions). The company’s customers are in the natural resource, construction, manufacturing and transportation industries. In the three months ended March 31, 2015, Wajax’s revenue fell 4.3%, to $317.2 million from $331.4 million a year earlier, as mining, oil and gas and oil sands firms made fewer purchases....
Here’s the text of the quarterly letter I recently sent to our Portfolio Management clients:

“Most investors find they improve their investment results when they invest conservatively. Speculating can pay off from time to time. But the gains are generally too small and/or too rare to offset the losses, and still provide a reasonable rate of return. More often, investors find they have a net loss on their speculative activities over a period of years. However, it is possible to get lucky.

Mr. W., one of our portfolio-management clients, loves his job as a high-school guidance counselor. But he recognized early in his career that it was never going to finance the lifestyle he wanted to provide for his family. So for the first couple of decades of his investing career, he tried to make his fortune as a speculator. He tried buying penny stocks, selling short, options trading and futures trading. That worked out as it does for most investors. His gains were enough to keep him in the game, but too little to provide a worthwhile financial return, much less justify the time he spent.

In middle age, he quit speculating and began dabbling in various small business ventures. Gains were irregular here as well. Then he bought a downtown Toronto rooming house. A couple of years later, an offer from a property developer put a highly rewarding end to his sideline as a rooming house operator. He then hired us to build and manage a conservative investment portfolio for him.

Then lightning really struck. Mr. W. has just acquired a large holding in a well-known Canadian gold mining company. He got the stock as a result of the success of an investment he made in a grubstaking syndicate after he sold the rooming house. When added to his portfolio, the stock made up 20% of its total value. This left Mr. W. with a dilemma: Should he hold on to the stock, even though it left him with an inappropriate and risky portfolio balance? Or should he sell all or part of it, and pay capital-gains tax?

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Our view on how Verizon, one of our best dividend stocks in the U.S., aims to hold off its challengers with two takeovers, including AOL.
p>WAJAX CORP. $20.60 (Toronto symbol WJX; TSINetwork Rating: Extra Risk) (905-212-3300; www.wajax.ca; Shares outstanding:20.0 million; Market cap: $414.1 million; Dividend yield: 4.9%) sells and services cranes, forklifts and other heavy equipment. It also provides related parts (such as bearings, motors, hoses and fittings) and power systems (including diesel engines and transmissions). The company’s customers are in the natural resource, construction, manufacturing and transportation industries.

In the three months ended March 31, 2015, Wajax’s revenue fell 4.3%, to $317.2 million from $331.4 million a year earlier, as mining, oil and gas and oil sands firms made fewer purchases.

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