commodity
BUCKEYE PARTNERS L.P. $77 (New York symbol BPL; Income Portfolio, Utilities sector; Units outstanding: 127.0 million; Market cap: $9.8 billion; Price-to-sales ratio: 1.5; Dividend yield: 5.9%; TSINetwork Rating: Average; www.buckeye.com) operates over 9,600 kilometres of pipelines in the northeastern and midwestern U.S. Its network pumps gasoline, jet fuel and other petroleum products. The partnership also owns oil and gas storage terminals.
Buckeye continues to expand by acquisition. In December 2013, it paid Hess Corp. (New York symbol HES) $850 million for 19 oil-storage terminals on the U.S. east coast and one on the Caribbean island of St. Lucia. It now has over 120 terminals.
In September 2014, it paid $860 million for 80% of a new firm that operates several oil-processing plants on the U.S. Gulf Coast. The deal included a deepwater oil-transfer terminal in Corpus Christi, Texas, as well as storage tanks and pipelines.
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Buckeye continues to expand by acquisition. In December 2013, it paid Hess Corp. (New York symbol HES) $850 million for 19 oil-storage terminals on the U.S. east coast and one on the Caribbean island of St. Lucia. It now has over 120 terminals.
In September 2014, it paid $860 million for 80% of a new firm that operates several oil-processing plants on the U.S. Gulf Coast. The deal included a deepwater oil-transfer terminal in Corpus Christi, Texas, as well as storage tanks and pipelines.
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SYMANTEC CORP., $24.77, Nasdaq symbol SYMC, reported better-than-expected earnings this week. The company sells computer-security technology, including antivirus and email-filtering software, to businesses and consumers. In its fiscal 2015 third quarter, which ended January 2, 2015, Symantec earned $367 million, unchanged from a year earlier. However, per-share earnings rose 1.9%, to $0.53 from $0.52, on fewer shares outstanding. That beat the consensus forecast of $0.48....
Every Tuesday we bring you “Best Canadian Stocks.” You get our specific recommendations 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.
A sinkhole recently forced Russia’s Uralkali to close its Solikamsk-2 mine, which accounts for 20% of Uralkali’s potash production and 3.5% of global capacity.
Uralkali didn’t say how long it would take to reopen the mine, but it could close it permanently.
Regardless of the length of the shutdown, high potash inventories will continue to weigh on prices. Moreover, this year’s record U.S. harvest has hurt corn, soybean and wheat prices, prompting farmers to store excess crops while they wait for a rebound.
However, we feel that steady sales from Agrium’s retail stores give it an advantage over bulk fertilizer producers like Potash Corp.
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A sinkhole recently forced Russia’s Uralkali to close its Solikamsk-2 mine, which accounts for 20% of Uralkali’s potash production and 3.5% of global capacity.
Uralkali didn’t say how long it would take to reopen the mine, but it could close it permanently.
Regardless of the length of the shutdown, high potash inventories will continue to weigh on prices. Moreover, this year’s record U.S. harvest has hurt corn, soybean and wheat prices, prompting farmers to store excess crops while they wait for a rebound.
However, we feel that steady sales from Agrium’s retail stores give it an advantage over bulk fertilizer producers like Potash Corp.
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FINNING INTERNATIONAL INC. $24 (Toronto symbol FTT; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 172.4 million; Market cap: $4.1 billion; Price-to-sales ratio: 0.6; Dividend yield: 3.0%; TSINetwork Rating: Above Average; www.finning.com) is the world’s largest dealer of tractors, bulldozers and trucks made by Caterpillar Inc. (New York symbol CAT). It also sells heavy equipment made by other firms. Finning’s clients are mainly in the mining, forest products and construction industries.
Weaker commodity prices have hurt demand for new gear in Canada and South America. That cut Finning’s earnings by 34.0% in the quarter ended September 30, 2014, to $0.33 a share from $0.50 a year ago. Without one-time items, including charges related to new tax laws in Chile and Argentina, Finning earned $0.50 a share in the latest quarter.
Overall revenue fell 6.2%, to $1.7 billion from $1.8 billion a year earlier.
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Weaker commodity prices have hurt demand for new gear in Canada and South America. That cut Finning’s earnings by 34.0% in the quarter ended September 30, 2014, to $0.33 a share from $0.50 a year ago. Without one-time items, including charges related to new tax laws in Chile and Argentina, Finning earned $0.50 a share in the latest quarter.
Overall revenue fell 6.2%, to $1.7 billion from $1.8 billion a year earlier.
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SNC-LAVALIN GROUP INC. $40 (Toronto symbol SNC; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 152.5 million; Market cap: $6.1 billion; Price-to-sales ratio: 0.8; Dividend yield: 2.4%; TSINetwork Rating: Average; www.snclavalin.com) is narrowing its focus to engineering projects in the oil and gas, mining and water treatment industries.
As part of this plan, it recently paid $2.1 billion for U.K.-based Kentz Corp., which supplies engineering and construction services to oil and gas firms. Kentz increased SNC’s exposure to fastgrowing regions like the Middle East, Asia and Australia.
To pay for Kentz, SNC recently sold AltaLink, which distributes electricity in Alberta, for $3.1 billion.
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As part of this plan, it recently paid $2.1 billion for U.K.-based Kentz Corp., which supplies engineering and construction services to oil and gas firms. Kentz increased SNC’s exposure to fastgrowing regions like the Middle East, Asia and Australia.
To pay for Kentz, SNC recently sold AltaLink, which distributes electricity in Alberta, for $3.1 billion.
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Pat McKeough responds to many requests from members of his Inner Circle for specific tips on investing in stocks as well as questions on investment strategy and the economy. Every week, his comments and recommendations on the most intriguing questions of the past week go out to all Inner Circle members. And each week we offer you a report on one of the stocks profiled in these Q&A sessions. We give you Pat’s buy-hold-sell recommendation as well as his analysis of the stock. This is part of the specific buy, hold and sell advice we offer you in our daily posts. Every week you get “A Stock to Sell” on Monday, “Best Canadian Stocks” on Tuesday, and “U.S. Stock Picks” on Thursday.
This week we received a question from an Inner Circle Member about one of Canada’s leading packaging firms. CCL Industries makes 83% of its revenue from pressure-sensitive labels, and the U.S. and Europe supply 73% of its overall revenue. The company grows by acquisition and bought three companies in 2014 alone. Pat balances CCL’s ability to build market share with its size and technology against the risk of growth by acquisition and exposure to volatile commodity prices.
Q: Pat: Do you have any comments on CCL Industries as an investment? Thanks.
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This week we received a question from an Inner Circle Member about one of Canada’s leading packaging firms. CCL Industries makes 83% of its revenue from pressure-sensitive labels, and the U.S. and Europe supply 73% of its overall revenue. The company grows by acquisition and bought three companies in 2014 alone. Pat balances CCL’s ability to build market share with its size and technology against the risk of growth by acquisition and exposure to volatile commodity prices.
Q: Pat: Do you have any comments on CCL Industries as an investment? Thanks.
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The four companies below sell gear and services to energy-exploration and mining firms. As a result, their shares have fallen with the recent drop in prices for oil, gold and other commodities. However, all four lead their niche industries and should rebound strongly when commodity prices recover. The drop also means they now trade at attractive multiples to their projected earnings. SNC-LAVALIN GROUP INC. $40 (Toronto symbol SNC; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 152.5 million; Market cap: $6.1 billion; Price-to-sales ratio: 0.8; Dividend yield: 2.4%; TSINetwork Rating: Average; www.snclavalin.com) is narrowing its focus to engineering projects in the oil and gas, mining and water treatment industries....
CCL Industries, $124.79, symbol CCL.B on Toronto (Shares outstanding: 32.3 million; Market cap: $4.3 billion; www.cclind.com), makes packaging products for the food, health care, automotive and personal care industries. Major customers include Procter & Gamble and Johnson & Johnson. The company gets 83% of its revenue by making pressure-sensitive labels for plastic bottles and other forms of packaging. CCL also makes aluminum aerosol cans and beverage bottles (12% of revenue) and flexible plastic tubes (5%)....
Overall, the drop in oil prices is a favourable development for the universe of stocks we follow and recommend. It will cut into the earnings of our oil stock recommendations, of course. But for all other stocks we follow, and their customers, it will act like a major tax cut. Note, too, that lower oil prices will cut into the cash flow of the top international troublemakers—Russia, Iran, and Venezuela—in three key parts of the world. A steep plunge like this inevitably sparks predictions of an even bigger drop ahead. It pays to be skeptical of predictions like these, just as it pays to be skeptical of bullish predictions that follow a big rise in the price of a stock or a commodity. Most are extrapolations on the rise or fall that has already taken place....
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.
SHERRITT INTERNATIONAL (Toronto symbol S; www.sherritt.com) sold off 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.
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SHERRITT INTERNATIONAL (Toronto symbol S; www.sherritt.com) sold off 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.
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