commodity

ENCANA CORP. (Toronto symbol ECA; www.encana.com) is one of North America’s largest natural gas producers. The company is now cutting its reliance on natural gas, as rising shale gas production has cut prices from $11.50 U.S. per thousand cubic feet in 2008 to just $3.60 U.S. today. Encana plans to narrow its focus from around 30 properties to five: Montney (B.C.), Duvernay (Alberta), DJ Basin (Colorado), San Juan Basin (New Mexico) and Tuscaloosa Marine Shale (Louisiana)....

Pat McKeough responds to many requests from members of his Inner Circle for specific advice on 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 one of the highlights from these Q&A sessions. While we reserve our buy-hold-sell advice for Inner Circle members, these excerpts provide a great deal of information and analysis on stocks we’ve covered for members of Pat’s Inner Circle....

SPDR Gold Trust ETF, $130.11, symbol GLD on New York (Shares outstanding: 302.8 million; Market cap: $39.4 billion; www.spdrgoldshares.com), holds gold bullion and, from time to time, cash. Unlike stocks, commodity investments such as gold bullion do not generate income. Instead they come with a continuing cash drain for management, insurance and so on. SPDR Gold Trust’s expenses are 0.4% of its assets per year. In general, we recommend staying away from buying gold bullion, coins (unless you collect them as a hobby) or certificates representing an interest in bullion....

TECK RESOURCES LTD. $26 (Toronto symbol TCK.B; Conservative Growth Portfolio, Resources sector; Shares outstanding: 576.3 million; Market cap: $15.0 billion; Price-to-sales ratio: 1.6; Dividend yield: 3.5%; TSINetwork Rating: Average; www.teck.com) is a leading producer of metallurgical coal, a key ingredient in steelmaking. It also produces copper and zinc.

The stock is down 29.7% from $37 when we named it our top pick for 2013. That’s mainly because slowing industrial activity, mainly in Asia, has hurt commodity prices.

In quarter ended June 30, 2013, earnings fell 50.5%, to $197 million, or $0.34 a share. These figures exclude unusual items, such as foreign exchange losses and writedowns. A year earlier, Teck earned $398 million, or $0.68 a share.
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HOME CAPITAL GROUP INC. (Toronto symbol HCG; www.homecapital.com) gets 90% of its revenue by making residential mortgage loans to borrowers who don’t meet the stricter standards of larger, traditional lenders, like banks. These clients include recent immigrants with limited credit histories, and self-employed individuals....

CHEMTRADE LOGISTICS INCOME FUND $16.95 (Toronto symbol CHE.UN; TSINetwork Rating: Speculative) (416-496-5856; www.chemtradelogistics- .com; Units outstanding: 41.7 million; Market cap: $706.4 million; Dividend yield: 7.1%) is one of North America’s largest providers of removal services for resource firms, such as oil refineries and base-metal processors....

The recent breakup of a marketing alliance between potash producers in Russia and Belarus could cut the commodity’s price by 20%. The move has already hurt the prices of fertilizer stocks.

Unlike its fertilizer-making competitors, Agrium derived just 4% of its revenue and 8% of its earnings from potash in 2012....

In choosing a Stock of the Year, we aim for a “heads you win, tails you break even” situation. These stocks can put on above-average rises, but they’re unlikely to be disasters if they disappoint.

Our past #1 picks, including Agrium (see page 101), sometimes take a year or more to get going....

Keyera Corp. $57.05, symbol KEY on Toronto (Shares outstanding: 78.5 million; Market cap: $4.5 billion; www.keyera.com), provides a number of services to the natural gas industry, including gathering, processing, storage and transportation. The company reported cash flow of $1.01 a share in the three months ended June 30, 2013, up 29.5% from $0.78 a share a year earlier. Keyera raised its monthly dividend by 11.1%, to $0.20 a share from $0.18, beginning with the September 2013 payment. The stock now yields 4.2%....

CHEMTRADE LOGISTICS INCOME FUND $16.95 (Toronto symbol CHE.UN; TSINetwork Rating: Speculative) (416-496-5856; www.chemtradelogistics- .com; Units outstanding: 41.7 million; Market cap: $706.4 million; Dividend yield: 7.1%) is one of North America’s largest providers of removal services for resource firms, such as oil refineries and base-metal processors. These companies create sulphur, acid and other by-products as part of their activities. Chemtrade converts these substances into useful chemicals, like sulphuric acid.

Chemtrade’s Marsulex subsidiary provides a range of environmental services, including improving air quality and treating and handling industrial waste.

In the three months ended June 30, 2013, Chemtrade’s revenue fell 4.4%, to $217.5 million from $227.6 million a year earlier. The decline mostly reflects lower prices for sulphur on international markets. However, cash flow per unit was unchanged at $0.73.
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