commodity

If you knew that the U.S. dollar would keep falling, the best way to protect yourself would be to sell all of your U.S. stocks and buy them back when the dollar stabilizes. However, you don’t know where the U.S./Canada exchange rate is going next – you never do. The financial industry has a variety of products that can insulate your U.S. investments from the risk of currency depreciation. These products obviously cost money. In addition, they reduce the long-term value of your U.S. investments. After all, part of the appeal of investing in U.S. stocks is that it provides currency diversification. I’m not convinced that the U.S. dollar will continue to fall. The Canadian dollar has moved up from under $0.80 U.S. in January to about $0.90 today. That’s partly due to a rise in commodity prices, particularly oil. But it’s hard to imagine that commodity prices will get anywhere near their 2008 highs this year, or even in 2010. So, a continued rise in our dollar (or a fall in the U.S. dollar against the Canadian dollar) seems unlikely, because of our relatively greater economic dependence (compared to the U.S.) on resource industries....

If you knew that the U.S. dollar would keep falling, the best way to protect yourself would be to sell all of your U.S. stocks and buy them back when the dollar stabilizes. However, you don’t know where the U.S./Canada exchange rate is going next – you never do. The financial industry has a variety of products that can insulate your U.S. investments from the risk of currency depreciation. These products obviously cost money. In addition, they reduce the long-term value of your U.S. investments. After all, part of the appeal of investing in U.S. stocks is that it provides currency diversification. I’m not convinced that the U.S. dollar will continue to fall. The Canadian dollar has moved up from under $0.80 U.S. in January to about $0.90 today. That’s partly due to a rise in commodity prices, particularly oil. But it’s hard to imagine that commodity prices will get anywhere near their 2008 highs this year, or even in 2010. So, a continued rise in our dollar (or a fall in the U.S. dollar against the Canadian dollar) seems unlikely, because of our relatively greater economic dependence (compared to the U.S.) on resource industries....

ATLANTIC TELE-NETWORK, $38.46, symbol ATNI on Nasdaq, jumped 50% this week after it announced plans to buy more than 800,000 wireless accounts from Verizon Wireless for $200 million in cash. The subscribers are mostly in rural areas of Georgia, North Carolina, South Carolina, Illinois, Ohio and Idaho. Verizon had to sell these accounts as part of the regulatory approval for its recent purchase of Alltel. Competition regulators still need to approve the deal, but it should close by the end of this year. Atlantic is paying just $250 per subscriber. That’s much less than the $1,567 per subscriber that AT&T paid when it bought wireless accounts from Verizon last month. (AT&T’s purchase was also related to the Alltel acquisition.)...

SNC-LAVALIN GROUP INC. $43 (Toronto symbol SNC; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 151 million; Market cap: $6.5 billion; Price-to-sales ratio: 1.0; SI Rating: Average) recently bought Newfoundland-based Spectrol Energy Services Inc. for an undisclosed sum. Spectrol sells engineering and technical services to oil and natural-gas producers off Canada’s east coast. SNC hopes the acquisition will let it take advantage of the recent jump in oil prices. However, 60% of SNC’s earnings already come from customers in the resource sector, and commodity prices are still well below last year’s peaks. As well, tight credit markets could make it difficult for these clients to borrow cash for new projects. SNC-Lavalin is a hold.

Armtec Infrastructure Income Fund, $17.84, symbol ARF.UN on Toronto (Units outstanding: 19.4 million; Market cap: $346.1 million), makes pipes, highway noise barriers and a range of other components that are used in the construction of roads, bridges and buildings. Armtec first sold units to the public at $10 each, and began trading on Toronto in July 2004. The fund has three divisions:...

Government efforts now underway are likely to solve today’s financial crisis. But the cure will likely only come at a cost of much higher inflation, starting possibly in the next decade. We’ve been asked by a number of investors how this should influence their investing. Many have asked specifically about resource stocks. As a general rule, resource stocks will provide a hedge against inflation, because they gain directly from rising prices for the commodities they produce....

Man AHL Diversified (Canada) Fund gives accredited Canadian investors exposure to the “AHL Diversified Program,” an offshore managed-futures program that started up in 1987. In general, accredited Canadian investors must have at least $1 million in investable assets after debt (this excludes money owed on a principal residence). They must also have net income before taxes exceeding $200,000 in each of the two preceding years, or net income before taxes exceeding $300,000 in each of those years when combined with that of a spouse. In either case, the investor must have a reasonable expectation of exceeding the same net income level in the current year. The Man AHL Diversified (Canada) Fund is a hedge fund that is part of the Man Group plc, a London-based manager of over 500 hedge funds. Man Group has more than $47 billion U.S. in assets under management....

Sherritt International, $5.24, symbol S on Toronto (Shares outstanding: 293.1 million; Market cap: $1.5 billion), is up over 65% since April 14. That’s when President Obama announced an easing of restrictions on American relations with Cuba. The U.S. is maintaining its 47-year-old trade embargo, but Obama plans to allow Cubans living in the U.S. to make unlimited trips and money transfers to family members on the island. Until now, Cubans living in the United States had been allowed to travel to the island once a year and could send only $1,200 per person in cash to family members in Cuba. Obama also plans to allow U.S. telecommunications firms to bid for Cuban contracts. Sherritt gets around 65% of its revenue and 82% of its earnings from Cuba, making it the country’s largest foreign investor. The company’s interests include the Moa nickel-cobalt mine, which is a 50/50 joint venture with the Cuban government. Sherritt also produces approximately two-thirds of Cuba’s oil and holds a one-third interest in Energas, a joint venture that generates electricity and sells it onto the Cuban electrical grid....

Low resource prices and tight credit have hit junior-mining stocks particularly hard. The group needs much higher commodity prices for an across-the-board rebound. These companies must also have considerably easier access to both equity and debt financing. We continue to recommend a number of high-quality juniors in Stock Pickers Digest. But, as always, we judge them using the same factors we’ve always used to find the best junior-mining stocks. These include: 1) Well-financed junior miners with no immediate need to sell shares at low prices, since this would dilute existing investors’ interests. The best junior miners have a major partner who has agreed to pay for the drilling or other exploration or development in exchange for an interest in the property....

HudBay Minerals Inc., $8.20, symbol HBM on Toronto (Shares outstanding: 153.1 million; Market cap: $1.3 billion), produces base metals. HudBay first sold shares to the public at $2.25 each, and began trading on Toronto in December 2004. HudBay produces most of its zinc and copper in northern Manitoba, where it owns the 777 mine and the Trout Lake mine. The company also runs a concentrator, a copper smelter and a zinc plant at Flin Flon. Aside from its operating mines, HudBay holds 1.4 million hectares of exploration properties in Manitoba and Saskatchewan, and land in Guatemala, New York State, the Yukon, Ontario and Chile. As well, last August HudBay completed a resource study that outlined an 18- to 20-million-tonne zinc deposit at its Lalor Lake project near Flin Flon. HudBay plans to undertake further exploration to outline a mineable deposit....