commodity

PRECISION DRILLING TRUST, $5.70, Toronto symbol PD.UN, announced this week that it has issued $175 million in new long-term notes to the Alberta Investment Management Corporation (AIMCo). AIMCo is a crown corporation that manages Alberta’s public-sector pension plans and other special funds. Precision is making the move to strengthen its balance sheet. AIMCo also bought 35 million Precision units at $3.00 each, for a total of $105 million. Moreover, Precision will give AIMCo warrants to buy 15 million more units at $3.22 each over the next five years. (As of March 31, 2009, there were 206.2 million Precision units outstanding.) AIMCo now owns roughly 15% of Precision’s units. This will rise to 19% if it exercises all of the warrants....

GENNUM CORP., $4.80, Toronto symbol GND, fell 9% on Friday after it increased its friendly takeover bid for Ottawa-based Tundra Semiconductor Corp. (Toronto symbol TUN). Like Gennum, Tundra makes chips and components for computer networking hardware, like modems and routers. Gennum’s products also let TV broadcasters store, edit and transfer video signals without losing picture quality. Gennum has increased its bid by 30%, and is now offering $112 million in cash and stock for Tundra. Two-thirds of Tundra’s shareholders must vote in favour of the deal at a special meeting on May 8. If they do, Gennum plans to close the purchase by June 1....

When the economy is volatile, there seems to be more advertisements for forex (foreign exchange) investment products, or strategies for making forex investments. Dealing in forex investments through foreign currency futures or options can make sense for a business that has been forced to take on unacceptable currency risk. Futures and options let the business pass that risk on to speculators who wish to accept it. That’s the textbook explanation for the existence of futures and options. Textbooks often fail to emphasize that most speculators who succumb to the lure offutures or potions wind up losing money. It doesn’t matter if they trade foreign currency or a traditional commodity, such as wheat. In the end, they almost always wind up losing....

You hear a lot of comparisons these days between the current market downturn and the 1929 stock market crash. That’s mainly due to a lack of comparables. The recent market downturn is the worst since World War II. However, nothing since then has come close to the crash that lasted into the 1930s. When investors ask how bad it can get, we need to qualify our answer. If governments around the world were doing nothing to counter the crisis – or, worse, were doing all the wrong things as they did in the wake of the 1929 stock market crash – then the crisis could get a lot worse. However, our view is that they are taking the kinds of steps that will contain the crisis and eventually restore liquidity to the banking system. That didn’t happen after the 1929 stock market crash....

Commodity prices are down lately along with fears of lower demand due to a slowing global economy. That makes them a tempting investment for some investors bracing for a rebound. We like the long-term prospects for commodity investments, including metals and minerals, fertilizers and agricultural products. However, most if not all non-professionals who get involved in commodities trading wind up losing money. There are various structured products sold by brokers that give you exposure to commodity investments, while limiting risk. Most participants will ultimately lose money in these investments as well, or make a poor return in relation to their risk....

If you are interested in gold investing, we recommend staying away from buying gold bullion, coins (unless you collect them as a hobby) or certificates representing an interest in bullion. Unlike stocks, commodity investments like gold bullion do not generate income. Instead, they come with a continuing cash drain, for management, insurance and so on. However, if you do want to hold bullion as part of your gold investing, then SPDR Gold Shares are a relatively low-cost and liquid way to do it. SPDR Gold Trust, symbol GLD on New York, is an investment trust that aims to reflect the performance of the price of gold bullion, less the trust’s expenses. SPDR’s sole assets are gold bullion, and, from time to time, cash. Expenses for SPDR Gold Shares are 0.4% of assets per year....

GENERAL MILLS INC. $50 (New York symbol GIS; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 329 million; Market cap: $16.5 billion; Price-to-sales ratio: 1.2; WSSF Rating: Above Average) earned $0.79 a share in its third fiscal quarter, which ended February 22, 2009. This is down 9.2% from $0.87 a year earlier. (These figures exclude writedowns of certain commodity-trading contracts and other unusual items.) The drop was largely caused by higher costs for the ingredients General Mills uses to make its cereals and other foods. These costs should fall over the next few months. Sales rose 3.9%, to $3.5 billion from $3.4 billion. General Mills expects to earn $3.88 a share in fiscal 2009. The stock trades at 12.9 times this estimate. That’s reasonable in view of its top brands and rising demand for eat-at-home meals. General Mills is a buy.

NEWELL RUBBERMAID INC., $6.91, New York symbol NWL, has cut its quarterly dividend by 52.4%, to $0.05 a share from $0.105. The new annual rate of $0.20 yields 2.9%. Newell makes plastic storage bins, tools, window blinds, pens and a number of other household items. Aside from Rubbermaid, Newell’s brands include Sharpie, Paper Mate, Waterman and Levolor. The recession is prompting Newell’s customers to switch to cheaper, generic versions of the company’s products. The lower dividend should save Newell about $61 million a year. (In 2008, Newell earned $338.7 million, or $1.22 a share before unusual items.) The company needs the cash to repay $750 million in debt that comes due during the second half of this year. If you include long-term borrowings, Newell’s total debt was $2.9 billion at the end of 2008....

CAMECO CORP. $21.22 (Toronto symbol CCO; SI Rating: Extra Risk) (306-956-6200; www.cameco.com; Shares outstanding: 392.4 million; Market cap: $8.3 billion) is the world’s largest uranium producer. Its large, high-grade reserves and low-cost operations, significant market position and access to other supplies of uranium give it a strong competitive position. Cameco is also one of three commercial converters of enriched uranium for use in nuclear reactors in the western world. Cameco gets most of its uranium from its McArthur River and Rabbit Lake mines in Saskatchewan, and the Crow Butte and Highland mines in the U.S. Cameco owns 70% of the McArthur River mine. Through subsidiaries, Cameco has a 31.6% interest in Ontario’s Bruce Power partnership, which operates four of eight reactors at North America’s largest nuclear power complex. Cameco is also the exclusive supplier of uranium for all eight reactors....

FINNING INTERNATIONAL INC. $11 (Toronto symbol FTT; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 170.5 million; Market cap: $1.9 billion; Price-to-sales ratio: 0.3; SI Rating: Above Average) sells, rents and repairs heavy equipment made by Caterpillar Inc. It has major customers in the mining, forest products and construction industries. Finning’s revenue rose 5.8% in 2008, to $6 billion from $5.7 billion in 2007. Finning’s clients ordered more heavy equipment in the first half of the year as a result of high commodity prices. Finning’s operations in the U.K. and South America account for roughly 45% of its sales, and the drop in the Canadian dollar in the last quarter of 2008 increased the contribution from these divisions. Finning is responding to the global recession by cutting jobs. If you exclude costs related to this, and a writedown of goodwill, earnings fell 11.7%, to $247.4 million from $280.1 million. Earnings per share fell 7.7%, to $1.43 from $1.55 on fewer shares outstanding....