commodity
J.P. MORGAN CHASE CO. $36.54, New York symbol JPM, fell 4% on Friday after it agreed to participate in an emergency loan package for troubled investment broker Bear Stearns Cos. Inc. (New York symbol BSC). J.P. Morgan will borrow funds from the Federal Reserve, and loan the money to Bear Stearns for 28 days. The Federal Reserve will guarantee the loan, so the risk to J.P. Morgan is minimal. Meanwhile, J.P. Morgan will help Bear Stearns find permanent financing. It’s possible J.P. Morgan may try to buy Bear Stearns. However, anti-trust regulators would probably block a merger. J.P. Morgan is still a buy....
It was an unsettling week, but the market ended up in the middle of the range it has stayed in since its January 21 plunge. No one can predict these things consistently, but I still think we are much closer to a bottom than a top. To put it another way, if I had to choose between “buy” and ”sell”, I would definitely say “buy”. DIEBOLD INC. $25.49, New York symbol DBD, plans to cut its workforce by 5%, mainly due to slow demand for its electronic voting machines and delays in installing a lottery system in Brazil. This latest move is in addition to Diebold’s earlier plan to cut costs by $100 million over three years. Diebold has not issued financial statements since April 2007, due to an SEC investigation into the way it recognizes revenue from sales of ATMs and surveillance systems. The company expects to catch up with its reporting in the next few months....
INDIA FUND $51.75 (New York symbol IFN; CWA Rating: Aggressive) invests mainly in large capitalization Indian stocks. The manager of the fund is the Blackstone Group. India Fund dropped recently from an all-time high of $71.54 along with turmoil in global stock markets. But the Indian economy is still strong, and inflation and interest rates remain low. The Indian government encourages foreign investment, and has boosted infrastructure spending and rural development, and cut taxes. India will likely report growth in its economy of 8.5% in 2007. Growth in 2008 is forecast at 10%....
We feel investors should diversify their resource sector holdings with non-oil stocks such as gold miner Newmont and forest products producer Weyerhaeuser. Both are leaders in their respective fields, and their large size makes it easier for them to endure commodity price swings NEWMONT MINING CORP. $51 (New York symbol NEM; Aggressive Growth Portfolio, Resources sector; Shares outstanding: 434.7 million; Market cap: $22.2 billion; WSSF Rating: Average) is one of the world’s largest producers of gold. It also mines copper, silver and zinc. Newmont aims to increase its exposure to gold. Its Canadian subsidiary Franco-Nevada Corp. recently sold shares to the public, and used the proceeds to pay Newmont $1.3 billion in cash for certain mining and oil and gas royalty assets....
FORDING CANADIAN COAL TRUST $37 (Toronto symbol FDG.UN; Aggressive Growth Portfolio, Resources sector; Units outstanding: 147.9 million; Market cap: $5.5 billion; SI Rating: Average) is a major producer of metallurgical coal, a key ingredient in steelmaking. Its proven reserves should last 25 years. With further development, Fording’s reserves could last 100 years. Fording’s main asset is its 60% interest in the Elk Valley Coal Partnership, which operates six coal mines in British Columbia. Teck Cominco Ltd. owns the other 40% of Elk Valley, and operates the mines. Teck also owns 19.95% of Fording’s units, which gives it a 52% economic interest in Elk Valley.
Aims to unlock more of its value
Fording is now exploring strategic alternatives to enhance unitholder value, including the sale of its Elk Valley stake or the entire trust. Teck has a right of first refusal over any sale of Fording’s Elk Valley interest. However, a deal to sell Fording itself would not trigger this right....
BANK OF MONTREAL $57 (Toronto symbol BMO; Conservative Growth Portfolio, Finance sector; Shares outstanding: 498.6 million; Market cap: $28.4 billion; SI Rating: Above average) is the fourth-largest Canadian bank, with $366.5 billion in assets. Bank of Montreal owns Harris Bank, a major bank in Chicago. Harris’s conservative lending policies have limited Bank of Montreal’s exposure to the problems in the U.S. mortgage market. However, Bank of Montreal still had to write down the value of asset-backed securities it holds by $211 million (after-tax) in fiscal 2007. Another problem for Bank of Montreal is its commodity trading operations, which lost $440 million (after-tax) on natural gas futures contracts. The bank is making progress cutting the risk of its trading operations, but further losses are possible....
Bank stocks have moved down in the past few months, mainly because of concerns over a general lack of liquidity for securities backed by risky assets, such as subprime mortgages in the United States. This lack of liquidity makes it difficult to assess the market value of these securities, and has led to significant writedowns. Canada’s big five banks remain well capitalized, so these charges shouldn’t hurt their strong profit and dividend outlook. They’re still cheap in relation to earnings, and provide above-average yields. Investors should own at least one of these five banks in the Finance segment of their portfolio. CANADIAN IMPERIAL BANK OF COMMERCE $69 (Toronto symbol CM; Conservative Growth Portfolio, Finance sector; Shares outstanding: 335.0 million; Market cap: $23.1 billion; SI Rating: Above average) is Canada’s fifth-largest bank, with assets of $342.2 billion....
FINNING INTERNATIONAL INC. $32 (Toronto symbol FTT; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 179.6 million; Market cap: $5.7 billion; SI Rating: Above average) sells and rents Caterpillar brand tractors, bulldozers and trucks. The company continues to win new contracts from oil sands developers. It recently received a $100 million order for 19 trucks. Due to a huge backlog, it will take Finning about two years to deliver these vehicles. Most new contracts like this also cover replacement parts and maintenance services. That should provide Finning with steady revenues for years after it delivers this equipment. The stock trades at 20.4 times its likely 2007 earnings of $1.57 a share, and the $0.36 dividend yields 1.1%. Finning’s high exposure to volatile commodity prices increases its risk. But we feel this boom could last several more years due to spreading industrialization in Asia....
The Alberta government is studying proposals to raise royalties on oil and gas developments. That could slow the expansion of the oil sands. However, at current production rates, oil sands reserves should last 200 years, so it’s unlikely higher royalties will scare off developers. As well, further increases in oil prices may more than offset higher royalties. Finning and SNC-Lavalin should continue to profit from various oil sands projects. But only one is a buy right now. FINNING INTERNATIONAL INC. $32 (Toronto symbol FTT; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 179.6 million; Market cap: $5.7 billion; SI Rating: Above average) sells and rents Caterpillar brand tractors, bulldozers and trucks....
CONAGRA FOODS INC. $25 (New York symbol CAG; Income Portfolio, Consumer sector; Shares outstanding: 489.8 million; Market cap: $12.2 billion; WSSF Rating: Above average) is phasing out less-profitable food products to focus on those with greater potential, such as foods aimed at health-conscious consumers. In its first fiscal quarter ended August 26, 2007, earnings before unusual items rose 30.8%, to $0.34 a share from $0.26 a year earlier. Sales rose 11.1%, to $3.0 billion from $2.7 billion. An ongoing cost cutting plan continues to help ConAgra cope with higher prices for ingredients and fuel. Profits at its commodity trading division, which accounts for about 10% of total revenue, rose four-fold due to rising fertilizer prices. The company has resumed production of its Peter Pan peanut butter after a recent salmonella outbreak. The problems had little impact on ConAgra’s stock, which now trades at 16.7 times the $1.50 a share it will probably earn in fiscal 2008. The improving earnings should let it raise its $0.72 dividend, which yields 2.9%....