commodity

CANADIAN IMPERIAL BANK OF COMMERCE $96 (Toronto symbol CM; Conservative Growth Portfolio, Finance sector; Shares outstanding: 334.6 million; Market cap: $32.1 billion; SI Rating: Above average) earned $2.42 a share in its third fiscal quarter ended July 31, 2007, up 25.4% from $1.93 a year earlier. These figures exclude unusual items, including a $0.56 a share writedown of mortgage-backed securities in the most recent quarter. Revenue grew 7.1%, to $3.0 billion from $2.8 billion, thanks to strong growth at its retail banking and investment operations. The bank has raised its quarterly dividend 13.0%, from $0.77 a share to $0.87. The new annual rate of $3.48 yields 3.6%. CIBC is a buy....

AMERICAN EXPRESS CO. $59.28, New York symbol AXP, has agreed to sell its international banking business for $1.1 billion. That figure includes $212 million that Amex will receive over the next 18 months from the transfer of a related operation. To put these amounts in perspective, Amex earned $1.06 billion or $0.88 a share in the second quarter of 2007. The company will probably invest most of the cash in its core card and travel operations, or buy back shares. American Express is a buy....

APPLE INC. $131.77, Nasdaq symbol AAPL, aims to solidify its 70% share of the digital music player market with its new line of iPods, including a version that can wirelessly connect to the Internet. A new alliance with the Starbucks coffee chain will also make it easier for iPod users to wirelessly download music from Apple’s iTunes music store. However, the stock fell 10% on news Apple is cutting the price of its iPhone by a third. The company will soothe the feelings of customers who bought an iPhone prior to the price cut by giving them a $100 credit toward future purchases. Investors took the price cut as a sign that iPhone demand is already weakening, just two months after its heavily hyped launch. But Apple may hope to make up the lost revenue in bigger iPhone sales volumes, particularly in the Christmas selling season, and possibly from the benefit of introducing Apple products to a larger segment of the public....

The Canadian economy grew at an annualized rate of 3.4% in the second quarter, well ahead of the Bank of Canada’s forecast of 2.8%. That followed strong growth of 3.9% in the first quarter. Consumer spending, which makes up almost 60% of our economy, grew at an annualized rate of 4.9% in the second quarter, up from 3.4% in the first quarter. Home building grew 5.2% in the quarter. And despite falling housing sales and prices in the U.S. due to the subprime mortgage problems, Canadian housing markets remain strong. In July, Canadian home resales rose 10% to a new record....

CANADIAN PACIFIC RAILWAY LTD. $70 (Toronto symbol CP; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 153.1 million; Market cap: $10.7 billion; SI Rating: Above average) transports freight over a rail network between Montreal and Vancouver. In the United States, subsidiaries connect CP’s Canadian lines to major hubs in the Midwest and Northeast. Alliances with other railways extend its reach to Mexico. CP’s revenue rose from $3.7 billion in 2002 to $4.6 billion in 2006, largely due to the expansion of trade with Asia. Profits fell from $3.06 a share (total $487.5 million) in 2002 to $2.52 a share ($401.3 million) in 2003 due to higher fuel costs....

One of the most powerful ways to succeed as an investor is to disregard market turbulence like today’s, in which there is a large random factor. Instead, buy companies with hidden assets such as high research spending, under-utilized real estate and brand names, and dominant market positions. It can take years before hidden or little appreciated assets begin to generate earnings for the company or capital gains for its investors. But eventually, hidden assets will pay off. In the meantime, they cut your risk of permanent loss. In July, takeover rumours helped push CP Rail up to a new all-time peak. A potential bidder saw CP’s land holdings as a hidden asset. Skeptics point out that this land is beneath railway tracks, and unsuitable for residential housing. However, warehousing is another story. Pessimists also overlook the hidden value of CP’s cost-cutting plan, and its key role in Canada’s economy. Both fuel earnings growth and cut risk....

BANK OF MONTREAL $69 (Toronto symbol BMO; Conservative Growth Portfolio, Finance sector; Shares outstanding: 500.0 million; Market cap: $34.5 billion; SI Rating: Above average) is the fourth-largest bank in Canada, with $356.5 billion in assets. The bank has roughly 1,200 branches in Canada, and aims to add at least 15 branches in fiscal 2007 as part of a new restructuring plan. That should help it regain some of the business it lost to other banks in the past few years. It’s also reducing some of its back office staff. The restructuring should eventually cut its annual expenses by $300 million a year. However, problems at its commodities trading operations led to a $327 million loss on some natural gas futures contracts. Bank of Montreal is currently working to cut the risk of its trading portfolio, so further charges are possible....

All five of Canada’s biggest banks have been exceeding investor expectations since at least the mid-1990s. Investors always worry too much about the impact on the banks of each new ripple in interest rates and business statistics. Bank profits and loan losses do go through swings, of course. In the late 1990s, banks suffered along with the economic turmoil in Asia. Early in this decade, they suffered due to problems in telecom and other areas. But when the problems end, you’ll find the banks have managed to contain their losses and have begun a new profit expansion. All five banks are still cheap in relation to earnings, and they provide above-average yields. Every Canadian investor should own one of them, if not several....

NEWMONT MINING $39 (New York symbol NEM; SI Rating: Average) is one of the largest gold producers in the world with major operations in the United States, Canada, Peru, Australia, Indonesia and Ghana. It also produces other metals, including copper, silver and zinc. The company expects to produce around 7 million ounces of gold this year. Like most mining companies, Newmont is facing higher costs for labor, energy and materials. Commodity prices have eased lately, so these costs should stabilize in 2007. Newmont now trades at a reasonable (for a gold stock) 19.7 times the $1.98 a share it will probably earn in 2007, and at 12.6 times its forecasted cash flow of $3.10 a share. The $0.40 dividend yields 1.0%....

CHILE FUND $21.02 (New York symbol CH) (CWA Rating: Aggressive) has net assets of $209.4 million U.S. It’s managed by Credit Suisse. Prices for copper, a key commodity for Chile, are down from their highs, but still remain strong. Chile is a major exporter of copper, particularly to Asia. It’s the world’s biggest supplier of copper. Other important non-mineral exports are forestry and wood products, food and wine. Top holdings are Compania de Petroleos de Chile (resources), 17.5%; Empresa Nacional de Electricidad (electric power), 14.7%; Empresas CMPC (pulp & paper), 12%; Enersis (electric power), 6.2%; Cencosud (retailing), 5%; Banco Santander Chile (banking), 4.9%; Vina Concha y Toro (wineries), 4.1%; SACI Falabella (retailing), 3.8%; Compania Cervecerias Unidas (beverages & food), 3.4%; and Banco de Credito e Inversiones (financial services), 2.9%....