diversification

TEMPUR SEALY $39.81 (New York symbol TPX; TSINetwork Rating: Speculative) (800-878-8889; www.tempursealy.com; Shares outstanding: 60.4 million; Market cap: $2.4 billion; No dividends paid) completed its $1.3- billion purchase of rival Sealy in March 2013. This was a major acquisition for Tempur Sealy (formerly Tempur-Pedic), but it has let the company diversify into the market for traditional spring-coil beds.

The purchase should help Tempur Sealy offset rising competition in its current business; the company makes and distributes mattresses and neck pillows made of its Tempur material, which conforms to the body to provide support and alleviate pressure points.

Competitors Simmons Bedding and Serta have both successfully launched memory-foam mattresses that directly compete with Tempur Sealy’s products.
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LOBLAW COS. $45.67 (Toronto symbol L; Shares outstanding: 282.1 million; Market cap: $12.8 billion; TSINetwork Rating: Above Average; Dividend yield: 2.1%; www.loblaw.ca) has transferred the bulk of its real estate holdings to a new, publicly traded real estate investment trust called Choice Properties REIT, $10.10, Toronto symbol CHP.UN.

Loblaw sold a 16.9% interest in the REIT to the public in July 2013 as a new issue at $10....

We think conservative investors could hold up to 10% of their portfolios in foreign stocks. One way to do that is to buy carefully chosen exchange traded funds (ETFs) that have an overseas focus.

The best ETFs offer very low management fees and well-diversified, tax-efficient portfolios of highquality stocks.

Here are six international ETFs we like:

ISHARES MSCI JAPAN INDEX FUND $11.81 (New York Exchange symbol EWJ; buy or sell through brokers; us.ishares.com) is an exchange traded fund that tries to match the return of the Morgan Stanley Capital International (MSCI) Japan index.

The ETF’s top holdings include Toyota, 6.6%; Mitsubishi UFJ Financial, 3.1%; Sumitomo Mitsui Financial, 2.4%; Softbank Corp., 2.4%; Honda Motor, 2.3%; Mizuho Financial Group, 1.9%; Japan Tobacco, 1.5%; Takeda Pharmaceutical, 1.4%; Canon, 1.3%; and Hitachi, 1.2%.

The fund’s industry breakdown is as follows: Financials, 21.4%; Consumer Discretionary, 21.1%; Industrials, 19.6%; Information Technology, 9.6%; Consumer Staples, 6.3%; Materials, 6.2%; Health Care, 5.9%; Telecommunication Services, 5.1%; Utilities, 2.8%; and Energy, 1.2%.

iShares MSCI Japan Index Fund was launched on March 12, 1996....

CANADIAN REIT $41.04 (Toronto symbol REF.UN; Units outstanding: 68.5 million; Market cap: $2.8 billion; TSINetwork Rating: Extra Risk; Dividend yield: 4.0%; www.creit.ca) owns 194 properties, including retail, industrial and office buildings, across Canada and in Chicago. These holdings contain over 19.7 million square feet of leasable area. The trust’s occupancy rate is 94.9%.

In the three months ended June 30, 2013, Canadian REIT’s revenue rose 7.9%, to $93.2 million from $86.4 million a year earlier. Cash flow per unit gained 18.9%, to $0.63 from $0.53.

Canadian REIT added $197.6 million worth of new buildings in the latest quarter and $11.3 million worth in the first quarter. That followed property purchases totalling $401.9 million in 2012, including a 50% stake in Calgary Place, a 575,000-square-foot office and retail complex, for $156.0 million.
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Friends of mine who work as brokers sometimes say, “You must have an awful opinion of brokers, judging by the terrible things you say about us.” That’s a misconception. Brokers are human—some are people of high integrity and others aren’t. But I do have a low opinion of many of today’s investment products and services. The core of the problem is that the financial industry offers its salespeople incentives to give clients bad advice. A broker can sell his or her clients a wide variety of products and services that will bring the broker a wide range of fees and commissions, from high to low. As a general rule, the more income a broker can earn from selling a particular investment, the poorer the match between the investment and the interests of the client....

H&R REIT $20.96 (Toronto symbol HR.UN; Units outstanding: 268.3 million; Market cap: $5.6 billion; TSINetwork Rating: Extra Risk; Dividend yield: 6.4%; www.hr-reit.com) owns stakes in 41 office buildings, 112 industrial properties and 165 shopping malls across Canada....

SHERRITT INTERNATIONAL $3.70 (Toronto symbol S; TSINetwork Rating: Speculative) (1-800-704- 6698; www.sherritt.com; Shares outstanding: 296.9 million; Market cap: $1.1 billion; Dividend yield: 4.7%) is a diversified natural resource company that produces nickel, cobalt, thermal coal, oil and gas....

Pat McKeough responds to many requests from members of his Inner Circle for specific advice on Canadian stocks and other investments 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....

SHERRITT INTERNATIONAL $3.70 (Toronto symbol S; TSINetwork Rating: Speculative) (1-800-704- 6698; www.sherritt.com; Shares outstanding: 296.9 million; Market cap: $1.1 billion; Dividend yield: 4.7%) is a diversified natural resource company that produces nickel, cobalt, thermal coal, oil and gas. It also manages 356 megawatts of power generation capacity in Cuba, with an additional 150 megawatts starting up this year.

The company is a major nickel producer, with operations in Cuba and Canada. As well, it has started up its 40%-owned Ambatovy mine on the island nation of Madagascar, off Africa’s east coast. Sherritt also produces oil and gas in Cuba, Spain and Pakistan and is Canada’s largest thermal coal producer.

In the three months ended June 30, 2013, Sherritt’s revenue fell 10.2%, to $338.5 million from $377.1 million a year earlier. Lower nickel, cobalt and coal prices were the main reasons for the drop. Cash flow per share declined 10.0%, to $0.18 from $0.20.
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BCE INC. $42.68 (Toronto symbol BCE; Shares outstanding: 775.9 million; Market cap: $33.4 billion; TSINetwork Rating: Above Average; Dividend yield: 5.5%; www.bce.ca) is Canada’s largest provider of telephone, Internet and wireless services. It also sells satellite and Internet TV services across the country.

In the three months ended March 31, 2013, BCE’s earnings per share rose 11.6%, to $0.77 from $0.69 a year earlier. Revenue increased slightly, to $4.35 billion from $4.33 billion. Revenue fell 2.8% at the wireline (land line) division, which accounts for 58% of total revenue. This division faces rising competition. As well, many customers are cancelling land lines and switching to wireless devices.

Revenue from wireless services (32% of total revenue) rose 6.3%. The company’s network upgrades continue to attract new wireless subscribers, and it’s benefiting from rising use of smartphones, which generate higher monthly fees than regular cellphones. Bell’s Fibe high-speed Internet TV service also offers strong growth prospects.
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