diversification

Verizon Communications (New York symbol VZ) has announced that it’s interested in buying two small Canadian wireless carriers: Wind Mobile and Mobilicity. Verizon is a recommendation of Wall Street Stock Forecaster, our newsletter that focuses on U.S. stocks. Wind and Mobilicity both have negligible market share, so regulators will probably approve a sale....

CANADIAN REIT $42.88 (Toronto symbol REF.UN; Units outstanding: 68.4 million; Market cap: $2.9 billion; TSINetwork Rating: Extra Risk; Dividend yield: 3.9%; www.creit.ca) owns over 192 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 March 31, 2013, Canadian REIT’s revenue rose 8.9%, to $91.4 million from $83.9 million a year earlier. Cash flow per unit rose 6.3%, to $0.68 from $0.64.

Canadian REIT added just $11.3 million of new properties in the latest quarter. However, it bought $401.9 million of buildings in 2012. That includes a 50% stake in Calgary Place, a 575,000-square-foot office and retail complex, for $156.0 million.
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ISHARES MSCI EMERGING MARKETS INDEX FUND $40.56 (New York symbol EEM; buy or sell through brokers) is an exchange traded fund that aims to track the MSCI Emerging Markets Index. Its geographic breakdown includes China, 17.8%; South Korea, 14.8%; Brazil, 12.1%; Taiwan, 11.5%; South Africa, 6.7%; India, 6.7%; Russia, 5.6%; Mexico, 5.2%; Malaysia, 3.9%; and Indonesia, 3.0%.

The ETF’s top holdings are Samsung Electronics (South Korea), 4.1%; Taiwan Semiconductor (computer chips), 2.4%; China Mobile, 1.7%; China Construction Bank, 1.6%; Industrial & Commercial Bank of China, 1.2%; Gazprom (Russia: gas utility), 1.1%; America Movil (Brazil: wireless), 1.1%; and Itau Unibanco (Brazil: banking), 1.1%.

The fund’s industry breakdown is as follows: Financials, 27.4%; Information Technology, 14.6%; Energy, 11.5%; Materials, 9.9%; Consumer Staples, 9.4%; Consumer Discretionary, 8.1%; Telecommunication Services, 7.5%; and Industrials, 6.4%.
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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 high quality stocks.

Here are six international ETFs we like:

ISHARES MSCI JAPAN INDEX FUND $10.60 (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, 3.0%; Honda Motor, 2.5%; Sumitomo Mitsui Financial, 2.1%; Softbank Corp., 1.9%; Mizuho Financial Group, 1.8%; Canon, 1.6%; Japan Tobacco, 1.5%; Takeda Pharmaceutical, 1.4%; and Hitachi, 1.3%.

The fund’s industry breakdown is as follows: Consumer Discretionary, 21.8%; Financials, 20.1%; Industrials, 18.9%; Information Technology, 10.7%; Consumer Staples, 6.5%; Health Care, 6.2%; Materials, 6.2%; Telecommunication Services, 4.7%; Utilities, 3.1%; and Energy, 1.3%.

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

H&R REIT $22.11 (Toronto symbol HR.UN; Units outstanding: 258.3 million; Market cap: $16.9 billion; TSINetwork Rating: Extra Risk; Dividend yield: 5.8%; www.hr-reit.com) owns stakes in 40 office buildings, 112 industrial properties and 163 shopping malls across Canada....

SHERRITT INTERNATIONAL $4.74 (Toronto symbol S; TSINetwork Rating: Speculative) (1-800-704-6698; www.sherritt.com; Shares outstanding: 296.9 million; Market cap: $1.4 billion; Dividend yield: 3.6%) reported cash flow of $0.20 a share in the three months ended March 31, 2013....

A couple of decades ago, I began advising Canadian investors to put 20% or so of their investment funds into U.S. stocks. I wanted investors to be able to invest in the great U.S. multinationals. These companies were likely to profit from the downfall of communism and the swing toward free enterprise that was getting underway back then. I also wanted investors to be able to profit from the incredible advances that were taking place in communications and computer technology. Since then, the U.S./Canada foreign exchange differential has at times worked in our favour. Other times, it has worked against us. In years of rising commodity prices, our Canadian stocks beat our U.S. stocks. When commodities were weak, U.S. stocks often did better. Recently, commodities have been weak and the U.S. market has been strong. The Standard & Poor’s 500 index has risen 13.1% so far this year, and 26.5% since the start of 2012. The Standard & Poor’s TSX index has dropped 0.9% so far this year, and has gained just 1.9% since the start of 2012....

SHERRITT INTERNATIONAL $4.74 (Toronto symbol S; TSINetwork Rating: Speculative) (1-800-704-6698; www.sherritt.com; Shares outstanding: 296.9 million; Market cap: $1.4 billion; Dividend yield: 3.6%) reported cash flow of $0.20 a share in the three months ended March 31, 2013. That was down 35.4% from $0.31 a year earlier. A decline in coal sales and lower nickel, cobalt and oil prices were the main reasons for the drop.

Sherritt recently raised its quarterly dividend by 13.2%. The shares now yield 3.6%.

The company needs an improving global economy to fuel commodity demand. But its low production costs and ongoing geographic diversification enhance its prospects.
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FAIR ISAAC CORP., $44.18, symbol FICO on New York, makes FICO Scores, a computer program that helps businesses make better decisions about customer creditworthiness. FICO Scores dominates this niche market. In addition, Fair Isaac continues to profit by selling software that helps credit card issuers control fraud and analyze cardholders’ spending patterns. In its fiscal 2013 second quarter, which ended March 31, 2013, Fair Isaac’s earnings per share before one-time items rose 4.4% from a year ago, to $0.69 from $0.66. Revenue rose 12.4%, to $179.3 million from $159.5 million. That’s largely because the company recently acquired Adeptra, which makes systems that let businesses communicate with customers through a range of channels, including voice, instant messaging, mobile applications and email. Fair Isaac continues to spend around 8% of its revenue on research. That lets it keep producing innovative new products that help it stay ahead of its competitors....

DigitalGlobe, $28.40, symbol DGI on New York (Shares outstanding: 73.7 million; Market cap: $2.1 billion; www.digitalglobe.com), is a leading provider of commercial high-resolution earth-imagery products and services. The company’s technology is used in a range of applications, including defence, intelligence, homeland security, environmental monitoring and oil and gas exploration. DigitalGlobe’s distribution options include a direct access program that allows certain customers to directly obtain data from satellites. The company’s main customers are governments, including U.S. and foreign defence and intelligence organizations, civil agencies and providers of location-based services such Internet portals, connected devices and digital mapmakers. Additionally, DigitalGlobe serves a wide variety of companies in other industries, such as financial services, energy, telecommunications, utilities, forestry, mining, environmental services and agriculture. DigitalGlobe’s sales and earnings continue to rise along with broad-based demand from both defence and commercial customers. As well, the company recently acquired rival GeoEye for $453 million. This lessens DigitalGlobe’s competition and leaves it with the largest fleet of high-resolution Earth imaging satellites orbiting the planet....