dividends paid
CGI Group is more speculative than most of our other recommendations. It does not pay a dividend, and its major shareholders control the company through multiple-voting shares. Its aggressive growth-by-acquisition strategy also adds risk. It’s true that each of these factors is something of a negative, but each is minor compared to CGI’s strong growth prospects. That’s why we picked CGI as our Stock of the Year in January 2010. The stock has gained 20.0% since then. We still feel CGI has years of growth ahead, particularly because its services help cash-strapped governments and businesses cut costs. It also trades at a low multiple to earnings. That’s why we are once again picking CGI as our Stock of the Year for 2011....
SYMANTEC CORP. $17.15 (Nasdaq symbol SYMC; SI Rating: Average) (1-408-517-8000; www.symantec.com; Shares outstanding: 789.3 million; Market cap: $13.5 billion; No dividends paid) makes software that protects computers from viruses and intruders. The popular Norton anti-virus program is its best-known consumer product. It also sells a range of products and services to businesses, including software and services for data backup and protection, as well as data-archiving to meet increasingly strict regulatory and compliance regulations. In the three months ended October 1, 2010, Symantec earned $266 million, or $0.34 a share. That’s down 10.1% from $296 million, or $0.36 a share, a year earlier. These figures exclude one-time items, such as the cost of integrating companies Symantec bought. Revenue was flat at $1.5 billion. Corporate customers account for two-thirds of Symantec’s revenue. The uncertain economy is prompting some of its clients to hold off on buying new software....
NORTHGATE MINERALS CORP. $3.08 (Toronto symbol NGX; SI Rating: Speculative) (604-681-4004; www.northgateminerals.ca; Shares outstanding: 291.1 million; Market cap: $896.5 million; No dividends paid) is focused on building a mine at its Young-Davidson gold property in northern Ontario. The $339-million open-pit/underground mine is now under construction, and is scheduled to start up in 2012. It is expected to produce 180,000 ounces of gold per year for the first two years of its expected 15-year life. Its production would then rise to 190,000 ounces. Northgate also owns the Kemess South open-pit gold/copper mine in north-central B.C. However, it expects to exhaust this mine’s reserves in 2011....
VERIGY LTD. $13.49 (Nasdaq symbol VRGY; SI Rating: Extra Risk) (1-800-447-8378; www.verigy.com; Shs. outstanding: 60 million; Market cap: $807.7 million; No dividends paid) is now the subject of a $12.15-a-share takeover offer from Japan-based Advantest Corp. Advantest is the world’s largest maker of systems that test computer memory chips. Advantest is taking advantage of the high value of the yen against the U.S. dollar to make the offer. Verigy is not satisfied with the $735-million offer, but aims to open discussions with Advantest to negotiate a higher price. The offer is below Verigy’s 2010 high of $13.75, which it reached in January. Separately, Verigy still plans to proceed with its all-stock purchase of LTX-Credence Corp. (Nasdaq symbol LTXC), which should close in the first half of 2011. LTX is a rival maker of computer-chip testing equipment....
MART RESOURCES $0.70 (Toronto symbol MMT; SI Rating: Speculative) (403-270-1841; www.martresources.com; Shares outstanding: 335.5 million; Market cap: $115.8 million; No dividends paid) is focused on developing, producing and drilling for oil at its onshore properties in Africa. Mart is currently producing oil from its 50%-held Umusadege field in Nigeria. Mart recently released preliminary results from its latest well at the field, the UMU-6 well. One section of the well flowed oil at 3,433 barrels per day. Average daily production for the entire Umusadege field was 3,886 barrels per day in latest quarter. Operating in Nigeria exposes the company to considerable political risk. However, further drilling success would continue to steadily increase Mart’s oil production....
COMPUTER MODELLING GROUP $25.91 (Toronto symbol CMG; SI Rating: Speculative) (403-531-1300; www.cmgroup.com; Shares outstanding: 18.1 million; Market cap: $467.9 million; Dividend yield: 3.1%) sells software to clients in the oil and gas industry. It also provides consulting services. Computer Modelling’s software helps companies use advanced oil-and-gas recovery techniques to raise output from their existing wells. It has over 360 customers in 50 countries. In the three months ended September 30, 2010, Computer Modelling’s revenue rose 46.8%, to $13.2 million from $9.1 million a year earlier. The company sold more of its software and consulting services to both new and existing customers. Earnings jumped 89.1%, to $4.6 million from $2.4 million. Earnings per share rose 78.6%, to $0.25 from $0.14, on more shares outstanding....
The Canadian retailing industry is intensely competitive. That’s why we prefer to focus on well-established retailers, such as the five we analyze below. Their high market shares and strong brands give them an edge. As well, all five trade at reasonable multiples to earnings. However, not all are buys right now. LOBLAW COMPANIES LTD. $41 (Toronto symbol L; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 279.5 million; Market cap: $11.5 billion; Price-to-sales ratio: 0.4; Dividend yield: 2.0%; TSINetwork Rating: Above Average; www.loblaw.ca) is Canada’s largest food retailer. It now has around 1,000 company-owned and franchised stores. Loblaw continues to restructure its business, including upgrading its inventory-management systems and streamlining its distribution networks....
We advise most investors to confine their Finance-sector investments to Canada’s five big banks and other recommendations in our Conservative Growth Portfolio. However, if you can accept more risk, we also like Home Capital and Dundee. HOME CAPITAL GROUP INC. $48 (Toronto symbol HCG; Aggressive Growth Portfolio, Finance sector; Shares outstanding: 34.7 million; Market cap: $1.7 billion; Price-to-sales ratio: 3.3; Dividend yield: 1.5%; TSINetwork Rating: Average; www.homecapital.com) is a mortgage lender that serves borrowers who don’t meet the more stringent criteria of larger, traditional lenders. In the three months ended September 30, 2010, Home Capital’s earnings rose 18.8%, to $45.4 million, or $1.31 a share. A year earlier, the company earned $38.2 million, or $1.10 a share. Low interest rates continue to fuel strong demand for residential mortgages and other loans. That lifted Home Capital’s revenue by 6.7%, to $133.8 million from $125.3 million. The company issued 17.8% more residential mortgages than in the year-earlier quarter. Non-residential mortgages rose 10.9%....
THE WESTAIM CORP. $0.55 (Toronto symbol WED, Aggressive Growth Portfolio, Finance sector; Shares outstanding: 580.6 million; Market cap: $319.3 million; Price-to-sales ratio: 1.8; No dividends paid; TSINetwork Rating: Speculative; www.westaim.com) owns Jevco Insurance Co., which sells insurance to high-risk drivers, as well as owners of motorcycles, snowmobiles and recreational vehicles. Jevco operates in Quebec and Ontario. The company bought Jevco for $264.2 million in March 2010. That’s why Westaim earned $5.9 million, or $0.01 a share, in the three months ended September 30, 2010. A year earlier, it lost $524,000, or $0.01 a share. However, Jevco faces strong competition from larger insurers. As well, its focus on high-risk drivers adds risk. Westaim is a hold, but only for highly aggressive investors.
TRANSCANADA CORP. $38 (Toronto symbol TRP; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 696.0 million; Market cap: $26.4 billion; Price-to-sales ratio: 3.2; Dividend yield: 4.2%; SI Rating: Above Average; www.transcanada.com) earned $374 million in the three months ended September 30, 2010. That’s up 11.6% from $335 million a year earlier. Earnings per share rose 10.2%, to $0.54 from $0.49, on more shares outstanding. These figures exclude gains and losses on contracts TransCanada uses to lock in prices on natural gas it has in storage. Revenue rose 3.9%, to $2.1 billion from $2.05 billion. Lower costs and higher production at the Bruce nuclear power complex in Ontario helped spur TransCanada’s earnings in the latest quarter. (The company owns 48.8% of the Bruce A reactors and 31.6% of the Bruce B reactors.) As well, TransCanada recently opened the first phase of its $12-billion U.S. Keystone pipeline, which pumps crude oil from Alberta to refineries in the U.S. Midwest. Keystone’s second phase should begin operating in the first quarter of 2011....