encana

Oil prices fell from their July 2008 peak of $148 U.S. a barrel to just under $40 U.S. in February 2009. Prices have roughly doubled since then, but it’s unlikely they will soon surpass last year’s highs. Still, oil is a good hedge against inflation. We feel that the best way to cut your risk in the volatile resource sector is through well-established oil producers like these three. Their large reserves should last decades. Moreover, they focus on politically stable North America. SUNCOR ENERGY INC. $37 (Toronto symbol SU; Conservative Growth Portfolio, Resources sector; Shares outstanding: 1.6 billion; Market cap: $59.2 billion; Price-to-sales ratio: 1.7; SI Rating: Average) is Canada’s largest oil producer following its purchase of Petro-Canada on August 1, 2009. Petro-Canada shareholders received 1.28 Suncor common shares for each Petro-Canada share they held....

ISHARES CDN LARGECAP 60 INDEX FUND $16.46 (Toronto symbol XIU; buy or sell through a broker) (units split 4-for-1 in August 2008) is a good, low-fee way to buy the top stocks and income trusts on the TSX. The units are made up of stocks that represent the S&P/TSX 60 Index, which consists of the 60 largest, most heavily traded stocks on the exchange. Expenses are just 0.17% of assets. Most of the stocks in the index are high-quality companies. However, as it must ensure that all sectors are represented, the index holds a few we wouldn’t include, such as Yellow Pages Income Fund. The index’s top holdings are: Royal Bank, 8.2%; Suncor Energy, 5.9%; TD Bank, 5.7%; Bank of Nova Scotia, 5.0%; EnCana, 4.8%; Barrick Gold, 4.1%;Canadian Natural Resources, 3.9%; Manulife, 3.5%; Research in Motion, 3.2%; Potash Corp., 3.1%; Goldcorp, 3.1%; Bank of Montreal, 2.9%; CN Railway, 2.6%; and CIBC, 2.5%....

While ETFs won’t protect you from the three costliest mistakes an investor can make, they may have a worthwhile place in your portfolio. Unlike many other innovations, ETFs don’t load you up with heavy management fees, or tie you down with heavy redemption charges if you decide to get out of them. Instead, they give you a lower-cost and more flexible and convenient alternative to mutual funds. ETFs trade on stock exchanges, just like stocks. Prices are quoted in newspaper stock tables and online. You’ll have to pay brokerage commissions to buy and sell them, but you will quickly make these back because of the low management fees....

FIDELITY TRUE NORTH FUND $24.80 (CWA Rating: Conservative) (Fidelity Investments Canada, 483 Bay St., Suite 200, Toronto, Ont. M5G 2N7. 1-800-263-4077; Web site: www.fidelity.ca. Load fund — available from brokers) invests in companies that the managers see as undervalued. They base their judgments on fundamentals, such as earnings, dividend yield, book value, cash flow and debt level. Fidelity True North Fund holds 77 stocks. Its top holdings consist of the following high-quality companies: Toronto-Dominion Bank, Manulife Financial, Rogers Communications, EnCana Corporation, Research in Motion, Canadian Natural Resources, Goldcorp Inc., Potash Corporation of Saskatchewan, Suncor Energy and Royal Bank of Canada. Fidelity True North Fund’s breakdown by economic segment is: Financials, 27.0%; Energy, 24.0%; Metals & Minerals, 22.6%; Industrials, 6.6%; Telecommunication Services, 6.3%; Information Technologies, 5.8%; Consumer Discretionary, 3.3%; and Consumer Staples, 2.0%....

These four resource stocks are more risky than, say, Imperial Oil or EnCana. Still, we feel that their large reserves and low-cost operations put them in a good position to take advantage of rising demand for commodities as the global economy recovers. However, only three are buys right now. POTASH CORP. OF SASKATCHEWAN $96 (Toronto symbol POT; Aggressive Growth Portfolio, Resources sector; Shares outstanding: 295.6 million; Market cap: $28.4 billion; Price-to-sales ratio: 3.6; SI Rating: Average) is the world’s largest fertilizer producer. The company operates six potash mines in Saskatchewan and one in New Brunswick. The reserves of five of these mines should last between 60 and 97 years. The other two mines have minimal or undetermined reserves. The stock hit an all-time high of $246 in June 2008, but fell to $62 last December. The drop was caused by lower prices for crops, which hurt demand for fertilizers like potash. As well, farmers in North America and Australia are seeing better-than-expected crop yields this year, even though they applied less fertilizer. This is mainly because of good weather and large amounts of residual fertilizer in the soil from last year....

UNITED CORPORATIONS $47.20 (Toronto symbol UNC) (165 University Avenue, 10th Floor, Toronto, Ontario M5H 3B8. 416-947-2583. Buy or sell through a broker) invests in a wide variety of average- to above-average quality Canadian and foreign stocks. United Corporations holds 39.9% of its $752.4-million portfolio in Canadian equities, 21.1% in the U.S., 23.1% in Europe, 8.1% in Asia, 6.6% in the U.K., 0.7% in Australia and 0.5% in Mexico. The fund’s largest holdings include Bank of Nova Scotia, EnCana, Royal Bank, Nexen, Potash Corp., Chevron, CVS Caremark, Manulife, TD Bank, Roche Holding, Adidas AG, Nestle AG and BASF AG....

ENCANA CORP. $62 (Toronto symbol ECA; Shares outstanding: 750.2 million; Market cap: $46.5 billion; SI Rating: Average) has announced that it will split itself into two separate companies. One will keep the EnCana name, and will focus on unconventional natural gas. The other will operate as Cenovus Energy Inc., and will specialize in oil-sands projects, oil refineries and conventional natural gas. EnCana had hoped to complete the split in early 2009, but the stock-market decline and tight credit markets delayed the transaction....

ENCANA CORP. $58 (New York symbol ECA; Conservative Growth Portfolio, Resources sector; Shares outstanding: 751.1 million; Market cap: $43.6 billion; Price-to-sales ratio: 1.7; WSSF Rating: Average) will split itself into two separate companies. One will keep the EnCana name, and will focus on unconventional natural gas. The other will operate as Cenovus Energy Inc., and will specialize in oil-sands projects, oil refineries and conventional natural gas. The new EnCana will account for about two-thirds of the company’s current production and reserves. Cenovus will account for the remaining third. EnCana had hoped to complete the split in early 2009, but the stock-market decline and tight credit markets would have made it difficult for the two new, smaller companies to raise capital to fund new projects. Now that conditions have improved, EnCana has decided to go ahead with the split. In September, Cenovus sold $3.5 billion in new long-term notes....

ENCANA CORP., $63.52, Toronto symbol ECA, rose 7% on Friday after the company announced that it will split itself into two separate companies. One will keep the EnCana name, and will focus on unconventional natural gas. The other will operate as Cenovus Energy Inc., and will specialize in oil-sands projects, oil refineries and conventional natural gas. The new EnCana will account for about two-thirds of the company’s current production and reserves. Cenovus will account for the remaining third. EnCana had hoped to complete the split in early 2009, but the stock-market decline and tight credit markets would have made it difficult for the two new, smaller companies to raise capital to fund new projects. Now that conditions have improved, EnCana has decided to go ahead with the split....

CIBC CANADIAN EQUITY FUND $19.69 (CWA Rating: Conservative) (CIBC Securities, 5140 Yonge Street, Suite 900, Toronto, Ontario M2N 6X7. 1-800-631-7008; Web site: www.cibc.com. No load — deal directly with the bank) looks at fundamentals like earnings, cash flow and debt level to identify companies that the managers see as having above-average growth potential. The $399.3-million fund’s top holdings are: Royal Bank of Canada, EnCana, Research in Motion, Bank of Nova Scotia, CN Railway, Goldcorp, TD Bank, Canadian Natural Resources and Manulife Financial. CIBC Canadian Equity holds 41.8% of its portfolio in resource stocks and 34.6% in finance stocks....