encana

RBC CANADIAN EQUITY FUND $21.21 (CWA Rating: Conservative) (RBC Funds, P.O. Box 7500, Station A, Toronto, Ontario. M5W 1P9. 1-800-463-3863; Web site: www.royalbank.com. No load — deal directly with the bank) mainly invests in larger-capitalization stocks, but may also buy small- and mid-cap stocks. The $4.2-billion fund’s largest holdings are Royal Bank, Manulife, EnCana, TD Bank, Goldcorp, Bank of Nova Scotia, Canadian Natural Resources, Suncor Energy and Research in Motion. The fund is heavily weighted (44.9%) toward the resource sector; 33.2% of its investments are in finance. Over the last 10 years, RBC Canadian Equity posted a 6.7% annual rate of return. That’s just over the S&P/TSX’s 6.5% gain. The fund lost 19.9% over the last year, compared to a loss of 17.7% for the S&P/TSX. The fund’s MER is 1.96%....

TD CANADIAN EQUITY FUND $21.81 (CWA Rating: Conservative) (TD Asset Management, P.O. Box 7500, Station A, Toronto, Ontario. M5W 1P9. 1-866-222-3456; Web site: www.tdcanadatrust.ca. No load — deal directly with the bank) uses a “bottom-up” approach to pick stocks. The fund’s managers look at fundamentals, like earnings, cash flow and debt level, to identify what they see as undervalued companies. TD Canadian Equity Fund’s 10 largest holdings are Royal Bank, TD Bank, Manulife Financial, Bank of Nova Scotia, Canadian Natural Resources, Sun Life Financial, Suncor Energy, Ivanhoe Mines, EnCana Corp. and Research in Motion. The $2.5-billion fund holds 49.0% of its portfolio in resource stocks. It also has a bias toward financial services stocks, at 32.1%....

These five large mutual funds — one from each of Canada’s big-five banks — suffered last year and early this year. That’s because they were heavily weighted toward financial services and resource stocks. However, many shares in those sectors have moved up since March. We think they have room to go higher. We still feel that the best way to profit in the stock market is to stick with high-quality, well-established companies and to spread your money out among the five sectors. You should also ensure that your investments are diversified within each sector. These five funds continue to stick with high-quality investments. However, you still should adjust your portfolio to reflect the funds’ high weightings in certain sectors....

These five large mutual funds — one from each of Canada’s big-five banks — suffered last year and early this year. That’s because they were heavily weighted toward financial services and resource stocks. However, many shares in those sectors have moved up since March. We think they have room to go higher. We still feel that the best way to profit in the stock market is to stick with high-quality, well-established companies and to spread your money out among the five sectors. You should also ensure that your investments are diversified within each sector. These five funds continue to stick with high-quality investments. However, you still should adjust your portfolio to reflect the funds’ high weightings in certain sectors....

ENCANA CORP. $55.05 (Toronto symbol ECA; Shares outstanding: 750.1 million; Market cap: $41.3 billion; SI Rating: Average) has held up well in the face of falling natural-gas prices. Gas is now around $3 U.S. per thousand cubic feet, which is near a seven-year low. That’s mainly because of lower industry demand during the recession, cooler-than-normal summer weather and increased production. In response, EnCana has cut its daily natural-gas production by about 10%, and put off investments in new projects. The company has also used hedging effectively: it has locked in two-thirds of its natural-gas production through October 31 at an average of $9.13 U.S. per thousand cubic feet. That’s on top of the 45% of its expected gas output that it has hedged at $6.09 U.S. per thousand cubic feet through October 2010....

The price of natural gas has fallen to around $2.50 U.S. per thousand cubic feet, a seven-year low. The price decline has been driven by lower industry demand during the recession. As well, consumers have cut their air-conditioner use because of cooler-than-normal summer weather in central Canada and the northeastern U.S. Another major factor is a buildup in gas inventories, to the point that the North American industry is running out of storage. According to the U.S. Energy Information Administration (EIA), natural-gas inventories are at 3.204 trillion cubic feet. That’s 21.3% higher than a year ago....

TRANSALTA CORP., $22.73, Toronto symbol TA, received approval from competition regulators this week for its proposed takeover of Canadian Hydro Developers Inc. (Toronto symbol KHD). Canadian Hydro owns and operates 21 power-generating facilities in Alberta, B.C., Ontario and Quebec. These include 12 hydroelectric plants, eight wind farms and one biomass plant, which generates power by burning plant materials and wood waste from lumber mills. Last month, TransAlta launched a hostile takeover bid for Canadian Hydro. The offer is worth $4.55 a share, for a total of $654 million. (That’s equal to 79% of TransAlta’s 2008 cash flow of $828 million, or $4.16 a share.) Buying Canadian Hydro would lower TransAlta’s reliance on power from non-renewable sources, such as coal and natural gas. It would also help TransAlta comply with the tougher new environmental regulations that will likely come into effect over the next few years. So far, Canadian Hydro has resisted the bid, and is looking for a new buyer....

AIC DIVERSIFIED CANADA FUND $34.89 (CWA Rating: Conservative) mainly holds shares of Canadian companies of average or above-average quality. It also holds some U.S. stocks. The $1.0-billion fund’s 10 largest holdings are TD Bank, Shoppers Drug Mart, Power Financial, Canadian Oil Sands Trust, First Capital Realty, Thomson Reuters Corporation, Brookfield Asset Management, Royal Bank of Canada, C.I. Financial Corp. and EnCana Corporation. AIC Diversified Canada holds just 21 stocks. The fund holds 43.9% of its assets in financial-services stocks. The rest of the portfolio breaks down as follows: energy, 15.2%; consumer staples, 10.6%; consumer discretionary, 8.0%; health care, 7.4%; and information technology, 3.6%....

These two AIC funds hold much of their portfolios in finance stocks. This sector has risen lately on better-than-expected profits and an improved outlook for the economy as a whole. We prefer diversified funds. But if you must focus on a particular sector, finance still offers sound long-term prospects. If you invest in these funds, be sure to adjust the rest of your portfolio so it won’t be overly concentrated in the financial sector. AIC AMERICAN ADVANTAGE FUND $4.04 (CWA Rating: Aggressive) (AIC Group of Funds, 1375 Kerns Road, Burlington, Ont., L7R 4X8, 1-800-263-2144; Web site: www.aicfunds.com. Buy or sell through brokers) invests mostly in U.S. stocks. It holds 99% of its assets in the financial-services area....

CRESCENT POINT ENERGY CORP. $34.74 (Toronto symbol CPG; Shares outstanding: 159.3 million; Market cap: $5.5 billion; SI Rating: Extra Risk) is the new name of Crescent Point Energy Trust. The trust recently converted itself into a conventional corporation. Crescent Point produces oil and natural gas in western Canada. Its production is weighted 87% toward oil and 13% to gas. The company is maintaining its $0.23-a-share monthly dividend, for a current yield of 7.9%. That rate represents approximately 65% of Crescent Point’s cash flow per share. That gives it lots of room to keep paying that dividend and continue investing in exploration and development. Its $611.5-million debt is low, at just 11% of its market cap....