encana

RBC CANADIAN EQUITY FUND $19.69 (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) invests mostly in larger-capitalization stocks, but also looks for opportunities in small and mid-cap stocks. The fund’s 10 largest holdings are Royal Bank, Manulife, EnCana, TD Bank, Potash Corp., Bank of Nova Scotia, Canadian Natural Resources, Suncor Energy, Research in Motion and BCE Inc. The $4.2 billion fund holds 41.3% of its holdings in Resources stocks. It also holds 30.7% in Finance. Over the last ten years, RBC Canadian Equity posted a 9.5% annual rate of return. That’s just under the S&P/TSX’s gain of 9.7%. The fund lost 14.9% over the last year, compared to the loss of 14.4% for the S&P/TSX. The fund’s MER is 1.96%....

The performance of these five large funds — one from each of Canada’s big-five banks — has suffered over the last year. That’s because they held high weightings in Financial services and Resources stocks. Financial services have dropped due to turmoil in credit markets. Resources have fallen along with commodity prices on fears that an economic slowdown will cut demand for resources. We still feel that the best way to profit in the stock market is to stick with high-quality, well-established companies, and to diversify among the five sectors, and within each sector. However, you won’t go too far wrong with these five funds. They continue to stick with high-quality issues with sound fundamentals, so their concentrations in certain sectors doesn’t add a lot of risk over the long term. Each has its quirks, but overall they are well positioned for low-risk returns....

ENCANA CORP. $60.24 (Toronto symbol ECA; Shares outstanding: 749.8 million; Market cap: $45.2 billion; SI Rating: Average) has decided to postpone its plan to split itself into two separate companies — one focusing on natural gas, the other on oil sands and oil refineries. EnCana had hoped to complete the split in early 2009, but current problems in the credit markets will make it difficult for the two new smaller companies to raise capital to fund new projects. EnCana’s stock has dropped sharply in the past three months, along with oil and natural gas prices. However, hedging contracts will lock in prices for about 60% of EnCana’s natural gas production in 2009 at an average price 34% higher than the current spot price. Natural gas accounts for 80% of EnCana’s total production....

RBC CANADIAN EQUITY FUND $19.69 (CWA Rating: Conservative) (RBC Mutual 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) invests mostly in larger-capitalization stocks, but also looks for opportunities in small- and mid-cap stocks. The fund’s 10 largest holdings are Royal Bank, Manulife, EnCana, TD Bank, Potash Corp., Bank of Nova Scotia, Canadian Natural Resources, Suncor Energy, Research in Motion and BCE Inc. The $4.2-billion fund holds 41.3% of its holdings in resource stocks. It also holds 30.7% in finance. Over the last ten years, RBC Canadian Equity posted a 9.5% annual rate of return. That’s just under the S&P/TSX’s gain of 9.7%. The fund lost 14.9% over the last year, compared to the loss of 14.4% for the S&P/TSX. The fund’s MER is 1.96%....

ENCANA CORP. $52 (Toronto symbol ECA; Conservative Growth Portfolio, Resources sector; Shares outstanding: 750.2 million; Market cap: $39.0 billion; SI Rating; Average) plans to let shareholders vote on its plan to split itself into two companies — one focusing on natural gas, the other on oil sands and oil refineries. The gas company will keep the EnCana name, while the oil company will take the name Cenovus Energy Inc. Shareholders will receive one new share in each new company for every EnCana share they hold. Break-ups like this generally work out well for investors, as the total value of the two new stocks usually exceeds the value of the former parent company over time. EnCana got as high as $98 in May, 2008, but has moved down to its current price, mostly due to falling natural gas prices. Natural gas accounts for about 80% of EnCana’s total production. However, the company’s break-up plan and growing reserves enhance its long-term prospects....

The Dow’s 11.1% gain on Monday was the fifth-biggest percentage gain on record. The 9.8% gain on Toronto the next day was the biggest ever. Markets remain volatile and have moved down since, but my view is that governments around the world are now taking the kind of steps that will contain the crisis and eventually restore liquidity in the banking system. You can only spot market reversals in hindsight, so it’s too early to declare if we are near a bottom. But even if we are, markets are apt to remain volatile and some stocks are bound to go to lower lows....

RIOCAN REAL ESTATE INVESTMENT TRUST $20.25 (Toronto symbol REI.UN; SI Rating: Average) has increased its monthly distributions by 2.2%, from $0.1125 a unit to $0.115. The new annual rate of $1.38 yields 6.8%. RioCan is a buy. ARC ENERGY TRUST $22.55 (Toronto symbol AET.UN; SI Rating: Extra risk) has rescinded one of its recent monthly distribution increases in light of lower oil and gas prices. It now yields 12.8%....

ENCANA CORP. $70 (New York symbol ECA; Conservative Growth Portfolio, Resources sector; Shares outstanding: 750.2 million; Market cap: $52.5 billion; WSSF Rating: Average) is a major North American producer of natural gas (about 80% of total production) and oil (20%). EnCana prefers to focus on what it calls “key resource plays”, including early-stage natural gas fields and oil sands projects. These assets cost more to develop, at least initially, but can last decades longer than conventional properties. The stock rose to a new peak $99 in May, 2008, partly due to EnCana’s plan to split itself up into two companies — one focusing on natural gas, the other on oil sands and oil refineries. Stockholders will receive one new common share in each new company for every EnCana share they hold. EnCana aims to complete the plan early next year....

Most oil and gas stocks hit record highs earlier this year, but have dropped lately along with energy prices. However, energy prices will undoubtedly rise again over the next few years as developing countries continue to industrialize their economies. As well, wind, solar and other forms of alternative energy sources will likely supply a small fraction of the world’s energy needs for the foreseeable future. We feel investors should focus on well-established oil and gas companies with large reserves and diverse sources of cash flow that help them stay profitable, even if energy prices fall. Here are three top examples, although we see only two as buys right now. CHEVRON CORP. $85 (New York symbol CVX; Conservative Growth Portfolio, Resources sector; Shares outstanding: 2.1 billion; Market cap: $178.5 billion; WSSF Rating: Above average) is the secondlargest integrated oil company in the United States after ExxonMobil. Production accounts for about 80% of its earnings. The remaining 20% comes from refineries and retail gas stations....

BANK OF MONTREAL $49 (Toronto symbol BMO) earned $0.98 a share in its third fiscal quarter, ended July 31, 2008, down 23.4% from $1.28 a year earlier. The drop was mainly caused by higher loan-loss provisions, particularly from two corporate loans linked to the weak U.S. mortgage market. However, overall revenue rose 7.5%, to $2.75 billion from $2.6 billion, reflecting strong gains at all of its main businesses. Buy. TRANSCANADA CORP. $38 (Toronto symbol TRP) has agreed to combine its natural gas transmission assets in Alberta with those of Canadian Utilities Ltd. Each company will continue to separately manage its own assets, but regulators will treat the merged system as a single entity with a single rate structure. This alliance should improve the efficiency of both systems. Conservative Investor Best Buy. ENCANA CORP. $69 (Toronto symbol ECA) is down 30% from its all-time peak of $98 in May 2008, largely because of falling oil and natural gas prices. However, EnCana’s upcoming split into two companies — one focusing on natural gas, the other on oil sands and oil refineries — enhances the long-term prospects of both of these businesses. Conservative Investor Best Buy....