encana

ENCANA CORP. $94.20, Toronto symbol ECA, gained 10% this week after it decided to split itself up 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 assume a new name. Shareholders will receive one new common share in each new company for every EnCana share they hold. Investors will not be liable for capital gains taxes until they sell their new shares. EnCana intends that the initial combined dividends of the two companies will be equivalent to its current annual dividend rate of $1.60 U.S. per share (1.7% yield). EnCana aims to complete the plan in early 2009. The EnCana situation is a little different from a typical spinoff in that the two portions are of comparable size. More often, the company that is created and handed out or spun off to its shareholders as a special dividend is much smaller than the parent....

SCOTIA CANADIAN GROWTH FUND $67.62 (CWA Rating: Conservative) (Scotia Securities, 40 King Street West, 6th Floor, Toronto, Ontario M5H 1H1. 1-800-268-9 269; Website: www.scotiabank.com. No load — deal directly with the company.) uses fundamental analysis to identify what the managers see as investments that have the potential for above-average growth. The $579.2 million Scotia Canadian Growth Fund’s largest stock holdings include Manulife, Royal Bank, TD Bank, Research in Motion, Potash Corp., Suncor Energy, Bank of Nova Scotia and EnCana Corp. Scotia Canadian Growth currently holds 33.8% of its portfolio in the Resources sector. Its next-largest holding is Financial services at 28.9%....

CANADIAN PACIFIC RAILWAY LTD. $69.08, Toronto symbol CP, fell 4% this week as the slowing U.S. economy prompted the company to lower its earnings forecast for 2008, to $4.50 a share from an earlier estimate of $4.70. Revenue in the three months ended March 31, 2008 grew 2.7%, to $1.15 billion from $1.12 billion a year earlier. Higher volumes of grain, fertilizers and industrial goods helped offset lower shipments of lumber and automobiles. Earnings before unusual items fell 3.8%, to $0.75 a share from $0.78, due to severe winter weather, rising fuel costs and foreign exchange losses. The higher costs pushed CP’s operating ratio (regular operating costs divided by revenue – the lower, the better) up to 82.7% in the latest quarter from 79.5% a year earlier....

HARBOUR FUND $21.66 (CWA Rating: Conservative)(C.I. Mutual Funds, 151 Yonge St., 7th Floor, Toronto, ON M5C 2W7. 1-800-268-9374; Web site: www.cifunds.com. Load fund — available from brokers) invests in only 25 to 40 high-quality mostly Canadian stocks, and it may hold stocks for four or five years to realize their value. The $5.2 billion Harbour Fund’s top holdings include Royal Bank, CN Railway, Goldcorp Inc., Suncor Energy, Bank of Nova Scotia, General Electric, EnCana Corp., Petro-Canada, Rio Tinto, TD Bank and BHP Billiton. The Harbour Fund gained 5.5% over the last year. Its MER is 2.33%....

UNIVERSAL CANADIAN GROWTH FUND $20.93 (CWA Rating: Conservative) (Mackenzie Financial Corp., 150 Bloor St. West, Toronto, Ont. M5S 3B5. Web site: www.mackenziefinancial.com. 1-800-387-0780; Load fund — available from brokers) holds companies with strong management and sound business prospects. The fund holds fewer than 40 stocks at all times. Top holdings include TD Bank, Kinross Gold, Edwards Lifesciences, John Wiley & Sons, Shoppers Drug Mart, Corus Entertainment, EnCana Corporation, Martinrea International and Nova Chemicals Corp. The fund’s breakdown by economic sector is as follows: 15.9% in Consumer discretionary, 13.5% in Energy, 10.9% in Materials, 10.5% in Financials, 7.2% in Health Care, 7.1% in Industrials, 6.0% in Information technology, 4.5% in Telecommunications Services and 4.0% in Consumer staples....

ENCANA $77 (Toronto symbol ECA; SI Rating: Average) continues to hit all-time highs as it enjoys the benefits of its oil sands joint venture with U.S.-based oil producer ConocoPhillips, as well as increased oil and gas production. In the three months ended December 31, 2007, earnings per share rose 65.4%, to $1.34 from $0.81 a year earlier (all figures except share price in U.S. dollars). Cash flow per share grew 17.4%, to $2.56 from $2.18. Revenue rose 57.8%, to $5.8 billion from $3.7 billion. EnCana has doubled its quarterly dividend, from $0.20 U.S. a share to $0.40 U.S. The new annual rate of $1.60 U.S. yields 2.1%....

HOME CAPITAL GROUP INC. $39.51, Toronto symbol HCG, earned $2.59 a share in 2007, up 32.8% from $1.95 in 2006. Revenue grew 30.6%, to $368.9 million from $282.5 million. The company’s loan portfolio rose 21.5%, mainly due to strong demand for residential and commercial mortgages. Home Capital has no exposure to the U.S. mortgage market. Receivables on its Equityline Visa credit cards rose 40.2% in 2007. The strong results let Home Capital increase its dividend for the eighth time in the past five years. The new annual rate of $0.48 a share, up 9.1% from $0.44, yields 1.2%. Home Capital Group is a buy....

It was an unsettling week, but the market ended up in the middle of the range it has stayed in since its January 21 plunge. No one can predict these things consistently, but I still think we are much closer to a bottom than a top. To put it another way, if I had to choose between “buy” and ”sell”, I would definitely say “buy”. BELL ALIANT REGIONAL COMMUNICATIONS INCOME FUND $28.28, Toronto symbol BA.UN, is beginning to realize the benefits of its plan to expand the availability and capacity of its high-speed Internet service. Internet subscribers grew 17.1% in the fourth quarter of 2007. This extra capacity has also helped Bell Aliant attract more business customers. Consequently, Bell Aliant’s earnings per share in 2007 rose 18.8%, to $2.53 a share from $2.13 in 2006. Overall revenue grew just 3.0%, to $3.4 billion from $3.3 billion, due to lower local and long distance revenue....

ISHARES CDN LARGECAP 60 INDEX FUND $76.65 (Toronto symbol XIU; buy or sell through a broker) (formerly called iUnits S&P/TSX 60 Index Participation Fund) is a good low-fee way to buy the top stocks on the TSX. The units hold a basket of stocks that represent the S&P/TSX 60 Index. The index is made up of the 60 largest and most heavily traded stocks on the TSX. Expenses on the units are just 0.17% of assets. Most of the 60 stocks in the index are good quality companies. However, to meet the requirement that all sectors are represented, the index holds a few firms we wouldn’t include, such as Cott Corporation and Celestica. The index’s top holdings are: Royal Bank, 6.6%; Manulife Financial, 5.8%; TD Bank, 4.7%; Bank of Nova Scotia, 4.7%; EnCana Corporation, 4.4%; Suncor Energy, 3.9%; Research in Motion, 3.7%; Canadian Natural Resources, 3.5%; Bank of Montreal, 3.1%; CIBC, 3.3%; BCE Inc., 2.6%; Barrick Gold, 2.8%; Sun Life Financial, 2.9%; and Potash Corporation, 2.6%....

We think high-quality mutual funds with a long term focus will beat indexes over long periods. If funds invest as we advise — sticking with well established companies and spreading their assets out across the five main economic sectors — they will tend to lose a lot less than the market indexes in periods when the indexes fall sharply. That’s because big market slides are particularly hard on the hottest, most popular stocks of the preceding market rise, and investing as we do leads you to avoid excessive investment in the hot stocks. Index funds, in contrast, do tend to load up on the hottest, most popular stocks as they rise. That’s because, as they rise, these stocks make up a rising proportion of the index. Index funds are a better deal than the majority of funds now available, however. So if you merely want to equal the indexes, here are some of the best deals available in ETFs. We’ve also analysed one we don’t like....