encana

ENCANA CORP. $59 (New York symbol ECA; Conservative Growth Portfolio, Resources sector; Shares outstanding: 753.3 million; Market cap: $44.4 billion; WSSF Rating: Average) is one of North America’s leading producers of natural gas. The company prefers to focus on early-stage properties in Alberta and the U.S. Rockies. These assets cost more to develop, at least initially, but should last much longer than conventional gas fields. Natural gas accounts for 80% of its production. EnCana is also active in Alberta’s oil sands region. But extracting the heavy, tar-like oil sands is much more costly than operating regular oil wells. That’s why EnCana recently folded its oil sands assets into two joint ventures with ConocoPhillips— one to operate the oil sands, and one to refine heavy oil. The two ventures operate independently of each other. In the second quarter of 2007, earnings before hedging gains and other one-time items jumped 83.7%, to $1.80 a share from $0.98 a year earlier, while cash flow per share rose 54.9%, to $3.33 from $2.15. Revenue rose 43.6%, to $5.6 billion from $3.9 billion, due to the expansion of its oil sands business....

It pays to include some oil and natural gas stocks in your portfolio, as an inflation hedge and for exposure to the Resources sector. Even so, we still advise against over-indulging in oil and gas stocks. Global demand for oil and gas will continue to rise. But no one can consistently predict oil and gas price prices. Both will continue to go through wild swings in price. So you’ll profit most with highquality stocks that will prosper even during the inevitable price setbacks. These three energy stocks are down from their peaks over the last couple of months, but are still up from the start of this year. Although all are attractive in relation to earnings and cash flow, only two are buys right now....

ENCANA CORP. $62 (Toronto symbol ECA; Conservative Growth Portfolio, Resources sector; Shares outstanding: 755.4 million; Market cap: $46.8 billion; SI Rating: Average) gets about 80% of its total production from natural gas. The company’s oil sands projects in Alberta account for the remaining 20%. The company recently folded its oil sands operations into two joint ventures with U.S.-based ConocoPhillips. That sped up the development of these assets, and cut EnCana’s costs. Last year, EnCana considered converting its oil sands holdings into an income trust. But Ottawa’s move to tax trusts in 2011 killed that plan. It’s possible EnCana may simply hand out shares in this business to its shareholders....

UNIVERSAL CANADIAN GROWTH FUND $24 (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 BCE Inc., Canadian National Railway, BorgWarner (U.S. auto parts & equipment) Industrial Alliance Insurance, Manulife Financial, Cognos Inc., Shoppers Drug Mart, EnCana Corporation, Martinrea International and Nova Chemicals. The fund’s breakdown by economic sector is as follows: 24.1% in Consumer discretionary, 15.3% in Financials, 11.9% in Industrials, 8.3% in Energy, 5.1% in Health Care, 4.9% in Telecommunications Services, 4.7% in Information technology and 4.6% in Consumer staples....

CIBC CANADIAN EQUITY FUND $27.77 (CWA Rating: Conservative) (CIBC Securities, 5140 Yonge Street, Suite 900, Toronto, Ontario M2N 6X7. 1-800-631-7008; Website: www.cibc.com. No load — deal directly with the company.) uses a “bottom-up” approach (using fundamentals such as earnings, cash flow and low debt) to identify companies that trade at reasonable valuations and yet have growth potential. The $662.8 million fund’s top holdings are Petro- Canada, EnCana, Manulife Financial, Teck Cominco, Bank of Nova Scotia, TD Bank, Canadian National Railway, Brookfield Asset Management, BCE Inc. and Alcan. CIBC Canadian Equity holds 38% of its portfolio in Financial services stocks and 25% in Energy stocks....

BMO EQUITY FUND $33.88 (BMO Mutual Funds, 77 King Street West, Suite 4200, Royal Trust Tower, Toronto, Ont., M5K 1J5, 1-800-665-7700; Web site: www.bmo.com. No load — deal directly with the bank) (CWA Rating: Conservative) generally invests mostly in ‘blue-chip” Canadian companies. These stocks are selected based on the manager’s outlook for the industry they operate in, the earnings record of each company, the strength of management and the potential for growth. BMO Equity Fund’s 10 largest holdings are Manulife Financial, Suncor Energy, Royal Bank, TD Bank, Sun Life Financial, EnCana Corporation, Alcan, Potash Corporation, CIBC and Bank of Nova Scotia. The $2.3 billion fund currently holds 33% of its portfolio in the Financial services industry. Its next-largest holding is Energy at 22%....

RBC CANADIAN EQUITY FUND $29.54 (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 TD Bank, Manulife Financial, Bank of Nova Scotia, Royal Bank, EnCana, Canadian Natural Resources, Suncor Energy, Alcan, CIBC and Bank of Montreal. The $5 billion fund holds 32% of its holdings in Financial stocks. It also holds 25% in Energy stocks. Over the last ten years, RBC Canadian Equity posted a 10.4% annual rate of return. That’s about equal to the S&P/TSX’s gain of 10.1%. The fund made 22.7% over the last year, equal to the gain of 22.7% for the S&P/TSX. The fund’s MER is 1.99%....

TD CANADIAN EQUITY FUND $32.70 (CWA Rating: Conservative) (TD Asset Management, P.O. Box 7500, Station A, Toronto, Ontario. M5W 1P9. 1-800-463-3863; Web site: www.tdcanadatrust.ca. No load — deal directly with the bank) uses a “bottom-up” approach (using fundamentals such as earnings, cash flow and low debt) to identify undervalued companies with strong growth potential. TD Canadian Equity Fund’s 10 largest holdings are Royal Bank, Suncor Energy, TD Bank, Rogers Communications, Alcan, Canadian Oil Sands Trust, CN Railway, Ivanhoe Mines, Goldcorp and EnCana. The $3.1 billion fund currently holds about 27% of its portfolio in Financial services shares. It also has a bias towards Energy stocks, with 27% of its holdings in that sector....

Here are five large funds run by each of Canada’s big-five banks. Each holds the kind of conservative, well-balanced portfolios of high quality stocks we recommend. All five have a high weighting in Financial services and Energy stocks. However, they stick with high-quality issues with sound fundamentals, so these concentrations don’t add a lot of risk. Each has its quirks, but overall they are well positioned for low-risk returns. TD CANADIAN EQUITY FUND $32.70 (CWA Rating: Conservative) (TD Asset Management, P.O. Box 7500, Station A, Toronto, Ontario. M5W 1P9. 1-800-463-3863; Web site: www.tdcanadatrust.ca. No load — deal directly with the bank) uses a “bottom-up” approach (using fundamentals such as earnings, cash flow and low debt) to identify undervalued companies with strong growth potential. TD Canadian Equity Fund’s 10 largest holdings are Royal Bank, Suncor Energy, TD Bank, Rogers Communications, Alcan, Canadian Oil Sands Trust, CN Railway, Ivanhoe Mines, Goldcorp and EnCana....

PETRO-CANADA $51 (Toronto symbol PCA; Conservative Growth Portfolio, Resources sector; Shares outstanding: 495.8 million; Market cap: $25.3 billion; SI Rating: Average) is Canada’s secondlargest integrated oil company after Imperial Oil. The company operates several properties in Western Canada as well as offshore platforms near Newfoundland. It also operates refineries and over 1,300 retail gas stations. Canada accounts for roughly 90% of Petro-Canada’s revenue. Internationally, the company owns or participates in projects in the North Sea, Libya, and Trinidad and Tobago. In the three months ended March 31, 2007, Petro-Canada earned $1.17 a share before unusual items, up 23.2% from $0.95 a year earlier....