encana

Natural gas prices soared to around $16 U.S. per million British thermal units in late 2005, as Hurricane Katrina hurt gas production in the Gulf Coast region of the United States. But supplies improved, and prices fell to their current level of around $6 U.S. The collapse of the Amaranth hedge fund, which made big bets that prices would rise, also helped keep prices down. Lower gas prices have had an effect on two of our favourites: AGRIUM INC. $30 (Toronto symbol AGU; Aggressive Growth Portfolio, Resources sector; SI Rating: Average) needs natural gas to make its fertilizers. Thanks partly to falling gas prices, the stock has gained 20% in 2006, and 70% since we made it our Stock of the Year in 2005....

ENCANA CORP. $54 (Toronto symbol ECA; Conservative Growth Portfolio; Resources sector; SI Rating: Average) aims to expand production at its oil sands projects in Alberta 10-fold in the next decade. As part of this strategy, EnCana is now thinking about building its own upgrading facility in Western Canada that would refine the tar-like oil sands output into various petroleum products. That makes sense, since EnCana would earn higher profits processing oil than simply selling the unrefined product. EnCana would like to cut its risk by bringing in partners. However, falling oil prices and rising costs for labour and equipment could hurt the feasibility of this project, and make it difficult to attract new investors....

NOVA CHEMICALS CORP. $35 (Toronto symbol NCX; Conservative Growth Portfolio, Manufacturing & Industry sector; SI Rating: Extra risk) plans to close a polystyrene plant in the UK. Writedowns and severance costs will cut Nova’s earnings by $43 million (all amounts except share price in U.S. dollars). The closure is part of the company’s plan to cut its annual costs by $65 million. To put these figures in context, Nova earned $108 million, or $1.30 a share in the second quarter of 2006. Nova Chemicals is a buy....

SCOTIA CANADIAN GROWTH FUND $63.03 (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 sees as investments that have the potential for above-average growth. The $571.6 million Scotia Canadian Growth Fund’s 10 largest holdings are Manulife, Suncor Energy, Royal Bank, TD Bank, Barrick Gold, Alcan, CN Railway, CIBC, Talisman Energy and EnCana. Scotia Canadian Growth currently holds 29.3% of its portfolio in the Financial services industry. Its next-largest holding is Energy at 21.3%....

CIBC CORE CANADIAN EQUITY FUND $23.21 (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 $627.6 million fund’s top holdings are Petro-Canada, EnCana, Manulife Financial, Falconbridge, Bank of Nova Scotia, TD Bank, Canadian National Railway, Bank of Montreal, Canadian Natural Resources and Suncor Energy. CIBC Core Canadian Equity holds 33.4% of its portfolio in Financial services stocks and 26.4% in Energy stocks....

BMO EQUITY FUND $31.50 (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 in the shares of 20 to 40 “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, Petro-Canada, Canadian National Railway, CIBC, Bank of Nova Scotia and EnCana. The $2 billion BMO Equity currently holds 37.6% of its portfolio in the Financial services industry. Its next-largest holding is Energy at 23.2%....

RBC CANADIAN EQUITY FUND $25.15 (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 Corporation, Petro-Canada, CN Railway, Talisman Energy, Suncor Energy and Canadian Natural Resources. The $4.4 billion fund holds a relatively high 28.8% of its holdings in Financial stocks. It also holds 25.3% in Energy stocks....

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 like. 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 $30.99 (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 Manulife Financial, Suncor Energy, Royal Bank, TD Bank, Western Oil Sands, Canadian Oil Sands Trust, CN Railway, Inco, Falconbridge and Teck Cominco....

FIDELITY TRUE NORTH FUND $26.33 (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) uses a “bottom-up” approach (using fundamentals such as earnings, cash flow and low debt) to identify undervalued companies. Fidelity True North Fund’s top holdings include high-quality stocks such as Manulife Financial, EnCana Corporation, TD Bank, Sun Life Financial, Canadian National Railway, Canadian Natural Resources, Bank of Nova Scotia, Research in Motion and Talisman Energy. The fund’s breakdown by economic sector is: 31% in Financials, 20.6% in Energy, 14% in Materials, 8.4% in Information technology, 7.4% in Industrials, 6.6% in Consumer discretionary, and 2.2% in Consumer staples....

ENCANA CORP. $59 (Toronto symbol ECA; Conservative Growth Portfolio, Resources sector; SI Rating: Average) suspended work in 2003 on its Deep Panuke offshore natural gas field near Sable Island. The company feared that rising development and other costs would hurt the project’s feasibility. EnCana now hopes to restart work on Deep Panuke in the next year or two. Based on new drilling data, the company has scaled down its original plan, from three offshore platforms to one. A new royalty deal with the Nova Scotia government has also improved the project’s prospects. Gas prices have more than doubled since the discovery of Deep Panuke seven years ago. However, they have come down in the past few months as mild winter weather cut demand. Gas prices could come under more pressure over the next few years as imports of liquefied natural gas rise....