general electric

HARBOUR FUND $21.52 (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 $5.7 billion Harbour Fund’s top holdings include Bank of Nova Scotia, Canadian National Railway, Goldcorp Inc., Suncor Energy, General Electric, EnCana Corporation, Petro-Canada, Rio Tinto, Talisman Energy and BHP Billiton. The Harbour Fund gained 0.5% over the last year. The fund’s five-year return averages 15.2% annually. Its MER is 2.33%....

GENERAL ELECTRIC CO. $29 (New York symbol GE; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 10.0 billion; Market cap: $290.0 billion; WSSF Rating: Above average) is one of the world’s largest industrial companies. It operates in six main segments: Infrastructure (33% of 2007 revenue, 37% of profit); Commercial Finance (20%, 21%); Consumer finance (18%, 14%); Healthcare (10%, 11%); Industrial (10%, 6%); and Media (9%, 11%). The company now plans to shed some of its slowgrowing businesses, and focus on its more promising operations. Consequently, GE will spin off its Consumer & Industrial division to its stockholders as a separate company next year. These businesses make household appliances, light bulbs and electrical equipment. The spinoff should help GE unlock value, and reduce its holding-company discount....

SONY CORP. ADRs $37.83, New York symbol SNE, fell roughly 10% this week after it reported earnings that fell short of consensus forecasts. In its first fiscal quarter ended June 30, 2008, earnings fell 39.2%, to $0.31 per ADR from $0.51 a year earlier. The drop was mainly due to lower profits at its TV division, where intense price competition and rising raw material costs have squeezed profit margins. Lower results from its cellphone and movie operations also contributed to the weaker earnings. However, overall sales improved 16.2%, to $18.7 billion from $16.1 billion. If you disregard foreign currency changes, sales were unchanged. The slowing U.S. economy and weak dollar could hurt Sony’s growth in fiscal 2009. But recent cost cuts should improve its long-term profitability. As well, rising sales of its PlayStation 3 video game player should lead to more licensing revenue from game designers. Sony is a buy for long-term gains....

ANHEUSER-BUSCH COMPANIES INC. $66.50, New York symbol BUD, jumped 9% on Friday on reports that Belgian brewer InBev NV has raised its takeover offer, from $65.00 a share to $70.00. InBev may also try to secure a friendly takeover deal, as well as drop its attempt to replace Anheuser-Busch’s directors with its own slate. Anheuser-Busch is still a hold. GENERAL ELECTRIC CO. $27.66, New York symbol GE, plans to spin off its Consumer & Industrial businesses to its stockholders as a single company. These businesses make household appliances, light bulbs and electrical equipment....

S&P DEPOSITORY RECEIPTS $126 (American Exchange symbol SPY; buy or sell through brokers) are commonly called ‘Spiders’. The fund holds the stocks in the S&P 500 Index. This index is comprised of 500 major U.S. stocks chosen for market size, liquidity, and industry group representation. The 10 highest weighted stocks on the index are Exxon Mobil, General Electric, IBM, Apple Inc., Microsoft, AT&T, Chevron Corp., Johnson & Johnson, Cisco and Procter & Gamble. Expenses for the fund are just 0.10% of assets. If you want exposure to the S&P 500 Index, S&P Depository Receipts are a buy.

We still 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. The most recent example is Potash Corporation of Saskatchewan., which now has the highest market cap on the Toronto exchange on the strength of soaring fertilizer and agriculture prices....

SUNOPTA INC., $5.22, symbol SOY on Toronto, fell 20% today after the company said it is replacing its chief executive officer and chief financial officer following an ongoing audit investigation into a large writedown in its berry business. SunOpta gets the bulk of its revenues from its Foods division, which specializes in the sourcing, processing and distribution of organic, kosher and specialty food products. The company’s BioProcess division engineers and sells proprietary steam explosion technology systems that aim to use high heat and pressure to convert biomass such as sugar cane pulp, wood chips and straw into useful components such as ethanol. These waste products are much cheaper and more plentiful than the corn or fresh sugar cane typically used to produce ethanol. However, the development of this process has not unfolded as well as we expected....

Washington Mutual Inc. recently cut its quarterly dividend, from $0.15 a share to $0.01. It now yields just 0.4%. The company needs to conserve capital in the face of rising loan losses and writedowns of mortgage-backed securities. As well, telephone directory publisher Idearc Inc. suspended its $1.37 dividend due to slowing advertising revenue. Consequently, we’re moving Washington Mutual and Idearc from the Income Portfolio to the Aggressive Growth Portfolio. We still see both as holds. Instead, we’re adding these three companies to our Income Portfolio:...

HEWLETT-PACKARD CO. $47.29, New York symbol HPQ, fell 10% this week after it agreed to buy Electronic Data Systems Corp. (New York symbol EDS), a provider of computer services to large government agencies and corporations. Major clients include the U.S. Navy and General Motors. Hewlett will pay $13.9 billion in cash for EDS. The company held cash of roughly $10 billion or $4.04 a share in cash at January 31, 2008, so it will have to borrow the money it needs to complete the takeover. However, long-term debt of $5.1 billion is just 5% of Hewlett’s market cap, so it can comfortably afford to take on more debt. The price is also less than half of Hewlett’s revenue of $28.3 billion in its second fiscal quarter ended April 30, 2008. That’s up 11.0% from $25.5 billion in the year-earlier quarter. Earnings per share before unusual items rose 24.3%, to $0.87 from $0.70....

WASHINGTON MUTUAL INC. $10.95, New York symbol WM, has obtained $7 billion of new capital from a group led by TPG Capital, a private equity fund. That’s equal to 70% of Washington Mutual’s current market cap of $10 billion. TPG will receive a combination of new common shares and convertible preferred shares that could nearly double the number of shares outstanding. The deal requires stockholder approval. Meanwhile, due to rising mortgage defaults and writedowns, Washington Mutual estimates it lost $1.1 billion or $1.40 a share in the three months ended March 31, 2008. To cut its exposure to the volatile real estate market, Washington Mutual will stop accepting new mortgages from brokers, and close all of its freestanding home loan offices. The company has also cut its quarterly dividend, from $0.15 a share to $0.01. It now yields just 0.4%. The dividend cut should save Washington Mutual $490 million a year....