holding company

POWER CORP. $30.40 (Toronto symbol POW; Shares outstanding: 412.4 million; Market cap: $14.2 billion; TSINetwork Rating: Above Average; Div. yield: 3.8%; www.powercorporation.com) is a diversified holding company. It holds its financial assets through 65.8%-owned Power Financial. These financial assets include 68.1% of Great- West Lifeco, one of Canada’s largest life insurers (see article on Great-West Lifeco in this issue), and 58.7% of IGM Financial, a leading Canadian mutual fund provider. Power Financial also owns 50% of holding company Parjointco, which holds 55.6% of Switzerland- listed Pargesa Holdings SA. Pargesa has 95% of its assets in five large European companies: Imerys (minerals), Total SA (oil), Pernod Ricard (wine and spirits), Suez Environnement (energy, water and waste services) and Lafarge (cement and building materials). Power Corp. also has investments in Asia....

DOREL INDUSTRIES, $38.69, symbol DII.B on Toronto, has agreed to buy Hong Kong-based Lerado Group, a maker of baby strollers and infant car seats, for $120 million. Lerado also makes baby beds, high chairs and baby bouncers. The acquisition includes four facilities—a research centre in Taiwan and three manufacturing plants in China. These will be Dorel’s first company-owned factories in Asia, which reduces its reliance on third-party suppliers in the region; Dorel will now be able to make its own products to sell in China and export around the world. Right now, the company’s juvenile division gets only a small part of its sales from China. But China’s new infant-seat laws and growing middle class make it a great place for Dorel to expand....

Every Wednesday, we publish our “Investor Toolkit” series on TSI Network. Whether you’re a beginning or experienced investor, these weekly updates are designed to give you advice on specific investment advice. Each Investor Toolkit update gives you a fundamental piece of investing strategy, and shows you how you can put it into practice right away. Today’s tip: “Value investing’s good reputation owes a great deal to Warren Buffett, but he and other successful investors owe their success to much more than just one relatively narrow approach to the market.” In last week’s Investor Toolkit, I pointed out that learning what not to do can be the hardest and costliest part of an investor’s education (see the Toolkit here). I focused on how this applies to technical analysis—the practice of trying to base investment decisions on past trading and market history. This week I want to expand on what I said, since the idea applies to a wide range of narrow approaches to investing....

SNC-LAVALIN GROUP INC. $52 (Toronto symbol SNC; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 152.1 million; Market cap: $7.9 billion; Price-to-sales ratio: 1.0; Dividend yield: 1,8%; TSINetwork Rating: Average; www.snclavalin.com) has agreed to sell AltaLink to Berkshire Hathaway (New York symbol BRK.B), the holding company controlled by billionaire investor Warren Buffett.

Wholly owned AltaLink provides electricity to 85% of Alberta’s population through 12,000 kilometres of power lines and 280 substations.

The company will receive $3.2 billion (or $2.9 billion after taxes). The transaction should close by the end of this year.

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Consolidated Edison, $54.23, symbol ED on New York (Shares outstanding: 292.9 million; Market cap: $15.9 billion; www.coned.com) is a holding company for Consolidated Edison Company of New York, Inc. The firm sells electricity, gas and steam in most of New York City and Westchester County. It also owns Orange and Rockland Utilities, which operates in New York, New Jersey and Pennsylvania. Consolidated Edison has 3.6 million electric and 1.2 million gas customers. Consolidated Edison recently reached an agreement with regulators that will let it raise its rates so it can spend $649 million to make its system more storm-resistant. This became a concern after Hurricane Sandy caused extensive damage in the fall of 2012....

SNC-LAVALIN GROUP INC. $52 (Toronto symbol SNC; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 152.1 million; Market cap: $7.9 billion; Price-to-sales ratio: 1.0; Dividend yield: 1,8%; TSINetwork Rating: Average; www.snclavalin.com) has agreed to sell AltaLink to Berkshire Hathaway (New York symbol BRK.B), the holding company controlled by billionaire investor Warren Buffett.

Wholly owned AltaLink provides electricity to 85% of Alberta’s population through 12,000 kilometres of power lines and 280 substations.

The company will receive $3.2 billion (or $2.9 billion after taxes)....

ATCO LTD. (Toronto symbols ACO.X [class I non-voting] $54 and ACO.Y [class II voting] $54; Income Portfolio, Utilities sector; Shares outstanding: 115.1 million; Market cap: $6.2 billion; Price-to-sales ratio: 1.4; Dividend yield: 1.6%; TSINetwork Rating: Above Average; www.atco.com) holds 53.1% of Canadian Utilities (see left). It also owns 75.5% of ATCO Structures & Logistics, which builds temporary buildings for construction and energy-exploration firms; Canadian Utilities owns the remaining 24.5%.

In 2013, ATCO’s revenue rose 8.6% to $4.4 billion from $4.0 billion in 2012. That’s mainly because Canadian Utilities’ new power lines boosted its contribution. The structures division’s revenue rose just 0.4%, partly because ATCO sold its 50% stake in a South American joint venture for $124 million. It also completed three large projects in Australia in 2012 and early 2013.

Earnings rose 13.0%, to $418 million, or $3.62 a share, from $370 million, or $3.20. Without unusual items, earnings rose 5.4%.
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Interest rates will probably stay low for the next year or two. That should encourage income-seeking investors to keep buying high-yielding utilities.

These four power providers continue to invest in new projects, which will give them more cash flow for dividends....

Biglari Holdings, $496.61, symbol BH on New York (Shares outstanding: 1.7 million; Market cap: $837.7 million; www.biglariholdings.com), is a holding company that operates a number of different businesses. Its strategy is to keep expanding by putting cash generated from its subsidiaries into new investments. Right now, Biglari’s two main holdings are the Steak ’n Shake chain of casual dining restaurants and Western Sizzlin’ steakhouses. The company’s CEO is 36-year old Iranian-American Sardar Biglari, who has frequently taken an aggressive activist shareholder stance with companies in which he invests. He’s now embroiled in a fight with Cracker Barrel (Nasdaq symbol CBRL) to put itself up for sale and seat Biglari candidates on its board of directors....

E-L Financial Corp. Ltd., $701.13, symbol ELF on Toronto (Shares outstanding; 4.0 million; Market cap: $2.9 billion; www.empire.ca), is a holding company that owns 80% of the Empire Life Insurance Company. In addition to life insurance, Empire provides employee benefit plans and financial services. E-L also owns an investment portfolio that includes both direct investments in companies and publicly traded stocks and bonds. As well, it has a 51.38% interest in United Corporations, a closed-end investment fund (symbol UNC on Toronto). The company sold its 100% interest in the Dominion of Canada General Insurance Company, which underwrites property and casualty insurance, on November 1, 2013. That brought in cash of $1.1 billion and let E-L pay a $75 dollar-a-share special dividend....