holding company

CANADIAN PACIFIC RAILWAY LTD., $129.16, Toronto symbol CP, fell 6% this week after activist investor Pershing Square Capital Management announced that it will sell 7 million of its CP shares over the next year. Pershing holds 24 million CP shares, or 14.2% of the total outstanding. In June 2012, Pershing helped install Hunter Harrison as CP’s chief executive officer. Mr. Harrison is the former CEO of Canadian National Railway (Toronto symbol CNR). Under his leadership, CP has improved its efficiency with new locomotives, upgraded tracks and software that optimizes train loads and speeds. The company is also cutting 25% of its workforce over the next two years....

MANITOBA TELECOM SERVICES INC., $33.93, Toronto symbol MBT, rose 6% today after it agreed to sell its Allstream subsidiary to Accelero Capital Holdings, a private firm controlled by Egyptian billionaire Naguib Sawiris. In 2004, the company paid $1.6 billion for Allstream, which provides integrated telephone, Internet and other communication services to over 50,000 businesses across Canada. The sale price is $520 million, which is equal to 23% of Manitoba Telecom’s $2.3-billion market cap. If you disregard various closing costs, Manitoba Telecom will receive $405 million. Assuming regulators approve, the company expects to complete the sale in the second half of 2013....

DIEBOLD INC., $29.66, New York symbol DBD, makes automated teller machines (ATMs), vaults and building-security systems. This week, the company announced a major new restructuring plan, including job cuts, selling certain plants and merging customer service activities. These moves should cut its annual costs by $100 million to $150 million by the end of 2015. The lower costs will make Diebold more profitable, particularly as the uncertain economy prompts banks to cut spending on new ATMs. In the three months ended March 31, 2013, Diebold’s revenue fell 9.3%, to $633.5 million from $698.5 million a year earlier....

TECK RESOURCES LTD., $25.21, Toronto symbol TCK.B, fell 10% this week, along with other mining stocks, mainly due to concerns about weakening economic growth in China. The Chinese economy grew by 7.7% in the first three months of 2013, down from 7.9% in the fourth quarter of 2012. The latest figure also fell short of the consensus estimate of 8% growth. China is a major consumer of coal, copper and other resources, so the news pushed down the prices of these commodities. As well, British Columbia environmental regulators have ordered Teck to develop a plan to reduce runoff from its coal mines because it is polluting adjacent rivers. The company estimates that building water-diversion systems and treatment facilities will cost $600 million over the next five years. To put that in context, Teck earned $1.5 billion, or $2.60 a share, in 2012....

Low interest rates continue to spur demand for dividend-paying stocks, such as these two electrical utilities. In the latest issue of The Successful Investor we examine the outlook for each of these Canadian dividend stocks. Both of these companies plan to split their shares on a 2-for-1 basis in May 2013. CANADIAN UTILITIES LTD. (Toronto symbols CU [class A non-voting] and CU.X [class B voting]; www.canadianutilities.com) distributes electricity and natural gas in Alberta. It also operates 18 power plants in Canada, Australia and the U.K. ATCO Ltd. (see below) owns 52.9% of the company....

MONSANTO CO., $105.63, New York symbol MON, sells technology-based agricultural products, such as genetically modified seeds, to farmers, grain processors and food companies. The company also sells weed- and pest-control products. The stock rose 4% this week after the company agreed to settle several lawsuits with DuPont Co. (New York symbol DD). Monsanto had sued DuPont for violating its patents. In response, DuPont launched an anti-trust lawsuit against Monsanto. Under the terms of the deal, Monsanto will license some of its genetically modified soybean seeds to DuPont. In return, DuPont will make four annual fixed royalty payments from 2014 to 2017 totalling $802 million. From 2018 to 2023, DuPont will pay royalties on a per-unit basis, subject to annual minimum amounts. These per-unit payments will total $950 million....

BLACKBERRY INC., $15.09, Toronto symbol BB, rose 2% on Thursday after the company reported much better-than-expected earnings. In its 2013 fourth quarter, which ended March 2, 2013, BlackBerry earned $114 million, or $0.22 a share (all amounts except share price in U.S. dollars). These figures exclude charges related to a restructuring plan that includes cutting the company’s workforce and simplifying its product lines. On that basis, the latest results easily beat the consensus forecast of a $0.34-a-share loss. A year earlier, BlackBerry lost $118 million, or $0.23 a share. Revenue fell 35.9%, to $2.7 billion from $4.2 billion. That’s mainly because customers were waiting for the company to launch new smartphones that use its BlackBerry 10 software. The company began selling these devices in Canada, the U.K. and other markets in February 2013. It started selling them in the U.S. on March 22, 2013....

ATCO LTD. (Toronto symbols ACO.X [class I non-voting] $92 and ACO.Y [class II voting] $92; Income Portfolio, Utilities sector; Shares outstanding: 57.5 million; Market cap: $5.3 billion; Price-to-sales ratio: 1.2; Dividend yield: 1.6%; TSINetwork Rating: Above Average; www.atco.com) is a holding company. Its main subsidiary is 52.9%-owned Canadian Utilities (see left). It also owns 75.5% of ATCO Structures & Logistics, which builds temporary buildings for construction companies and energy exploration firms; Canadian Utilities owns the remaining 24.5%.

In 2012, ATCO’s revenue rose 11.9% to $4.4 billion from $4.0 billion a year earlier. In addition to a higher contribution from Canadian Utilities, revenue at its structures division rose 24.8% due to new mines, such as the Jansen potash project in Saskatchewan. Earnings rose 14.7%, to $375 million, or $6.48 a share, from $327 million, or $5.64.

ATCO continues to trade for less than the value of its assets; investors call this a “holding company discount.” Based on current prices, you can buy a share of ATCO for $92 and get roughly $93 worth of Canadian Utilities. That means you get ATCO’s non-utility businesses, which provide a third of its earnings, for free.
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ARCHER DANIELS MIDLAND CO. $33 (New York symbol ADM; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 658.6 million; Market cap: $21.7 billion; Priceto- sales ratio: 0.2; Dividend yield: 2.3%; TSINetwork Rating: Above Average; www.adm.com) has moved up nearly 20% in the past three months....

ARCHER DANIELS MIDLAND CO. $33 (New York symbol ADM; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 658.6 million; Market cap: $21.7 billion; Priceto- sales ratio: 0.2; Dividend yield: 2.3%; TSINetwork Rating: Above Average; www.adm.com) has moved up nearly 20% in the past three months. That’s partly because Berkshire Hathaway, the holding company controlled by billionaire investor Warren Buffett, now owns 1% of Archer Daniel’s shares.

The company is also profiting from strong demand for sweeteners and soybean products. That let it raise its its dividend by 8.6%. The new annual rate of $0.76 a share yields 2.3%.

Archer Daniels Midland is a buy....