holding company
FPI LTD. $18 (Toronto symbol FPL; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 13.5 million; Market cap: $243.0 million; SI Rating: Speculative) plans to sell its remaining assets in two transactions. Ocean Choice International will buy FPI’s fish harvesting and processing operations in Atlantic Canada for $158.5 million. High Liner Foods Inc. will pay $143 million in cash and High Liner common and preferred stock for FPI’s North American marketing division. The sales require the approval of shareholders at a special meeting on October 22, 2007. The Newfoundland government must also approve the sales. Following these transactions, FPI’s remaining assets will consist of cash and the High Liner securities. The company plans to change its name to FP Resources Ltd., and aims to maintain its listing on the Toronto Exchange....
DUNDEE CORP. $23 (Toronto symbol DC.A; Aggressive Growth Portfolio, Finance sector; Shares outstanding: 75.4 million; Market cap: $1.7 billion; SI Rating: Average) is reorganizing its operations, and selling certain assets. Dundee is a holding company with subsidiaries in three main areas: wealth management, real estate and resources. Dundee’s main subsidiary is 56.3%-owned DundeeWealth Inc., which offers wealth management services and owns the Dynamic family of mutual funds. In September 2006, Dundee- Wealth launched Dundee Bank of Canada, a Schedule I Chartered Bank. DundeeWealth has now agreed to sell Dundee Bank to Bank of Nova Scotia for $260 million. Scotiabank has also purchased new shares of DundeeWealth for $348 million. That gives Scotiabank an 18% stake....
We feel most investors should hold the bulk of their investment portfolios in securities from wellestablished companies. However, you may also want to hold some aggressive stocks. Most of our aggressive recommendations have a strong hold on niche markets. This approach cuts your risk by zeroing in on companies like these five, whose strong long-term prospects will help them overcome the inevitable downturns. However, we see only four of them as buys at this time. ARBOR MEMORIAL SERVICES INC. $30 (Toronto symbol ABO.A; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 10.6 million; Market cap: $318.0 million; SI Rating: Average) owns 41 cemeteries, 27 crematoria, three reception centres located on cemetery premises and 93 funeral homes in eight provinces....
DUNDEE CORP. $25 (Toronto symbol DC.A; Aggressive Growth Portfolio, Finance sector; Shares outstanding: 75.3 million; Market cap: $1.9 billion; SI Rating; Average) provides a variety of financial services, including banking, wealth management and mutual funds through 56%-owned DundeeWealth Inc. (formerly Dundee Wealth Management Inc.). This business supplies roughly three-quarters of its total revenue. Through 78%-owned Dundee Realty Corp. and 16%-owned Dundee Real Estate Investment Trust, the company owns and manages residential and commercial real estate projects. Dundee REIT recently agreed to sell its properties in Central and Eastern Canada so it can focus on its more promising holdings in Western Canada. As part of the transaction, Dundee Realty will manage these properties for the new owners. The new arrangement should improve the long-term prospects of both investments....
LOBLAW COMPANIES $46.27 (Toronto symbol L; SI Rating: Above average) is Canada’s largest food seller, with about 1,700 stores under the Loblaws, Fortinos, No Frills, Provigo and Zehrs banners. It also distributes groceries to other stores. George Weston Ltd. owns 63% of Loblaw’s shares. Loblaw’s sales rose 3.5% in the three months ended December 30, 2006, to $6.78 billion from $6.55 billion. Earnings per share fell sharply, to $0.16 from $0.73. However, if you disregard one-time items, per-share profits fell 38.3%, to $0.58 from $0.94. For the full year 2006, sales rose 3.7%, to $28.6 billion from $27.6 billion in 2005. The company lost $0.80 a share, compared to a profit of $2.75. Excluding one-time reorganization and restructuring charges, per share earnings fell 18.8%, to $2.72 from $3.35. Loblaw will likely earn $2.74 a share this year. The stock now trades at 16.9 times those earnings....
CANADIAN PACIFIC RAILWAY LTD. $64 (Toronto symbol CP; Conservative Growth Portfolio, Manufacturing & Industry sector; SI Rating: Above average) provides freight service through a 13,500- mile rail network between Montreal and Vancouver. It also operates in the U.S. Midwest and Northeast through subsidiaries. Alliances with other rail companies extend its reach to Mexico.
Diverse cargo cuts risk
CP transports a wide variety of products, such as grain, coal and manufactured goods. That helps cut its reliance on a single industry or customer....
BCE INC. $33 (Toronto symbol BCE; Conservative Growth Portfolio, Utilities sector; SI Rating: Above average) is Canada’s largest provider of traditional telephone services, with over 12 million customers in Ontario and Quebec. It also provides Internet access (Sympatico), satellite TV (Bell ExpressVu) and wireless services (Bell Mobility). In the past few months, the company has moved to unlock some of its value. It recently sold most of its interest in Bell Globemedia, the private company that owns The Globe and Mail and CTV Television. BCE also plans to sell a minority stake in satellite operator Telesat to the public. In July 2006, BCE merged its rural telephone business with 53.2%-owned subsidiary Aliant Inc. into a new income trust called Bell Aliant Regional Communications Income Fund....
Both BCE and Telus have unveiled plans to convert into income trusts, which helped spark a rise in their stock prices. Canada’s other big telecom company, Manitoba Telecom, moved up on rumors that it too would convert. The trust structure will let BCE and Telus avoid a big tax increase in the next few years as certain tax shelters expire. But investors have higher payout expectations of a trust compared with a regular company. Telecom companies must invest large sums in new equipment, or risk losing customers. These costs could hurt BCE’s and Telus’s ability to raise future cash distributions....
Holding companies tend to trade for less than the value of their various pieces (‘holding company discount’). Still, despite the apparent bargain, we only recommend the holding company over its subsidiaries when we have a high opinion of all the subsidiaries. A good example is our longtime favourite Canadian Pacific Ltd. When it broke itself up into five new companies in 2001, we saw all of the new stocks as buys.
Power Corp., Toronto symbol POW, through subsidiary Power Financial Corp., Toronto symbol PWF, currently controls two of our long-time recommendations: Great-West Lifeco Inc. and IGM Financial Inc.
However, Power Financial also holds several European companies. We feel that weaker economic conditions in Europe expose Power Financial investors to more risk than either Great-West or IGM. Conservative investors are better off with these two instead of the parent. Both offer value, income and an excellent way to diversify the Finance sector of your portfolio.
GREAT-WEST LIFECO INC. $28 (Toronto symbol GWO; Conservative Growth Portfolio, Finance sector; SI Rating: Above average) is one of Canada’s largest insurance companies, with $191.3 billion in assets under administration. It sells its insurance products directly and through brokers to both individuals and groups. Power Financial controls about 75% of Great-West.
The company also provides wealth management and other financial services. Great-West gets roughly 50% of its profit from Canada, 30% from the U.S. and 20% from Europe.
Great-West’s revenues rose from $16.1 billion in 2001 to $23.9 billion in 2005, or 10.4% compounded annually. Much of that growth is due to Great-West’s 2003 purchase of rival Canada Life Financial Corp. for $7.2 billion in cash and stock.
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Power Corp., Toronto symbol POW, through subsidiary Power Financial Corp., Toronto symbol PWF, currently controls two of our long-time recommendations: Great-West Lifeco Inc. and IGM Financial Inc.
However, Power Financial also holds several European companies. We feel that weaker economic conditions in Europe expose Power Financial investors to more risk than either Great-West or IGM. Conservative investors are better off with these two instead of the parent. Both offer value, income and an excellent way to diversify the Finance sector of your portfolio.
GREAT-WEST LIFECO INC. $28 (Toronto symbol GWO; Conservative Growth Portfolio, Finance sector; SI Rating: Above average) is one of Canada’s largest insurance companies, with $191.3 billion in assets under administration. It sells its insurance products directly and through brokers to both individuals and groups. Power Financial controls about 75% of Great-West.
The company also provides wealth management and other financial services. Great-West gets roughly 50% of its profit from Canada, 30% from the U.S. and 20% from Europe.
Great-West’s revenues rose from $16.1 billion in 2001 to $23.9 billion in 2005, or 10.4% compounded annually. Much of that growth is due to Great-West’s 2003 purchase of rival Canada Life Financial Corp. for $7.2 billion in cash and stock.
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DUNDEE CORP. $38 (Toronto symbol DBC.A (old symbol DBC.SV.A); Aggressive Growth Portfolio, Finance sector; SI Rating: Average) provides investment management and brokerage services, mainly through 62%-owned Dundee Wealth Management Inc. It also owns the Dynamic family of mutual funds. These operations supply over 80% of Dundee’s revenue and profit. The company also develops real estate projects, mainly in Western Canada, and invests in junior resource companies, including a 51.3% stake in Eurogas Corp. (oil and gas exploration) and 18.6% of Breakwater Resources Ltd. (zinc and copper).