imperial oil

MDS INC., $5.72, Toronto symbol MDS, is a life-sciences company that conducts contract-drug research for pharmaceutical companies, sells analytical devices (which scientists use to detect diseases) and supplies medical isotopes for cancer research. The company lost $17 million, or $0.15 a share, in the three months ended April 30, 2009 (all amounts except share price in U.S. dollars). The loss included a $16-million writedown of buildings and equipment at its drug-testing division. In the year-earlier quarter, MDS earned $13 million, or $0.11 a share. If you disregard the writedown and several other unusual charges, earnings per share fell 62.5%, to $0.03 from $0.08. That was well below the $0.06 a share that analysts were expecting. Revenue fell 19.4%, to $282 million from $350 million. Still, this was higher than the consensus estimate of $274.4 million. If you exclude the impact of foreign-exchange rates and the businesses that MDS bought and sold, its revenue fell 10%....

Oil prices are rising again, but it’s unlikely they will soon match or exceed the record highs they hit in 2008. Over the long-term, we feel the best way for conservative investors to profit from volatile energy prices is with integrated oil producers like Imperial Oil. If oil prices rise, it earns more from crude production. But if oil prices fall, Imperial’s refining and marketing operations, which need crude oil to make gasoline and other fuels, will become more profitable. IMPERIAL OIL LTD. $46 (Toronto symbol IMO; Conservative Growth Portfolio, Resources sector; Shares outstanding: 848.9 million; Market cap: $39 billion; Price-to-sales ratio: 1.3; SI Rating: Average) is Canada’s largest integrated oil company. Imperial accounts for about 6% of Canada’s total oil production. U.S.-based ExxonMobil Corp. (New York symbol XOM) owns 69.6% of Imperial’s shares. Imperial gets most of its revenue from its “downstream” businesses. These consist of its four refineries and 1,900 retail gas stations, which operate under the “Esso” banner. Downstream operations accounted for 77% of Imperial’s 2008 revenue, but just 21% of its earnings....

Nexen Inc., $27.32, symbol NXY on Toronto (Shares outstanding: 520.8 million; Market cap: $14.2 billion), is a large Calgary-based oil and gas producer. Nexen has interests in the North Sea, the Gulf of Mexico, North America (including the Alberta oil sands), Yemen and off the Nigerian coast.

Nexen produces about 252,000 barrels of oil equivalent per day (this measurement includes natural gas)....

Government efforts now underway are likely to solve today’s financial crisis. But the cure will likely only come at a cost of much higher inflation, starting possibly in the next decade. We’ve been asked by a number of investors how this should influence their investing. Many have asked specifically about resource stocks. As a general rule, resource stocks will provide a hedge against inflation, because they gain directly from rising prices for the commodities they produce....

IVY GROWTH AND INCOME FUND $17.86 (CWA Rating: Conservative) (Mackenzie Financial Corp., 150 Bloor Street West, Toronto, Ontario M5S 3B5. 1-800-387-0780; Web site: www.mackenziefinancial.com. Load fund — available from brokers) is a balanced fund. As such, it holds a mix of stocks, bonds and cash. Ivy Growth and Income Fund has returned 2.9% annually for the 10 years ended April 30, 2009. Over the last year, the fund lost 16.6%. Its MER is 2.08%. The fund’s top stock holdings are: Thomson Reuters Corp., Shoppers Drug Mart, Imperial Oil, Tim Hortons, Bank of Nova Scotia, Becton Dickinson, Colgate-Palmolive, McDonald’s Corporation, Nestle SA and Reckitt Benckiser Group plc. The $1.8-billion Ivy Growth and Income Fund holds 25% of its assets in bonds. In Canada, interest rates on bonds are between 2% and 4% annually. That’s the total return that a bond can provide from today until the day it matures. However, bonds leave investors at the mercy of inflation, which shrinks the purchasing power of all fixed-return investments. In fact, an upsurge in inflation could wipe out all returns on bonds, as well as some of their principal....

IVY CANADIAN FUND $20.80 (CWA Rating: Conservative) invests in high-quality, large-capitalization stocks. The $1.8-billion fund’s top holdings include: Thomson Reuters, Shoppers Drug Mart, Imperial Oil, Tim Hortons, Becton Dickinson & Co., McDonald’s, Colgate-Palmolive, Nestle SA, Bank of Nova Scotia and Reckitt Benckiser Group plc. Ivy Canadian’s breakdown by industry includes: consumer staples, 35.4%; consumer discretionary, 18.9%; energy, 9.2%; financials, 8.6%; health care, 6.2%; and industrials, 6.2%....

In the past, investors bought mutual funds within the “fund families” promoted by fund sellers for a couple of main reasons. Mutual funds within a particular fund family often shared some key investment characteristic, such as a conservative or aggressive investment approach, or a stress on value as opposed to growth. That let investors switch between funds within the family at little or no charge. This way, they could rebalance their portfolios and still maintain a common investment philosophy. But it also encouraged frequent trading. That can cause investors to miss out on some of their biggest gains....

MANITOBA TELECOM SERVICES $33.99 (Toronto symbol MBT; Shares outstanding: 64.7 million; Market cap: $2.2 billion; SI Rating: Average) is the main supplier of traditional and wireless telephone services in Manitoba. The company’s wholly owned subsidiary, Allstream, sells telecom services to businesses across Canada. In the three months ended March 31, 2009, Manitoba Telecom’s revenue rose 0.9%, to $482.9 million from $478.8 million a year earlier. The gain was mainly caused by strong demand for wireless and high-speed Internet. These growth areas account for 47% of Manitoba Telecom’s revenue, and continue to offset lower revenue from its traditional telephone services. As well, the recession drove down demand at Allstream, particularly for long-distance services. This lowered the subsidiary’s revenue by 1.0%. Despite the higher overall revenue, Manitoba Telecom’s earnings fell 15.5%, to $45.9 million, or $0.71 a share. The company earned $54.3 million, or $0.84 a share, a year earlier. The drop was mainly caused by lower long-distance volumes at Allstream....

BANK OF MONTREAL, $43.80, Toronto symbol BMO, earned $358 million in its second quarter, which ended April 30, 2009. That’s down 44.2% from $642 million a year earlier. Earnings per share fell 51.2%, to $0.61 from $1.25, on more shares outstanding. If you exclude writedowns of securities it holds and severance costs related to the layoff of 1,100 employees, the bank would have earned $0.91 a share. That beat analysts’ forecasts of $0.90, and the stock gained over 5%. The recession forced Bank of Montreal to set aside $372 million for bad loans in the latest quarter, up 146.4% from $151 million a year earlier. Still, that’s down 13.1% from $428 million in the first quarter. Moreover, the staff cuts, which amount to 3% of the bank’s total workforce, should save at least $118 million a year....

PENGROWTH ENERGY TRUST $8.64 (Toronto symbol PGF.UN) reported that its cash flow for the first quarter of 2009 fell 57.5%, to $0.37 a unit from $0.87 a year earlier. Higher interest expenses, performance bonuses and royalties were the main reasons for the drop. Still, its $1.20 distribution rate seems secure, and yields 13.9%. Buy. IMPERIAL OIL LTD. $41 (Toronto symbol IMO) will make a final decision on whether to proceed with its 70%-owned Kearl Lake oil-sands project by the end of June. (Imperial’s parent, ExxonMobil Corp., owns the other 30%.) Lower oil prices have reduced labour and material costs. If it goes ahead, Kearl’s reserves should last 40 years. Best Buy. MOLSON COORS CANADA INC. $50 (Toronto symbol TPX.B) continues to profit from MillerCoors, last year’s joint venture that merged its U.S. brewing operations with those of SABMiller. Thanks to savings from combining bottling facilities and distribution networks, Molson Coors’ first-quarter earnings rose 75.2%. Best Buy.