imperial oil

A member of my Inner Circle recently asked a question that many clients may have wondered about. “Have you ever felt like mortgaging the house to load up on an investment? If so, what was it and when? Also, considering the current correction, are you bullish longer term on any particular sector or is it too early to project that at this time?” The short answer to the first question is no. But we often do single out a ‘stock of the year’. When we like a stock enough to give it that status, we feel all our clients should own it, if it fits their investment objectives....

IVY CANADIAN FUND $30 (CWA Rating: Conservative) invests in high-quality, largecapitalization stocks. The $3.7 billion fund’s top holdings include Shoppers Drug Mart, Imperial Oil, Manulife Financial, Canadian National Railway, Reckitt Benckiser plc, McDonald’s Corp., Thomson Corporation, Diageo plc and PepsiCo. Ivy Canadian’s breakdown by industry is: Consumer staples, 22.3%; Financials, 13.9%; Consumer discretionary, 13.7%; Industrials, 12.4%; and Energy, 8.3%....

IVY GROWTH AND INCOME FUND $23.41 (CWA Rating: Conservative) (Mackenzie Financial Corp., 150 Bloor St. West, Toronto, Ont. M5S 3B5. 1-800-387-0780; Web site: www.mackenziefinancial.com. Load fund — available from brokers) is a balanced fund, holding a mixture of stocks, bonds and cash. The fund has returned 6.3% annually for the 10 years. It made 4.1% over the last year. The fund’s MER is 2.14%. The fund’s top stock holdings are Shoppers Drug Mart, PepsiCo, Canadian National Railway, Manulife Financial, Imperial Oil, Thomson Corp., McDonald’s Corp., Becton Dickinson (U.S. medical technology), Diageo plc (UK alcoholic beverages) and Reckitt Benckiser plc (UK household & healthcare products). This $3.0 billion fund holds 24% of its assets in bonds. Interest rates on bonds are now under 5% annually in Canada. That’s the total return that a bond can provide, from today until 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, and some of their principal besides....

At one time, 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. However, due to trends in the mutual-funds industry such as corporate mergers and takeovers, and more aggressive marketing, a fund’s membership in a fund family now has little bearing on its investment approach or appeal as an investment. Below, for instance, we analyse five funds from the Ivy Group. (Note that Ivy is now part of Mackenzie Financial, which in turn is part of IGM Financial. The contact information listed for Ivy Growth and Income also applies to the other four.)...

IMPERIAL OIL $48 (Toronto symbol IMO; SI Rating: Average) is Canada’s largest integrated oil company, with operations in all phases of the petroleum industry. In the three months ended June 30, 2007, Imperial’s earnings fell 14.9%, to $712 million or $0.76 a share, from $837 million or $0.85 a share. The decline came from the absence of tax rate reductions reported a year earlier and lower oil prices. Revenues fell 5.2%, to $6.3 billion from $6.7 billion. Imperial’s cash flow rose 1.7%, to $882 million from $867 million. Cash flow per share rose 5.6%, to $0.94 from $0.89. The higher per-share figure reflects continued aggressive stock buybacks. The company bought back $622 million of its stock in the latest quarter. Imperial still holds cash of $2 billion....

BMO DIVIDEND FUND $50.82 (BMO Mutual Funds, 77 King Street West, Suite 4200, Royal Trust Tower, Toronto, Ont., M5K 1J5, 1-800-665-7700; Web site: www.bmo.com. No load — deal directly with the bank) (CWA Rating: Conservative) currently holds about 57.3% of its portfolio in the Financial services industry. Its next-largest holdings are Energy at 13.3% and Consumer discretionary at 6.5%. BMO Dividend Fund’s largest holdings are Manulife Financial, Bank of Nova Scotia, CIBC, Royal Bank of Canada, Power Financial, Toronto-Dominion Bank, Canadian National Railway, TransCanada Corporation, Alcan, Imperial Oil, Brookfield Asset Management, Thomson Corporation, BCE Inc. and Sun Life Financial. Over the last five years, the $5.9 billion BMO Dividend Fund has posted a 15.3% annual rate of return. That’s under the S&P/TSX’s gain of 18.4%. However, the S&P/TSX index held a high 40% or so of its holdings in Resources shares. That’s been one of the best-performing, although riskiest, sectors. The fund gained 15.4% over the last year, compared to a gain of 20.1% for the S&P/TSX index. BMO Dividend’s MER is 1.73%....

BMO Dividend and RBC Canadian Dividend hold mostly high-quality stocks. These stocks sometimes run into trouble and go through lengthy struggles, just like lesser investments. Eventually, though, most solve their problems and go on to thrive anew. Both funds hold a high proportion of their assets in financial services stocks. However, if you must focus on something, finance is a relatively stable sector. If you do invest in these funds, be sure to adjust the rest of your portfolio so these funds won’t overly concentrate your holdings in the financial sector....

We’ve changed our view on Agrium Inc. We still like Agrium’s long-term outlook, but it has gone up so much that we now see it as a hold, rather than our #1 choice as Resource Stock for 2007. IMPERIAL OIL LTD. $50 (Toronto symbol IMO; Conservative Growth Portfolio, Resources sector; Shares outstanding: 929.2 million; Market cap: $46.5 billion; SI Rating: Average) is looking more attractive. Imperial is Canada’s largest integrated oil company. Imperial gets 70% of its revenue from refining crude oil into gasoline and other fuels, but just 30% of its profit. The remaining revenue and profit come from oil production....

SHAWCOR LTD. $29 (Toronto symbol SCL.A; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 73.7 million; Market cap: $2.1 billion; SI Rating: Average) is building a $38 million facility in Camrose, Alberta to take advantage of growing demand for its pipeline coating services in the oil sands region. The company has now paid an undisclosed sum for land next to this new plant, which will increase its storage capacity and efficiency. ShawCor is a buy for aggressive investors. IMPERIAL OIL LTD. $50 (Toronto symbol IMO; Conservative Growth Portfolio, Resources sector; Shares outstanding: 939.6 million; Market cap: $47.0 billion; SI Rating: Average) has moved up in the past few weeks, partly due to rumours that parent company ExxonMobil Corp. is considering buying the 30% of Imperial that it does not already own....

IMPERIAL OIL LTD. $43 (Toronto symbol IMO; Conservative Growth Portfolio, Resources sector; Shares outstanding: 939.6 million; Market cap: $40.4 billion; SI Rating: Average) is Canada’s largest integrated oil company, with major producing properties in Western Canada. It also operates nearly 2,000 retail gas stations under the “Esso” banner. ExxonMobil Corp. owns 69.6% of the stock. In the first three months of 2007, Imperial’s profits grew 37.3%, to $0.81 a share (total $774 million) from $0.59 a share ($591 million) a year earlier. If you exclude a gain on the sale of an asset, income in the latest quarter rose 25.4%, to $0.74 a share, mostly due to higher oil production and prices. Cash flow per share rose 8.9%, to $0.98 from $0.90, while revenue crept up to $5.9 billion from $5.8 billion. A fire at Imperial’s refinery in Nanticoke, Ontario cut its output in the first quarter. But the shortage pushed up retail gas prices in Ontario, which helped offset the lost production....