investment

RIOCAN REAL ESTATE INVESTMENT TRUST $27.64 (Toronto symbol REI.UN; Units outstanding: 304.4 million; Market cap: $8.4 billion; TSINetwork Rating: Average; Dividend yield: 5.1%; www.riocan.com) is Canada’s largest real estate
investment trust (REIT), with interests in 340 shopping malls containing over 82 million square feet of leasable area. That total includes 47 U.S. malls with over 13 million square feet.

In the three months ended March 31, 2014, RioCan’s revenue increased 6.4%, to $299 million from $281 million a year earlier. Cash flow per unit rose 2.4%, to $0.42 from $0.41, on more units outstanding.

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AGRIUM INC. (Toronto symbol AGU; www.agrium.com) continues to benefit from its plan to expand its retail operations, which sell seed, fertilizer and other products to farmers. Steady sales from the company’s stores help offset its exposure to volatile fertilizer prices. Agrium’s 1,400 outlets in North America, South America and Australia now supply 75% of its sales and 40% of its earnings. The remaining 25% of sales and 60% of earnings mainly comes from making fertilizers from natural gas. Agrium also operates potash and phosphate fertilizer mines. Sales jumped 82.8%, from $9.1 billion in 2009 to $16.7 billion in 2012 (all amounts except share price and market cap in U.S. dollars), thanks to rising fertilizer prices and acquisitions of retail stores, particularly in Australia. However, lower fertilizer prices cut its 2013 sales to $15.7 billion. Earnings were $7.31 a share (or $1.1 billion) in 2013....

CANADIAN IMPERIAL BANK OF COMMERCE $97 (Toronto symbol CM; Conservative Growth and Income Portfolios, Finance sector; Shares outstanding: 397.4 million; Market cap: $38.5 billion; Price-to-sales ratio: 2.2; Dividend yield: 4.1%; TSINetwork Rating: Above Average; www.cibc.com) took control of FirstCaribbean, which offers banking services in 17 Caribbean countries, in December 2006. CIBC now holds a 91.7% stake. The region’s slow growth and high unemployment have prompted CIBC to write down the value of this investment by $420 million.

Due to this charge, as well as costs to launch a new loyalty plan for travellers after it lost the Aeroplan contract, CIBC’s earnings in the quarter ended April 30, 2014 fell 64.5%, to $306 million, or $0.73 a share. If you exclude all unusual items, the bank earned $887 million, or $2.17 a share. A year earlier, CIBC earned $862 million, or $2.09 a share.

Revenue rose just 1.4%, to $3.17 billion from $3.12 billion, mainly due to the loss of the Aeroplan deal.

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METRO INC. $67 (Toronto symbol MRU; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 87.0 million; Market cap: $5.8 billion; Price-to-sales ratio: 0.5; Dividend yield: 1.8%; TSINetwork Rating: Average; www.metro.ca) is Canada’s third-largest supermarket operator, after Loblaw (also in this issue) and Sobeys. It now has 600 supermarkets and 250 drugstores.

To cut its reliance on Quebec, which accounted for nearly all of its revenue, Metro bought A&P Canada for $1.7 billion in 2005. The chain consisted of 240 food stores in Ontario, mostly under the A&P and Dominion names.

Since then, Metro has mainly focused on improving the profitability of its stores. Lower costs will give the company more flexibility to adjust its prices, and cope with the recent 7.3% increase in Ontario’s minimum wage.

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Pat McKeough responds to many requests from members of his Inner Circle for specific advice on stocks to buy as well as questions on investment strategy and the economy. Every week, his comments and recommendations on the most intriguing questions of the past week go out to all Inner Circle members. And each week, we offer you one of the highlights from these Q&A sessions. While we reserve our buy-hold-sell advice for Inner Circle members, these excerpts provide a great deal of information and analysis on stocks we’ve covered for members of Pat’s Inner Circle. This week an Inner Circle members asked us about one of the world’s best known entertainment companies. Walt Disney now has five separate businesses and continues to add to its assets. Pat examines the company’s entertainment empire and the impact of several recent high-profile acquisitions. He also consider the company’s financial outlook and whether the shares can continue their recent rise. Q: What is your opinion about Disney? Thanks....

FAIR ISAAC CORP. $60.30 (New York symbol FICO; TSINetwork Rating: Average) (415-472-2211; www.fairisaac.com; Shares outstanding: 34.3 million; Market cap: $2.1 billion; Dividend yield: 0.1%) makes FICO Scores, the computer program that dominates the market for software that businesses use to evaluate customer creditworthiness. The company is also profiting by selling software that helps credit card issuers control fraud and analyze cardholders’ spending patterns. In its fiscal 2014 second quarter, which ended March 31, 2014, Fair Isaac’s earnings per share rose 15.7% from a year ago, to $0.59 from $0.51. Revenue gained 3.4%, to $185.5 million from $179.3 million. The company saw stronger sales of its credit-scoring software and customized programs for analyzing large amounts of a business’s data. However, sales at its main Applications division (62% of the total) fell 1.4% on weaker licensing revenue from software that detects bank fraud....

ACI WORLDWIDE $55.40 (Nasdaq symbol ACIW; TSINetwork Rating: Speculative) (402-334-5101; www.tsainc.com; Shares outstanding: 37.9 million; Market cap: $2.1 billion; No dividends paid) makes software that processes transactions involving credit cards, debit cards, automated teller machines, point-of-sale terminals and interbank payments. Its products also help cut fraud. The company has added another major client for its Postilion retail point-to-point encryption (PSPE) software. This technology encrypts credit card numbers and other sensitive information from the point of entry (card swipe) at the merchant to the other end (issuing bank or other payment processor). The client is Ecentric Payment Systems, South Africa’s leading payment processor. Ecentric processes nearly 400 million transactions a year for retailers. This number should rise as African markets continue to develop and South African retailers expand into other countries on the continent....

FIRSTSERVICE CORP. $55.55 (Toronto symbol FSV; TSINetwork Rating: Extra Risk) (416-960-9500; www.firstservice.com; Shares outstanding: 34.7 million; Market cap: $2.0 billion; Dividend yield: 0.8%) serves the following areas of the real estate market: commercial real estate, residential property management and property improvement....

Sales are slowing at these beverage makers, mainly because health-conscious consumers are cutting back on sugary drinks and alcohol. Still, they are taking measures to support their well-known brands and help them continue to prosper. They’re also cutting their costs in order to free additional cash. PEPSICO INC. (New York symbol PEP; www.pepsico.com) is the world’s second-largest soft drink maker after Coca-Cola. It also makes other products, such as Frito-Lay snack foods, Gatorade sports drinks, Tropicana fruit juices and Quaker Oats cereals....

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 topics. 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: “Wise investors always value dividends, but many investors don’t realize that share buybacks can be just as valuable as dividends, and in some cases, more so.” Dividends are in fashion with investors, and that’s a good thing. Creative accounting can produce false impressions of prosperity and hide embarrassing financial problems. But accounting can’t create cash for this year’s dividend, let alone conjure up a history of past dividends. If you restrict your stock market picks to dividend payers, you’ll avoid most of the market’s greatest disasters....