investment

The price of gold hit a peak a little more than two years ago, in August 2011, at around $1,900 an ounce. It has generally been falling ever since. It fell below $1,200 in July, and is now around $1,300. If you had that kind of movement in a broad stock market average, you might say that now is a good time to consider if that market has come down into buying territory. You might wonder if prices were ready to reverse course and resume a long-term rise. However, if you try to make that kind of assumption with gold, you have a lot less information to work with. After all, stocks have a relationship with various measures of value such as earnings, dividends, sales and so on. The history of these relationships ranges widely, but they still give you a basis for comparison. Not so for gold. It doesn’t produce any sales, revenue or earnings. In fact, it consumes rather than produces income, because you have to pay to insure and store it. Unlike stocks which represent a share in a profit-seeking enterprise, gold is a commodity, and a highly specialized one at that....

Our main criteria for deciding if a company falls into the Consumer or Manufacturing sector is whether it behaves in a cyclical or non-cyclical manner. A manufacturing company is subject to the ups and downs of the economic cycle; consumer firms benefit from continuous and often habitual use of their products and services, so they have much more stability in their sales and earnings, regardless of the state of the economy. It doesn’t matter who the company sells to. For instance, consumers buy cars and soup. But carmakers are subject to wide swings in demand, so they go in the Manufacturing sector. Soup demand is far more stable, so soup makers go in the Consumer sector. While the soup company “manufactures” its products, its customers buy them during good economic times or bad. Real estate investment trusts (REITs) lease mostly office space or industrial space to firms that go through swings along with the rise and fall of the economy, so we place them in the Manufacturing sector....

CISCO SYSTEMS INC. (Nasdaq symbol CSCO; www.cisco.com) is a leading maker of hardware and software that links and manages computer networks. The company’s hardware includes routers, local area network (LAN) and asynchronous transfer mode (ATM) switches, and server computers. Cisco mainly sells this equipment to large businesses and government agencies....

Heavy equipment distributor Toromont Industries Ltd. completed the spinoff of its natural gas equipment division, Enerflex Ltd., in July 2011. Shareholders received shares of the new Toromont and shares of Enerflex. Here is our latest report on these two Canadian stocks which we follow in our advisory for more aggressive investing, Stock Pickers Digest....

ENBRIDGE INC. $42 (Toronto symbol ENB; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 1.0 billion; Market cap: $42.0 billion; Price-to-sales ratio: 1.2; Dividend yield: 3.0%; TSINetwork Rating: Above Average; www.enbridge.com) has opened its first geothermal power plant. This facility, which is located near Vale, Oregon, taps into heat from the earth’s core to generate electricity.

Enbridge paid $23.8 million for a 20% stake in this plant. U.S. Geothermal Inc. (New York symbol HTM) owns the other 80%.

Power from geothermal plants is much more reliable than solar and wind projects. That cuts the risk of this investment. As well, the plant has a 25-year deal to sell its electricity to Idaho’s power grid.
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DUNDEE CORP. $19 (Toronto symbol DC.A; Aggressive Growth Portfolio, Finance sector; Shares outstanding: 54.1 million; Market cap: $1.0 billion; Price-to-sales ratio: 2.2; No dividends paid; TSINetwork Rating: Average; www.dundeecorp.com) is a holding company with investments in wealth management, real estate, natural resources and agriculture.

In the three months ended June 30, 2013, Dundee lost $69.3 million, or $1.32 a share. However, that’s a big improvement over the $133.6 million, or $2.47 a share, it lost a year earlier. That’s because the company had fewer losses from its investment portfolio. Revenue rose 2.0%, to $48.0 million from $47.1 million.

Dundee is a buy....

MANITOBA TELECOM SERVICES INC. $33 (Toronto symbol MBT; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 67.7 million; Market cap: $2.2 billion; Price-to-sales ratio: 1.5; Dividend yield: 5.2%; TSINetwork Rating: Average; www.mts.ca) recently 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. If you disregard various closing costs, Manitoba Telecom will receive $405 million. The company expects to close the deal by the end of 2013.
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BLACKBERRY LTD., $8.28, Toronto symbol BB, has accepted a $9.00 U.S.-a-share takeover offer from a consortium led by Fairfax Financial Holdings (Toronto symbol FFH). Fairfax is the smartphone maker’s largest investor, with roughly 10% of its outstanding shares. This tentative agreement gives BlackBerry until November 4, 2013, to secure a better deal. It will also give Fairfax and its potential partners time to examine BlackBerry’s financial condition. If BlackBerry accepts a rival offer, it will have to pay a $157.2-million U.S. break fee to Fairfax. That fee would rise to around $262 million U.S. if the company signs a binding deal with Fairfax and does not go through with it. However, Fairfax would not have to pay a fee if it cancels the deal....

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....

High unemployment and gasoline prices have hurt U.S. consumer spending and prompted shoppers to shift to discount and warehouse chains. That’s putting pressure on department stores. Here is how one of America’s most renowned department stores is seeking to overcome the slowdown in consumer spending....