investment

MANITOBA TELECOM SERVICES INC. (Toronto symbol MBT; www.mts.ca) gets around 55% of its revenue from its 1.3 million telephone and wireless customers in Manitoba. The remaining 45% has come from its Allstream division, which sells integrated telephone, Internet and other communication services to over 50,000 businesses across Canada. Following a strategic review, Manitoba Telecom has agreed to sell its Allstream subsidiary to Accelero Capital Holdings, a private firm controlled by Egyptian billionaire Naguib Sawiris....

DOREL INDUSTRIES, $35.10, symbol DII.B on Toronto, fell over 10% this week after it announced that its earnings will fall below expectations in the current quarter. Dorel makes a wide range of products, including ready-to-assemble home and office furniture; juvenile products, such as car seats, strollers, high chairs, toddler beds and cribs; and recreational products, mainly bicycles. Continued poor weather across the U.S., Canada and Europe has led to lower-than-expected sales volumes, particularly for bicycles (which account for roughly 34% of Dorel’s sales). The slowdown has also prompted the company’s competitors in the bicycle industry to cut their prices....

CENOVUS ENERGY INC., $29.59, Toronto symbol CVE, is selling its Shaunavon shale oil property in Saskatchewan. This field produces 3,600 barrels a day, or about 2% of Cenovus’s total oil production. The company will receive $240 million when the deal closes in July 2013. That’s equal to 61% of the $391 million, or $0.52 a share, that Cenovus earned in the three months ended March 31, 2013. The sale is part of Cenovus’s plan to sell some of its less-important operations. The company also expects to sell its Bakken shale oil property in Saskatchewan in the next few months. It will probably use the cash from these deals to expand its main oil sands operations in Alberta....

Royal Bank (see page 63) recently raised the interest rate on its mortgage loans, which will probably spur other lenders to do the same. That could dampen demand for new loans. Even so, we still like the outlook for all five of Canada’s big banks. That’s because interest rates are still close to historic lows....

Bank of Nova Scotia (see page 61) is our favourite bank, but we still like the outlook for Canada’s other top banks. All four are using their strong balance sheets to buy up assets that diversify their businesses, often at bargain prices.

ROYAL BANK OF CANADA $59 (Toronto symbol RY; Conservative Growth Portfolio, Finance sector; Shares outstanding: 1.4 billion; Market cap: $82.6 billion; Price-to-sales ratio: 2.3; Dividend yield: 4.3%; TSINetwork Rating: Above Average; www.rbc.com) is Canada’s largest bank, with $867.5 billion of assets.

Royal recently paid $3.7 billion for Ally Financial’s Canadian operations....

Pat McKeough responds to many requests for advice on specific stocks and other questions on investment and the economy from the members of his Inner Circle. 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. Our Inner Circle members ask Pat many questions about familiar stocks that are well known to investors, but he also gets a lot of requests to give his opinion on specific penny stocks in the resource sector. This week, in reply to a question on DNI Metals, Pat looks at the numerous risks this stock faces as it pioneers a technology that has had only limited success so far....

TIM HORTONS INC. $54 (Toronto symbol THI; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 153.4 million; Market cap: $8.3 billion; Price-to-sales ratio: 2.6; Dividend yield: 1.9%; TSINetwork Rating: Average; www.timhortons.com) is the largest fast-food company in Canada, with 3,453 outlets that mainly serve coffee and donuts....

DOMINO’S PIZZA (New York symbol DPZ; www.dominos.com) is the world’s largest chain of pizza stores that offer takeout and delivery. It operates 10,040 outlets in the U.S. and over 70 other countries. Franchisees run most of these stores. Excluding one-time items, the company’s earnings per share rose 25.5% in the quarter ended March 24, 2013, to $0.59 from $0.47 a year earlier. Sales rose 8.6%, to $417.6 million from $384.6 million. Same-store sales rose 6.5% internationally and 6.2% in the U.S....

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 specific investment advice. Each Investor Toolkit update gives you a fundamental piece of strategy, such as stock trading advice, and shows you how you can put it into practice right away....

Investors are often surprised when I tell them I see nothing inherently wrong with the basic concept of a hedge fund. In essence, hedge-fund managers are supposed to buy stocks they like, while simultaneously selling short in stocks they feel are unattractive. This aims to put their fund in a “market-neutral” position. By buying good stocks and shorting bad ones, you have hedged your stock market exposure. Theoretically, this means you make money regardless of which way the market moves. If the market goes up, all or most of the stocks you own or have shorted are likely to gain as well. However, if you have chosen your buys and short sales wisely, and diversified, the stocks you own are likely to gain more value in total than the stocks you’ve sold short. You are unlikely to make as much profit in a rising market as a so-called “long-only” investor (one who only bought stocks but didn’t do any shorting). But you are still likely to make money. If the market goes down, all or most of the stocks you own are likely to go down. But the stocks you’ve sold short are likely to fall more than your buys. That’s because bad stocks—those with high risk and/or little investment appeal—are particularly vulnerable to a big decline when the market as a whole is falling....