investment

Please note: The next Stock Pickers Digest newsletter issue will be sent out on Friday, May 24, 2013. WESTJET AIRLINES LTD., $21.85, symbol WJA on Toronto, fell almost 13% this week, even though it reported record earnings in the latest quarter. WestJet reports that its earnings jumped 33.3% in the three months ended March 31, 2013, to $91.1 million from $68.3 million a year earlier. That marks the company’s 32nd consecutive quarter of profitability. Earnings per share rose 38.8%, to $0.68 from $0.49, on fewer shares outstanding. Revenue rose 8.6%, to $967.2 million from $891.0 million a year earlier....

CANADIAN TIRE CORP., $83.78, Toronto symbol CTC.A, jumped 13% this week after the company announced a plan to spin off most of its real estate holdings into a new, publicly traded real estate investment trust (REIT). Under the company’s plan, which is similar to a move by grocery retailer Loblaw Companies Ltd. (Toronto symbol L), Canadian Tire will transfer 250 of its stores, a distribution centre and other properties to the new REIT. In all, these assets total 18 million square feet and are worth $3.5 billion; that’s 72% of Canadian Tire’s 25 million square feet of real estate. After this transaction closes in the fall of 2013, Canadian Tire will sell units of the REIT to the public. It will hang on to an 80% to 90% interest. Meanwhile, the company earned $73.0 million in the three months ended March 31, 2013. That’s up 2.8% from $71.0 million a year earlier. Earnings per share rose 3.4%, to $0.90 from $0.87, on fewer shares outstanding. That matched the consensus estimate....

Pat McKeough responds to many requests for specific advice on stock market investing 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. This week, an Inner Circle member asked about the prospects for one of Canada’s leading natural gas processors and distributors. AltaGas profits from a number of fixed long-term contracts, but it is also growing by acquisition and diversifying into new sources of energy. Pat looks at the company’s ability to manage this added risk going forward....

POTASH CORP. OF SASKATCHEWAN $44 (Toronto symbol POT; Aggressive Growth Portfolio, Resources sector; Shares outstanding: 865.1 million; Market cap: $38.1 billion; Price-to-sales ratio: 4.7; Dividend yield: 2.6%; TSINetwork Rating: Average; www.potashcorp.com) no longer aims to buy control of Israel Chemicals, which produces potash from minerals it extracts from the Dead Sea....

TRANSCANADA CORP. $49 (Toronto symbol TRP; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 707.0 million; Market cap: $34.6 billion; Price-to-sales ratio: 4.2; Dividend yield: 3.8%; TSINetwork Rating: Above Average; www.transcanada.com) plans to build a new 200- kilometre crude oil pipeline that will connect Edmonton to the storage hub at Hardisty, Alberta....

MCCOY CORP. (Toronto symbol MCB; www.mccoyglobal.com) operates through two divisions: Mobile Solutions and Energy Products and Services....

A couple of decades ago, I began advising Canadian investors to put 20% or so of their investment funds into U.S. stocks. I wanted investors to be able to invest in the great U.S. multinationals. These companies were likely to profit from the downfall of communism and the swing toward free enterprise that was getting underway back then. I also wanted investors to be able to profit from the incredible advances that were taking place in communications and computer technology. Since then, the U.S./Canada foreign exchange differential has at times worked in our favour. Other times, it has worked against us. In years of rising commodity prices, our Canadian stocks beat our U.S. stocks. When commodities were weak, U.S. stocks often did better. Recently, commodities have been weak and the U.S. market has been strong. The Standard & Poor’s 500 index has risen 13.1% so far this year, and 26.5% since the start of 2012. The Standard & Poor’s TSX index has dropped 0.9% so far this year, and has gained just 1.9% since the start of 2012....

Growth by acquisition can be risky, as newly purchased companies may develop unforeseen problems, especially in an unsettled economy. However, Veresen aims to cut that risk by adding plants with long-term contracts already in place.

VERESEN (Toronto symbol VSN; www.vereseninc.com) owns pipelines, power plants and gas processing facilities across North America. A major holding is 50% of the Alliance gas line, which runs 3,000 kilometres between Chicago and Fort St. John, B.C. Enbridge (Toronto symbol ENB) owns the other 50%....

BROADRIDGE FINANCIAL SOLUTIONS $26.81 (New York symbol BR; TSINetwork Rating: Extra Risk) (201-714-3000; www.broadridge.com; Shares outstanding: 121.9 million; Market cap: $3.3 billion; Dividend yield: 2.7%) serves the investment industry in three main areas: investor communications, securities processing and transaction clearing. The company processes 85% of all proxy votes in the U.S.

In its fiscal 2013 third quarter, which ended March 31, 2013, Broadridge’s earnings per share, excluding one-time items, climbed 21.9%, to $0.39 from $0.32.

Revenue rose 5.4%, to $576.7 million from $547.0 million. Broadridge continues to do a good job of attracting new clients. It also held on to 99% of its existing customers.
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TIM HORTONS $57.34 (Toronto symbol THI; TSINetwork Rating: Average) (905-845-6511; www.timhortons.com; Shares outstanding: 153.4 million; Market cap: $8.9 billion; Dividend yield: 1.8%) has renovated and redesigned its stores over the last couple of years to make them more appealing to customers and boost traffic.

However, the company is now under pressure to do more from Highfields Capital, a U.S.-based activist investment firm that owns 1.5% of Tim Hortons’ shares.

Highfields has proposed several ways to unlock shareholder value, including slowing Tim Hortons’ expansion in the intensely competitive U.S. market; borrowing money to buy back roughly 40% of its stock; selling or spinning off its distribution operations; and transferring its real estate holdings to a new real estate investment trust.
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