investment

STANTEC INC. $36.68 (Toronto symbol STN; TSINetwork Rating: Extra Risk) (780-917-7288; www.stantec.com; Shares outstanding: 45.9 million; Market cap: $1.7 billion; Dividend yield: 1.6%) sells a range of consulting, project delivery, design and technology services. Stantec’s clients operate in a variety of industries, including transportation, construction and oil and gas. In the three months ended September 30, 2012, Stantec’s revenue rose 12.4%, to $483.7 million from $430.4 million a year earlier. Acquisitions were one reason for the gains. Stantec is also working on several new projects. Earnings rose 17.9%, to $34.1 million, or $0.74 a share, from $28.9 million, or $0.63. Stantec continues to grow by acquisition. In 2011, it bought five companies. Its purchases this year include engineering-consulting firm Cimarron Engineering, which develops, designs, installs and maintains oil and gas pipeline systems and station facilities. Demand for these services is growing quickly....

In this space last week, I said the Dow Jones Industrial Average could fall another 1,000 points, beyond the 300 points it had already dropped in response to President Obama’s re-election. The next day, it dropped 120 points more. Since then it has flattened out. Note that this wasn’t a prediction. I was setting a limit on how far I felt the market could drop. However, although the market has gone sideways for the past three days, the “fiscal cliff” deadline is the end of the year. (This newly coined term refers to the higher taxes and federal spending cuts that are set to go into force automatically, if the U.S. fails to take action on its federal spending deficit and debt.) The two U.S. political parties have until then to bluster and posture and generally demonstrate to their supporters (particularly their donors) how they are defending their interests. This could make for some scary moments for short-term traders who pay close attention to every 100-point lunge in the Dow. I think now would be a bad time to sell. Investors on the whole are already highly pessimistic, because they don’t like the Obama approach to taxes and business, they are worried about Europe’s debt problems, they think slow economic growth will stifle corporate profits, and so on. However, these problems are old news; investors have had plenty of time to adjust to them. More important, stock prices are attractive right now on an historical basis—that is, in relation to earnings. They are even cheaper in light of today’s low interest rates. Note that with Obama re-elected, interest rates are likely to stay low at least until 2015....

CAE INC. (Toronto symbol CAE; www.cae.com) is the world’s leading maker of flight simulators for commercial airlines, with 70% of the market. It also makes simulators for military clients. The company began training pilots for its customers in 2001; it now has over 100 flight schools in 30 countries. CAE gets 50% of its revenue from military clients. That cuts its exposure to cyclical commercial airlines, which supply 45% of its revenue....

Even when stock markets are in an upward trend, they are still subject to sharp setbacks, such as the one triggered by the re-election of Barack Obama as president last week. Many investors seek to protect their profits against such reverses though the use of stop-loss orders. Before you try this approach, you should keep in mind that stop-loss orders have a number of risks that can cost you money. Here’s a look at this investing strategy, and some of the dangers you may be exposed to with stop-loss orders....

AT&T INC., $33.54, New York symbol T, plans to spend $14 billion over the next three years on upgrades to its wireless and wireline networks. That’s equal to 7% of its $190.5-billion market cap. These upgrades will expand the company’s high-speed fibre optic service to 75% of its home and business customers by the end of 2015. Replacing copper wire with fibre optic cable will also make AT&T’s high-speed Internet service faster and more reliable, and help it sign up more customers for its U-verse digital TV service. In addition, the company now says it will expand its 4G long-term evolution (LTE) wireless service to cover 300 million people in the U.S. by the end of 2014. That’s up from its current plan to reach 250 million by that time. LTE networks are up to five times faster than those in use today....

WESTJET AIRLINES LTD., $18.17, symbol WJA on Toronto, reports that its revenue rose 11.8% in the three months ended September 30, 2012, to $866.5 million from $775.3 million a year earlier. Demand for the company’s flights remains high, and it has entered into new partnerships with other airlines; these were the main reasons for the increase. WestJet’s load factor rose to a record 84.6%. Load factor is the percentage of available seats that are occupied by paying passengers. More important, the rise came despite the fact that the company increased its capacity by 2% to meet higher demand....

Pat McKeough responds to many personal questions about specific stocks and other investment topics 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 the Inner Circle. This week, one question from an Inner Circle member concerned a fund that holds gold stocks. The fund’s high distributions give it a substantial dividend yield. Pat examines whether it can sustain its yield and also looks at its policy of using call options to boost returns....

RIOCAN REAL ESTATE INVESTMENT TRUST $27 (Toronto symbol REI.UN; Aggressive Growth Portfolio, Manufacturing & Industry sector; Units outstanding: 298.6 million; Market cap: $8.1 billion; Price-to-sales ratio: 5.0; Dividend yield: 5.1%; TSINetwork Rating: Average; www.riocan.com) has completed its deal to buy full control of 21 shopping malls in the U.S. from Cedar Shopping Centers, Inc. (New York symbol CDR).Previously, RioCan had an 80% stake in these malls through a joint venture with Cedar. It now owns 49 malls in the U.S., and 289 in Canada. RioCan paid $39.0 million U.S. for these properties. To put that price in context, it earned $125 million (Canadian) in the three months ended September 30, 2012. That’s down 25.6% from $168 million a year earlier. Earnings per unit fell 33.3%, to $0.42 from $0.63, on more units outstanding. However, the best way to assess a real estate investment trust’s operating performance is to look at its cash flow. That’s because it excludes nonrecurring items, like gains on the sale of real estate. RioCan’s cash flow rose 18.6% in the quarter, to a record $115 million from $97 million. Cash flow per unit rose 8.1%, to $0.40 from $0.37....

Faircourt Gold Income Corp., $8.33, symbol FGX on Toronto (Shares outstanding: 4.5 million; Market cap: $37.5 million; www.faircourtassetmgt.com), mainly invests in large- and mid-sized gold producers that are part of the S&P/TSX Global Gold Index. The company holds mostly high-quality stocks, including Barrick Gold, Detour Gold, Franco-Nevada Corp., Freeport-McMoran Copper & Gold, Goldcorp, Kinross Gold, Newmont Mining, Yamana Gold and New Gold. Faircourt pays a high 7.2% dividend yield. To meet its high distributions, the company may use capital gains on its investments to increase its cash flow—a strategy that works when markets are rising but not when they are falling....

YIELDPlus Income Fund, $7.43, symbol YP.UN on Toronto (Units outstanding: 22.4 million; Market cap: $166.4 million; www.middlefield.com), is a closed-end fund that holds a portfolio made up of stocks (71% of assets) and real estate investment trusts (29%). The top fund’s 10 holdings are: Progress Energy, Peyto Exploration & Development Corp., Labrador Iron Ore Royalty Corp., Mullen Group, Northland Power, Killam Properties, Pembina Pipeline Corp., Chartwell Seniors Housing REIT, Westshore Terminals and Canadian REIT. The fund holds 45% of its assets in the Resources sector. It trades at a 3.0% discount to its net asset value....