investment

BROADRIDGE FINANCIAL SERVICES INC. $24 (New York symbol BR; Aggressive Growth Portfolio, Finance sector; Shares outstanding: 124.9 million; Market cap: $3.0 billion; Price-to-sales ratio: 1.3; Dividend yield: 3.0%; TSINetwork Rating: Average; www.broadridge.com) gets 70% of its revenue from its Investor Communication Solutions division, which distributes proxy materials, including ballots, to investors in stocks and mutual funds. It also counts the votes. Broadridge’s ProxyEdge software helps centralize and simplify shareholder voting, particularly if a meeting involves multiple ballots. Broadridge mails and processes 60% of all proxy votes worldwide. The remaining 30% of its revenue comes from its Securities Processing Solutions division, which provides transaction-processing services that automate many functions, including taking and executing orders, confirming trades, settlement and accounting. Big changes since spinoff ...

NEWELL RUBBERMAID INC. $18 (www.newellrubbermaid.com) saw its sales fall 1.9% in the second quarter of 2012, to $1.52 billion from $1.55 billion a year earlier. If you exclude unusual items, such as the negative impact of currency exchange rates, sales would have risen 2.3%. The gain was mainly due to strong demand for baby strollers and construction tools. Earnings per share rose 4.4%, to $0.47 from $0.45. Best Buy. BUCKEYE PARTNERS L.P. $50 (www.buckeye.com) earned $54.4 million, or $0.55 a unit, in the three months ended June 30, 2012. That’s down 40.9% from $92.0 million, or $1.00 a unit, a year earlier. However, the year-earlier figure included a $34.1-million gain on the sale of its investment in a Texas-based pipeline company. Revenue fell 8.8%, to $982.6 million from $1.1 billion, mainly because of lower prices for fuels its sells, like gasoline. Hold. FRONTIER COMMUNICATIONS CORP. $4.62 (www.frontier.com) is selling more high-speed Internet and TV services. However, demand for traditional phone service continues to decline. That’s why its overall revenue fell 4.8% in the second quarter of 2012, to $1.26 billion from $1.32 billion a year earlier. However, earnings per share improved 33.3%, to $0.08 from $0.06. Job cuts and other cost-saving moves were the main reason for the earnings jump. Hold.

I read Seth Godin’s books and blog for his keen understanding of online business and marketing, and of the way business and society are evolving because of the Internet. In his August 17 email, Seth talked about an individual who died in an auto collision. Her survivors had a claim against her insurance company, but the company refused to pay. As Seth puts it, “Instead, the company paid to send a lawyer to co-ordinate a defense with the other driver—in other words, they paid their lawyers to go to court to prove that their client was at fault. They went to court against their client even though there was significant evidence to the contrary, and even though the other driver’s insurance company had already paid the family $25,000. The amount at stake: just $75,000.” You can read the whole story in Seth’s blog post: http://sethgodin.typepad.com/seths_blog/2012/08/corporations-are-not-people.html...

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 into the Consumer sector. While the soup company “manufactures” its products, its customers buy them during good and bad economic times. Real estate investment trusts (REITs) like RioCan mostly lease office 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. We’d also place REITs with residential holdings in the Manufacturing sector (actually, the full name we use is Manufacturing & Industry sector). Consumers buy soup every day, but they can go for months or years without buying a new car, much less a new home.

Natural gas prices recently dropped below $2 U.S. per million British thermal units (BTUs), a 10-year low. Prices have since moved up somewhat, to $2.82. Shale gas discoveries continue to increase supply. At the same time, demand is slowing due to the weak global economy. Even so, the long-term outlook for gas is positive—and one reason is the prospect of rising liquefied natural gas (LNG) exports to countries like Japan, China and South Korea, where gas sells at a big premium to North American prices....

Pat McKeough responds to many personal questions on 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 Inner Circle member asked Pat how he thinks one growing U.S. consumer chain measures up as a stock market investment. Tapping into the increasing demand for a healthier diet, this stock has already made its presence felt in Canada and aims to continue its ambitious expansion program....

BROADRIDGE FINANCIAL SERVICES INC. $24 (New York symbol BR; Aggressive Growth Portfolio, Finance sector; Shares outstanding: 124.9 million; Market cap: $3.0 billion; Price-to-sales ratio: 1.3; Dividend yield: 3.0%; TSINetwork Rating: Average; www.broadridge.com) gets 70% of its revenue from its Investor Communication Solutions division, which distributes proxy materials, including ballots, to investors in stocks and mutual funds. It also counts the votes. Broadridge’s ProxyEdge software helps centralize and simplify shareholder voting, particularly if a meeting involves multiple ballots. Broadridge mails and processes 60% of all proxy votes worldwide.

The remaining 30% of its revenue comes from its Securities Processing Solutions division, which provides transaction-processing services that automate many functions, including taking and executing orders, confirming trades, settlement and accounting.

Big changes since spinoff

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AGRIUM INC., $98.86, Toronto symbol AGU, rose 2% this week on news that activist investment firm Jana Partners LLC now owns roughly 4% of Agrium’s stock. This is the same company that pressured McGraw-Hill (New York symbol MHP) to split itself into two new firms: one that will produce financial-information products and one that will publish textbooks for colleges and schools. McGraw-Hill is a recommendation of Wall Street Stock Forecaster, our newsletter that focuses on U.S. stocks. Jana now wants Agrium to spin off its retail division as a separate company. These stores sell seed, fertilizer and other products to farmers. They also supply two-thirds of Agrium’s revenue and half of its earnings....

ALARMFORCE INDUSTRIES $11.22 (Toronto symbol AF; TSINetwork Rating: Speculative) (1-800-267-2001; www.alarmforce.com; Shares outstanding: 12.2 million; Market cap: $136.9 million; Dividend yield: 0.9%) has jumped 26% since the start of August after it announced that it is launching a strategic review of its business, including a possible sale of the company. AlarmForce is increasing its advertising as it expands into the U.S. It’s also investing more in its VideoRelay system, which it launched in October 2011. VideoRelay lets subscribers watch their homes through their computers and smartphones. Users can either view live video or receive alerts when the system detects motion. It also lets them establish two-way voice communication through the camera....

DOREL INDUSTRIES $29.65 (Toronto symbol DII.B; TSINetwork Rating: Extra Risk) (514-731-0000; www.dorel.com; Shares outstanding: 31.9 million; Market cap: $945.8 million; Dividend yield: 4.0%) has just doubled its quarterly dividend, to $0.30 from $0.15. The shares now yield a high 4.0%. The increase follows the company’s strong 2012 second-quarter results. In the three months ended June 30, 2012, Dorel’s sales rose 2.4%, to $633.7 million from $619.0 million a year earlier (all figures except share price in U.S. dollars). Revenue increased at all three of the company’s divisions. Earnings per share rose 35.7%, to $0.95 from $0.70 a year earlier. The gain resulted from the higher revenue and increased sales of more profitable products. The company holds cash of $45.1 million, or $1.44 a share. Its long-term debt of $316.8 million is a reasonable 33.5% of its $945.8-million market cap....