maple leaf foods

TRANSCANADA CORP. $38.06, Toronto symbol TRP, has teamed up with U.S.-based Williams Companies Ltd. to evaluate the Sunstone project, a proposed pipeline that would transport natural gas from the Rockies to the western United States. Sunstone could begin operations in 2011. Both companies already operate pipelines in the region, which cuts the risk of this project. TransCanada is a buy. TRANSALTA CORP. $30.36, Toronto symbol TA, fell 10% this week after activist shareholder Luminus Management withdrew its slate of director nominees....

NORTEL NETWORKS CORP. $8.48, Toronto symbol NT, fell over 20% this week after it reported growing losses and a new restructuring plan. In 2007, Nortel lost $957 million or $1.98 a share (all amounts except share price in U.S. dollars). That figure included a $1.1 billion (pre-tax) non-cash writedown of a deferred tax asset. Excluding all one-time items, Nortel earned an estimated $0.23 a share in 2007. The company earned $28 million or $0.06 a share in 2006. Revenue fell 4.4%, to $10.9 billion from $11.4 billion, as it shifts from traditional telephone networking equipment to higher-margin wireless products and other technologies. The new restructuring plan will cut Nortel’s workforce by 6%, and shift more operations overseas. It will cost roughly $525 million, but should cut annual expenses by $300 million....

TRANSCONTINENTAL INC. $15 (Toronto symbol TCL.A; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 83.7 million; Market cap: $1.3 billion; SI Rating: Average) has paid an undisclosed sum for L’Autre Voix, a community newspaper that serves 13,500 households in the Côte-de-Beaupré region of Quebec. It has also acquired the Italian-language weekly newspaper Corriere Italiano, which serves the Italian community in the Montreal area. Transcontinental now operates 172 community newspapers across Canada. The stock has moved down lately, as the high Canadian dollar hurts profits from its operations in the United States and Mexico. As well, slowing consumer spending and Internet competition could also hurt advertising revenue. However, small newspapers such as these are less vulnerable to competition from the Internet than larger newspapers. Transcontinental is a buy....

Today many people seem sure that the subprime situation and associated problems will bring on a long-term market decline that could carry stock prices much lower. When conclusions like these become widespread, the conclusion or the timing or both are often wrong. Think back to how many people agreed with former Federal Reserve Board Chairman Alan Greenspan’s famous (or notorious) ‘irrational exuberance’ speech, in December, 1996. Yet nearly four years passed before the market hit its ultimate peak. In between the Greenspan speech and 2000 market peak, we went through a market setback in response to an economic crisis that started in Thailand in 1997....

MAPLE LEAF FOODS INC. $14 (Toronto symbol MFI; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 129.1 million; Market cap: $1.8 billion; SI Rating: Average) is Canada’s leading supplier of fresh and frozen meat products. Major brands include Maple Leaf and Schneiders. In July 2007, Maple Leaf sold its animal feed operations as part of a major restructuring plan to focus on its more profitable value-added food businesses. Maple Leaf used the gross proceeds of $525 million to pay down its long-term debt, from $1.2 billion at the end of 2006 to $845.4 million at September 30, 2007. That’s still high at 60% of Maple Leaf’s market cap, but reasonable in light of the company’s well-known brands and improving long-term prospects....

A key part of our approach to investing is spreading your money out among the five economic sectors: Finance; Utilities; Consumer Goods & Services; Resources & Commodities; and Manufacturing & Industry. That way, you avoid overloading yourself with stocks that are about to slump simply because of industry conditions or changes in investor fashion. Generally speaking, stocks in the Resources & Commodities sector and the Manufacturing & Industry sectors are apt to expose you to above-average volatility, while those in the Finance and Utilities sectors involve below-average volatility. Consumer stocks are in the middle. Due to the recent market downturn, investors are now taking a closer look at Consumer stocks. But the Consumer sector is a two-tier market, where some stocks thrive while others stagnate. That’s why it pays to zero in on well-established companies with strong brands that are attractive in relation to current prices, like these three....

MAPLE LEAF FOODS INC. $15 (Toronto symbol MFI; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 128.6 million; Market cap: $1.9 billion; SI Rating: Average) makes fresh and frozen meat products, mainly under the Maple Leaf and Schneiders brands. It also owns 88.0% of Canada Bread Company (see box at right). The company is currently restructuring its operations to focus on value-added products, which generate higher profits than fresh meat. Consequently, it recently closed two pork processing plants and will close a third later this year. In the second quarter of 2007, Maple Leaf’s revenue fell 2.9%, to $1.32 billion from $1.36 billion a year earlier. However, earnings from continuing operations and excluding restructuring costs grew 8.3%, to $0.13 a share (total $52.7 million) from $0.12 a share ($46.8 million)....

CANADA BREAD COMPANY, LTD. $60 (Toronto symbol CBY; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 25.4 million; Market cap: $1.5 billion; SI Rating: Above average) reported a 12.0% increase in sales in the second quarter of 2007, to $375.7 million from $335.5 million a year earlier. If you disregard acquisitions, sales grew 6%. However, earnings per share fell 6.7%, to $0.84 from $0.90, due to a 17% jump in wheat costs. The company’s tax rate also increased to 34.7% in the latest quarter from 26.4%, due to changes at its U.S. bakery operations. Maple Leaf Foods’ high degree of ownership hurts Canada Bread’s liquidity. But Maple Leaf will probably wait until it finishes its restructuring before taking Canada Bread private. Meanwhile, the stock trades at 16.9 times the $3.54 a share it will probably earn in 2007. The $0.24 dividend yields 0.4%....

MAPLE LEAF FOODS INC. $16 (Toronto symbol MFI; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 127.2 million; Market cap: $2.0 billion; SI Rating: Average) is a leading producer of fresh and frozen meat products. It also owns 88% of Canada Bread (see at right). At current prices, Canada Bread accounts for around $10 of each Maple Leaf share. That means the company’s remaining businesses, which provide 75% of its sales, are trading at around $6 a share. Maple Leaf’s core businesses are less profitable than Canada Bread’s. However, its broader range of revenue sources cuts its long-term risk. Maple Leaf’s plan to scale back its fresh meat operations and focus on value-added branded meat products also adds to its appeal....

BANK OF NOVA SCOTIA $53 (Toronto symbol BNS; Conservative Growth Portfolio, Finance sector; Shares outstanding: 993.0 million; Market cap: $52.6 billion; SI Rating: Above average) continues to expand its international operations, which supply a third of its earnings. It recently agreed to acquire a 24.99% stake in Thailand’s eighth-largest bank for $240 million, which is about 24% of the $1.02 billion or $1.01 a share it earned in its most recent fiscal quarter. The bank is also opening new offices in Malaysia and Turkey. Overseas operations like these, particularly with local partners, give Bank of Nova Scotia access to high-potential markets at moderate risk. International operations also cut its exposure to the Canadian economy and its heavy reliance on natural resources. Bank of Nova Scotia is a buy....