merger

NEW GOLD $4.20 (Toronto symbol NGD; SI Rating: Speculative) (888-315-9715; www.newgold.com; Shares outstanding: 212.1 million; Market cap: $891.0 million) is the result of the merger completed on June 30, 2008 of three companies: Peak Gold, symbol PIK on Toronto, Metallica Resources, symbol MR on Toronto, and New Gold, symbol NGD on Toronto. New Gold operates three mines: the Peak gold/ copper mine in Australia, the Cerro San Pedro gold/ silver mine in Mexico and the Amapari gold mine in Brazil. New Gold expects to produce 297,000 ounces of gold in 2008 and 350,000 ounces in 2009. The company also has $319 million in cash to expand production at the Amapari mine, to develop the El Morro gold/copper mine in Chile and to develop the gold/ silver/copper Afton mine in British Columbia....

Gold hit a high of $850 an ounce in 1980, then worked its way downward for 25 years. It began rising again in 2002, and rose to a record high of $1,011 in March 2008. Gold moved down after that March high, to a recent low of $750. That, in turn, pushed gold mining stocks down. However, gold recently jumped $66 in one day, to $851, due to turmoil in financial market, This had a positive impact on gold mining stocks. We’re not convinced that gold prices will move significantly higher, or even hold their recent gains. However, some of the conditions that typically accompany higher gold prices are present. U.S. economic growth has slowed and stock markets have dropped. That’s keeping interest rates down. Those lower rates, plus still-high energy prices, could push inflation up....

Some investors worry that Washington’s $700 billion bailout of the banking industry is going to fall apart, and that this will lead to a rise in gold and a drop in the stock market. We think the bailout will go through. The only obstacle to it is the political bickering and posturing that is bound to go into a highly visible effort like this, all the more so just prior to a presidential election. There is always a possibility that the market will move lower from here. Meanwhile, gold will stay volatile. But we still feel stock prices will hit bottom over the next month or two, then move up for six months or more. WASHINGTON MUTUAL INC. $0.16, New York symbol WM, fell over 90% on Friday before the New York exchange halted trading. That’s because banking regulators have seized control of the company. Regulators subsequently sold the assets of Washington Mutual’s main banking subsidiary to J.P. MORGAN CHASE & CO. $48.24, New York symbol JPM. The purchase included branches, deposits and the loan portfolio....

Today’s rebound in the market is reassuring, but I expect stocks to remain highly volatile for a month or more. After that, we could see a six-month rebound in prices. The U.S. bailout of major financial institutions raises inflation risk over the next few years, but it heads off panic. Nobody can predict market bottoms, but I suspect we are much closer to the bottom than the top. NORTEL NETWORKS CORP. $3.25, Toronto symbol NT, fell 50% this week after the company cut its revenue and earnings outlook for 2008. Due to slowing demand for telecommunications equipment, unfavourable foreign exchange rates and delays delivering certain products, Nortel now expects revenue for 2008 will be 2% to 4% lower than in 2007. It had earlier predicted that revenue would rise this year. Due to the lower revenues, Nortel will probably lose $0.39 U.S. a share in 2008. That estimate excludes the costs of a new restructuring plan. Nortel earned $0.37 U.S. a share before unusual items in 2007....

NEW GOLD $7.95 (Toronto symbol NGD; SI Rating: Speculative) (888-315-9715; www.newgold.com; Shares outstanding: 211.9 million; Market cap: $1.7 billion) is the new name for Peak Gold, formerly symbol PIK on Toronto. New Gold is the result of the merger of three companies: Peak Gold, Metallica Resources, symbol MR on Toronto, and New Gold, symbol NGD on Toronto. Under the terms of the merger, Peak Gold shareholders received 0.1 of a New Gold share and $0.0001 in cash for each Peak share held. New Gold expects to produce 297,000 ounces of gold in 2008 and 350,000 ounces in 2009. The company also has $500 million in cash to expand production at Peak’s Amapari mine in Brazil, to develop Metallica’s El Moro mine in Chile and to develop New Gold’s Afton mine in British Columbia....

THOMSON REUTERS CORP. $31 (Toronto symbol TRI; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 816.6 million;Market cap: $25.3 billion; SI Rating: Above average) provides information products to over 30 million professionals in five areas: Legal (45% of 2007 revenues), Financial (30%), Tax & Accounting (9%), Scientific (9%) and Healthcare (6%). The company took its present form on April 17, 2008. That’s when The Thomson Corp. (old symbol TOC) merged with UK-based information provider Reuters Group plc. Thomson shareholders received one share of Thomson Reuters for each Thomson Corp. share they held....

PRECISION DRILLING TRUST $25 (Toronto symbol PD.UN; Aggressive Growth Portfolio, Resources sector; Units outstanding: 125.8 million;Market cap: $3.1 billion; SI Rating: Extra risk) is Canada’s largest contract driller. It pays monthly distributions of $0.13 a unit, for a yield of 6.2%. Precision recently offered to buy American Exchange-listed Grey Wolf Inc., which operates drilling rigs in the U.S. Gulf Coast region. Expanding outside of Canada gives Precision steadier revenue streams, as many of its Canadian customers suspend drilling during the winter. Grey Wolf has rejected the offer, and instead plans to merge with rival Basic Energy Services, Inc. However, if Grey Wolf’s shareholders reject the merger with Basic, Precision may take its offer...

MOLSON COORS CANADA INC. (Toronto symbols TPX.A $56 and TPX.B $54; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 181.5 million; Market cap: $10.0 billion; SI Rating: Average) is the world’s fifth-largest brewer by volume....

THOMSON REUTERS CORP. $31 (Toronto symbol TRI; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 816.6 million;Market cap: $25.3 billion; SI Rating: Above average) provides information products to over 30 million professionals in five areas: Legal (45% of 2007 revenues), Financial (30%), Tax & Accounting (9%), Scientific (9%) and Healthcare (6%). The company took its present form on April 17, 2008. That’s when The Thomson Corp. (old symbol TOC) merged with UK-based information provider Reuters Group plc. Thomson shareholders received one share of Thomson Reuters for each Thomson Corp. share they held....

These three resource income trusts are more volatile than telecom stocks. But we feel their high yields and steady cash flows help offset their risk. As always, you should limit income trusts to no more than 15% of your total portfolio. PENGROWTH ENERGY TRUST $18 (Toronto symbol PGF.UN; Aggressive Growth Portfolio, Resources sector; Units outstanding: 247.9 million;Market cap: $4.5 billion; SI Rating: Average) owns oil and natural gas properties in Alberta and B.C. Pengrowth prefers to focus on mature, proven properties that provide it with steady cash flows. At...