option

Cluff Gold plc, $1.15, symbol CFG on Toronto (Shares outstanding: 131.8 million; Market cap: $185.6 million; www.cluffgold.com), is a U.K.-based gold-mining company that operates in West Africa. Its shares are also listed on the London Stock Exchange. In Burkina Faso, Cluff operates the Kalsaka mine, which produces about 70,000 ounces of gold a year. The company is now focusing on increasing production at its wholly owned Baomahun project in Sierra Leone. This deposit could hold as much as three million ounces of gold....

EUROPEAN GOLDFIELDS, $9.65, symbol EGU on Toronto, has attracted a number of investments from Qatar Holdings LLC, a division of Qatar’s sovereign wealth fund, to develop its mines. Qatar Holdings has given European Goldfields a seven-year, $600 million U.S. loan. In addition, Qatar Holdings is buying a 9.9% stake in European Goldfields from Greek building firm Aktor Construction, and has an option to buy another 5.3%. European Goldfields will also issue 40.4 million warrants to Qatar Holdings at an exercise price of $9.08 a share. If Qatar Holdings exercises the warrants, it could increase its stake in European Goldfields to about 29%. It would also give European Goldfields an additional $366.8 million in development funding....

Stock option investing includes selling options; covered call writing is where you sell a call option against a stock you currently own.

GENUINE PARTS CO., $50.80, New York symbol GPC, distributes auto parts to over 5,700 independent stores in North America. The company also operates about 1,000 auto parts stores under the NAPA banner. Auto parts account for roughly 50% of its sales. It gets the other 50% by distributing industrial parts, office furniture and electrical equipment.

This week, the company agreed to buy 30% of privately held Exego Group, which distributes auto parts through 430 company-owned stores in Australia and New Zealand. The deal closes on December 1, 2011.

Genuine will pay $150 million for this stake. That’s a little less than the $151.8 million, or $0.96 a share, that Genuine earned in the three months ended June 30, 2011. Genuine Parts has an option to buy the remaining 70% of Exego, provided Exego reaches certain earnings targets.

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CANADIAN PACIFIC RAILWAY LTD. $55 (Toronto symbol CP; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 169.4 million; Market cap: $9.3 billion; Price-to-sales ratio: 1.9; Dividend yield: 2.2%; TSINetwork Rating: Above Average; www.cpr.ca) transports freight between Montreal and Vancouver. It also connects with hubs in the U.S. Midwest and Northeast. CP gets 25% of its revenue from the U.S. In 2010, CP got 28% of its revenue by hauling shipping containers that contain a variety of goods. Another 23% of its revenue came from hauling grain, followed by consumer and industrial products (19%), coal (10%), fertilizers (10%), automotive products (6%) and forest products (4%). CP’s revenue rose 16.7%, from $4.6 billion in 2006 to $5.3 billion in 2008, as increasing trade with Asia pushed up freight volumes. CP’s 2008 purchase of Dakota, Minnesota & Eastern Railroad Corp. (DM&E) for $1.5 billion also added to its revenue. DM&E operates a 4,000-kilometre rail network in eight midwestern states....

CP’s earnings have suffered lately, mainly due to bad weather. Avalanches during the winter disrupted its operations in western Canada, and spring floods washed out some of its lines in the Canadian Prairies and the U.S. Midwest. However, these are short-term setbacks. As well, the company is now working on a number of improvements that should make it more efficient, and push up its profits. CP’s upgrades mainly include improving its tracks and expanding its loading facilities so they can handle longer trains. That will extend the lives of CP’s locomotives, because they will have to make fewer stops and starts. These improvements will also help the company profit as shipping volumes rise....

One of the key issues we examine in this new stock market investing report is how to decide whether you should invest through a full service stock broker

INTERNATIONAL BUSINESS MACHINES CORP., $185.18, New York symbol IBM, reported higher-than-expected earnings for the latest quarter. In the three months ended June 30, 2011, the company earned $3.7 billion. That’s up 8.2% from $3.4 billion a year earlier. IBM spent $4.0 billion on share buybacks in the latest quarter. Due to fewer shares outstanding, earnings per share rose 14.9%, to $3.00 from $2.61. If you exclude unusual items, mainly costs to integrate acquisitions, IBM’s earnings per share would have risen 17.9%, to $3.09 from $2.62. On this basis, the latest earnings beat the consensus estimate of $3.03 a share....

Pathfinder Convertible Debenture Fund, $12.35, symbol PCD.UN on Toronto (Units outstanding: 10.0 million; Market cap: $124.0 million; www.middlefield.com/path.htm), is a closed-end fund that holds 73.5% of its portfolio in convertible debentures issued by publicly traded Canadian companies. The rest of the fund consists of common stocks, real estate investment trusts and cash. Convertible debentures are often promoted as offering more income than common stocks, and more growth potential than bonds. But it’s equally true that they offer less income than bonds, and less growth than stocks. We rarely recommend convertible or exchangeable debentures, because most expose investors to too much risk and too little profit potential. In effect, most convertible debentures are just low-quality, fixed-return investments....

CGI GROUP INC., $22.99, Toronto symbol GIB.A, has gained 27.1% since we named it our “#1 Stock of the Year” for 2011. CGI is Canada’s largest provider of computer-outsourcing services. The company’s services can automate certain routine functions, such as accounting and buying supplies. That makes its clients more efficient, and lets them focus on their main businesses. The company’s strong reputation continues to help it win new contracts. As well, CGI is benefiting as governments and businesses look for ways to cut their computing costs....