royal bank

TD CANADIAN EQUITY FUND $21.81 (CWA Rating: Conservative) (TD Asset Management, P.O. Box 7500, Station A, Toronto, Ontario. M5W 1P9. 1-866-222-3456; Web site: www.tdcanadatrust.ca. No load — deal directly with the bank) uses a “bottom-up” approach to pick stocks. The fund’s managers look at fundamentals, like earnings, cash flow and debt level, to identify what they see as undervalued companies. TD Canadian Equity Fund’s 10 largest holdings are Royal Bank, TD Bank, Manulife Financial, Bank of Nova Scotia, Canadian Natural Resources, Sun Life Financial, Suncor Energy, Ivanhoe Mines, EnCana Corp. and Research in Motion. The $2.5-billion fund holds 49.0% of its portfolio in resource stocks. It also has a bias toward financial services stocks, at 32.1%....

These five large mutual funds — one from each of Canada’s big-five banks — suffered last year and early this year. That’s because they were heavily weighted toward financial services and resource stocks. However, many shares in those sectors have moved up since March. We think they have room to go higher. We still feel that the best way to profit in the stock market is to stick with high-quality, well-established companies and to spread your money out among the five sectors. You should also ensure that your investments are diversified within each sector. These five funds continue to stick with high-quality investments. However, you still should adjust your portfolio to reflect the funds’ high weightings in certain sectors....

These five large mutual funds — one from each of Canada’s big-five banks — suffered last year and early this year. That’s because they were heavily weighted toward financial services and resource stocks. However, many shares in those sectors have moved up since March. We think they have room to go higher. We still feel that the best way to profit in the stock market is to stick with high-quality, well-established companies and to spread your money out among the five sectors. You should also ensure that your investments are diversified within each sector. These five funds continue to stick with high-quality investments. However, you still should adjust your portfolio to reflect the funds’ high weightings in certain sectors....

CANADIAN IMPERIAL BANK OF COMMERCE, $64.11, Toronto symbol CM, set aside roughly $3 billion in August 2005 to settle a class-action lawsuit related to its involvement with failed energy company Enron Corp. In its 2008 fourth quarter, which ended October 31, 2008, the bank recorded a $486-million tax benefit related to this settlement. The Canadian Revenue Agency is now challenging this deduction, and may take CIBC to court. If CIBC wins, it will recognize a further tax gain of $214 million. If it loses, it will have to pay $826 million. To put these figures in context, CIBC earned $434 million, of $1.02 a share, in the three months ended July 31, 2009. That’s a big improvement over the $71 million, or $0.11 a share, it earned a year earlier. However, if you exclude several unusual items, such as writedowns of securities, earnings per share fell 21.9%, to $1.29 from $1.65. On that basis, analysts were expecting $1.41 a share....

Claymore 1-5 Yr Laddered Corporate Bond ETF (exchange-traded fund), $20.78, symbol CBO on Toronto (Shares outstanding: 8.8 million; Market cap: $182.9 million), invests in a portfolio of short-term bonds drawn from the DEX (formerly Scotia Capital) Bond Index. The ETF is a recent new issue that first sold units to the public at $20 each, and began trading on Toronto on February 25, 2009. It has a 0.25% annual management fee and pays a $0.0715 quarterly distribution, which yields 1.4% on a yearly basis. The fund’s 25 holdings are divided into five staggered, or “laddered,” equally weighted maturities that range from one to five years. Each maturity includes five or more bonds with a minimum credit rating of “A”. Each year, the longest-term bonds will reach maturity, and the shorter-term bonds will be a year older. The fund can use proceeds of the matured bonds to buy new bonds that restore the desired portfolio balance....

Many companies have cut their spending on information technology while they wait for the economy to start growing again. At the same time, consumers are buying less computer equipment as job losses push up the unemployment rate and erode confidence. Still, we feel that high-quality junior tech stocks have a bright long-term outlook. Despite the recession, the best of them remain profitable, and they’ll benefit further from pent-up demand as the economy recovers.

Cyberplex: An “Internet survivor”

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AIC DIVERSIFIED CANADA FUND $34.89 (CWA Rating: Conservative) mainly holds shares of Canadian companies of average or above-average quality. It also holds some U.S. stocks. The $1.0-billion fund’s 10 largest holdings are TD Bank, Shoppers Drug Mart, Power Financial, Canadian Oil Sands Trust, First Capital Realty, Thomson Reuters Corporation, Brookfield Asset Management, Royal Bank of Canada, C.I. Financial Corp. and EnCana Corporation. AIC Diversified Canada holds just 21 stocks. The fund holds 43.9% of its assets in financial-services stocks. The rest of the portfolio breaks down as follows: energy, 15.2%; consumer staples, 10.6%; consumer discretionary, 8.0%; health care, 7.4%; and information technology, 3.6%....

These two AIC funds hold much of their portfolios in finance stocks. This sector has risen lately on better-than-expected profits and an improved outlook for the economy as a whole. We prefer diversified funds. But if you must focus on a particular sector, finance still offers sound long-term prospects. If you invest in these funds, be sure to adjust the rest of your portfolio so it won’t be overly concentrated in the financial sector. AIC AMERICAN ADVANTAGE FUND $4.04 (CWA Rating: Aggressive) (AIC Group of Funds, 1375 Kerns Road, Burlington, Ont., L7R 4X8, 1-800-263-2144; Web site: www.aicfunds.com. Buy or sell through brokers) invests mostly in U.S. stocks. It holds 99% of its assets in the financial-services area....

CYBERPLEX $1.54 (Toronto symbol CX; SI Rating: Speculative) (416-597-8889; www.cyberplex.com; Shares outstanding: 64.8 million; Market cap: $99.7 million) sells a service that matches advertisers with electronic publishers. Cyberplex links advertisers’ campaigns with its 10,000 or so affiliates, which include web-site operators, bloggers and email marketers. Advertisers only pay if Cyberplex’s campaigns prompt users to do something, such as a fill out an online form or register at a web site. At the peak of the dot-com bubble of 2000, Cyberplex’s share price climbed as high as $35, and it had a market cap of almost $1 billion. Most of Cyberplex’s clients are smaller companies, such as Netflix, eHarmony and AcaiBerry Detox. But it also serves a number of larger organizations, including the U.S. army, DirecTV, FTD, Xerox, Sony Canada, IAC, Atlantic Lottery Corporation, Vista Print, Aecon, Ontario Power Generation, Scotia Bank and Royal Bank of Canada....

BMO DIVIDEND FUND $37.58 (BMO Mutual Funds, 77 King Street West, Suite 4200, Royal Trust Tower, Toronto, Ont., M5K 1J5, 1-800-665-7700; Web site: www.bmo.com. No load — deal directly with the bank) (CWA Rating: Conservative) currently holds about 43.3% of its portfolio in the Financial services industry. Its next-largest holding is Energy at 23.1%. The $3.7 billion BMO Dividend Fund’s largest holdings are Bank of Nova Scotia, CIBC, Royal Bank, Canadian National Railway, Manulife Financial, TD Bank, TransCanada Corporation, EnCana Corporation, Enbridge and Goldcorp. The fund’s MER is 1.71%. Over the five years to May 31, 2009, the fund posted a 3.7% annual rate of return. The S&P/TSX index returned 6.9% annually. The index gained from the big run up in resources prices that lasted until early in 2008. The S&P/TSX index holds a high 46% or so of its holdings in Resources stocks....