royal bank

HOME CAPITAL GROUP INC. $38.39 (Toronto symbol HCG; SI Rating: Extra Risk) (1-800-990-7881; www.homecapital.com; Shares outstanding: 34.5 million; Market cap: $1.3 billion) is a federally regulated trust company offering residential first mortgages to small business owners, the self-employed and others who don’t meet the stricter criteria of larger, traditional lenders. Home Capital reports that revenues rose 31% in the three months ended March 31, 2007, to $81.7 million from $62.4 million. Total assets increased 25.3%, to $4.2 billion from $3.3 billion. Earnings per share rose 47.6% in the latest quarter, to $0.62 from $0.42. The company’s shares now yield 1.0%. Results in the latest quarter included a contribution of $4.7 million from the company’s consumer lending services. These services include Home Trust’s VISA card, which lets cardholders borrow against the equity in their homes....

ROYAL BANK OF CANADA $56 (Toronto symbol RY; Conservative Growth Portfolio, Finance sector; Shares outstanding: 1.3 billion; Market cap: $72.8 billion; SI Rating: Above average) is the largest of Canada’s big five banks, with total assets of $589.1 billion. It provides a wide range of financial services through over 1,300 branches in Canada, and 34 other countries. International operations account for 10% of Royal’s total revenue. Royal sees limited opportunities in Canada, so it has used acquisitions in the U.S. to fuel its growth in the past few years. Its U.S. retail banking operation, RBC Centura, now operates 270 branches in six southeast states. RBC Dain Rauscher is one of the top full-service brokerage firms in the U.S., with over 670,000 clients....

All five of Canada’s biggest banks have been exceeding investor expectations since at least the mid-1990s. Investors always worry too much about the impact on the banks of each new ripple in interest rates and business statistics. Bank profits and loan losses do go through swings, of course. In the late 1990s, banks suffered along with the economic turmoil in Asia. Early in this decade, they suffered due to problems in telecom and other areas. But when the problems end, you’ll find the banks have managed to contain their losses and have begun a new profit expansion. All five banks are still cheap in relation to earnings, and they provide above-average yields. Every Canadian investor should own one of them, if not several....

UNITED CORPORATIONS $68.80 (Toronto symbol: UNC) (165 University Ave., 10th Floor, Toronto, ON M5H 3B8. 416-947-2583. Buy or sell through a broker) invests in a wide variety of average-quality to above-average quality Canadian and foreign stocks. At last report, 31.2% of the fund’s $1.1 billion portfolio was invested in Canadian equities, 26.0% in the U.S., 21.2% in Europe, 8.0% in the UK, 11.7% in Asia and 1.4% in Mexico and Latin America. The fund’s largest holdings included Bank of Nova Scotia, Royal Bank of Canada, Manulife, Talisman Energy, Algoma Central Corporation, Nexen, TransCanada Corporation, General Electric, TD Bank and Chevron....

AIC DIVERSIFIED CANADA FUND $46.42 (CWA Rating: Conservative) mainly holds shares of Canadian companies of average or above-average quality. It also holds stocks of some U.S. firms. The $1.6 billion fund’s 10 largest holdings are Power Financial, Canadian Oil Sands Trust, TD Bank, Shoppers Drug Mart, Johnson & Johnson, Thomson Corporation, Brookfield Asset Management, Royal Bank, Manulife Financial and Royal Bank of Scotland. AIC Diversified Canada Fund holds just 23 stocks. The fund holds 53.6% of its assets in Financial services stocks. The rest of the portfolio breaks down as follows: Consumer staples, 16.1%; Energy, 8.2%; Consumer discretionary, 7.5%; Health care, 7.0%, Industrials, 3.0%; Information technology, 2.3%; and Conglomerates, 1.5%....

These two AIC funds hold much of their portfolios in financial services stocks. We prefer diversified funds. But if you must focus on something, finance is a relatively stable sector. If you do invest in these funds, be sure to adjust the rest of your portfolio so they won’t overly concentrate your stock and mutual fund holdings in the financial sector. AIC AMERICAN ADVANTAGE FUND $7.73 (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, with over 99% of assets in the financial services area....

SCOTIA CANADIAN GROWTH FUND $72.43 (CWA Rating: Conservative) (Scotia Securities, 40 King Street West, 6th Floor, Toronto, Ontario M5H 1H1. 1-800-268-9 269; Website: www.scotiabank.com. No load — deal directly with the company.) uses fundamental analysis to identify what the managers see as investments that have the potential for above-average growth. The $614.0 million Scotia Canadian Growth Fund’s 10 largest holdings are Manulife Financial, Suncor Energy, Royal Bank, TD Bank, Goldcorp, Nexen, Bank of Montreal, BCE Inc., Bank of Nova Scotia and Alcan. Scotia Canadian Growth currently holds 31% of its portfolio in the Financial services industry. Its next-largest holding is Energy at 22%....

BMO EQUITY FUND $33.88 (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) generally invests mostly in ‘blue-chip” Canadian companies. These stocks are selected based on the manager’s outlook for the industry they operate in, the earnings record of each company, the strength of management and the potential for growth. BMO Equity Fund’s 10 largest holdings are Manulife Financial, Suncor Energy, Royal Bank, TD Bank, Sun Life Financial, EnCana Corporation, Alcan, Potash Corporation, CIBC and Bank of Nova Scotia. The $2.3 billion fund currently holds 33% of its portfolio in the Financial services industry. Its next-largest holding is Energy at 22%....

RBC CANADIAN EQUITY FUND $29.54 (CWA Rating: Conservative) (RBC Funds, P.O. Box 7500, Station A, Toronto, Ontario. M5W 1P9. 1-800-463-3863; Web site: www.royalbank.com. No load — deal directly with the bank) invests mostly in larger-capitalization stocks, but also looks for opportunities in small and mid-cap stocks. The fund’s 10 largest holdings are TD Bank, Manulife Financial, Bank of Nova Scotia, Royal Bank, EnCana, Canadian Natural Resources, Suncor Energy, Alcan, CIBC and Bank of Montreal. The $5 billion fund holds 32% of its holdings in Financial stocks. It also holds 25% in Energy stocks. Over the last ten years, RBC Canadian Equity posted a 10.4% annual rate of return. That’s about equal to the S&P/TSX’s gain of 10.1%. The fund made 22.7% over the last year, equal to the gain of 22.7% for the S&P/TSX. The fund’s MER is 1.99%....

TD CANADIAN EQUITY FUND $32.70 (CWA Rating: Conservative) (TD Asset Management, P.O. Box 7500, Station A, Toronto, Ontario. M5W 1P9. 1-800-463-3863; Web site: www.tdcanadatrust.ca. No load — deal directly with the bank) uses a “bottom-up” approach (using fundamentals such as earnings, cash flow and low debt) to identify undervalued companies with strong growth potential. TD Canadian Equity Fund’s 10 largest holdings are Royal Bank, Suncor Energy, TD Bank, Rogers Communications, Alcan, Canadian Oil Sands Trust, CN Railway, Ivanhoe Mines, Goldcorp and EnCana. The $3.1 billion fund currently holds about 27% of its portfolio in Financial services shares. It also has a bias towards Energy stocks, with 27% of its holdings in that sector....