royal bank

Here are five large funds run by each of Canada’s big-five banks. Each holds the kind of conservative, well-balanced portfolios of high quality stocks we like. All five have a high weighting in Financial services and Energy stocks. However, they stick with high-quality issues with sound fundamentals, so these concentrations don’t add a lot of risk. Each has its quirks, but overall they are well positioned for low-risk returns. TD CANADIAN EQUITY FUND $30.40 (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 Bank of Nova Scotia, Suncor Energy, Royal Bank, TD Bank, Rogers Communications, Canadian Oil Sands Trust, CN Railway, Tim Hortons, Canadian Natural Resources and Teck Cominco....

TORONTO-DOMINION BANK $69 (Toronto symbol TD; Conservative Growth Portfolio, Finance sector; SI Rating: Above average) is Canada’s second-largest bank with $392.9 billion in assets. Like Royal Bank, TD has expanded its American operations in the past few years. These businesses now provide around 45% of TD’s income, In 2006, TD combined the U.S. operations of its TD Waterhouse discount brokerage subsidiary with rival Ameritrade to form TD Ameritrade. TD owns 39.8% of this operation, which is now among the top three discount brokers in the U.S....

ROYAL BANK OF CANADA $54 (Toronto symbol RY; Conservative Growth Portfolio, Finance sector; SI Rating: Above average) is the largest bank in Canada, with assets of $536.8 billion. It also operates in the United States and 30 other countries. International operations supply a third of its income. Royal has steadily built up its U.S. operations in the past few years. It recently bought Flag Financial Corp. for $456 million U.S. Flag Financial operates 17 branches in Atlanta. Royal also agreed to buy 39 branches in Alabama for an undisclosed sum. se purchases will strengthen Royal’s retail banking business in the fast-growing southeastern U.S. It also gives Royal more opportunities to offer its retail customers other services, such as insurance and wealth management....

Investors have generally under-estimated the big five Canadian bank stocks for at least the past 33 years, which is when I started paying attention to them. As a result, the banks have been among the market’s top long-term performers throughout that period, while staying reasonably priced in relation to earnings and dividends. That’s a highly attractive combination. Banks do go through deep setbacks from time to time. But that’s a risk with any stock. The difference is that the banks play a central role in Canada’s economy. When economic setbacks end, they go on to thrive anew and outdo their previous successes. North America economic growth could fall from 3% in 2006 to 2.5% in 2007. That could hurt loan demand and raise loan defaults. But the banks have strengthened their loan portfolios in the past few years, and are doing a better job of controlling costs....

AIC DIVERSIFIED CANADA FUND $46.74 (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 $1.7 billion fund’s 10 largest holdings are Power Financial, Canadian Oil Sands Trust, TD Bank, Shoppers Drug Mart, Loblaw, Thomson Corp., Brookfield Asset Management, Royal Bank, Manulife Financial and Royal Bank of Scotland. The fund holds just 23 stocks. The fund holds 47.8% of its assets in Financial services stocks. The rest of the portfolio breaks down as follows: Consumer staples, 19.4%; Energy, 8.6%; Consumer discretionary, 7.6%; and Health care, 5.5%....

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 $8.21 (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....

HARBOUR FUND $20.74 (CWA Rating: Conservative)(C.I. Mutual Funds, 151 Yonge St., 7th Floor, Toronto, ON M5C 2W7. 1-800-268-9374; Web site: www.cifunds.com. Load fund — available from brokers) invests in only 25 to 40 high-quality Canadian stocks, and it may hold stocks for four or five years to realize their value. The $4.6 billion Harbour Fund’s top holdings include Royal Bank, Bank of Nova Scotia, Suncor Energy, Royal Bank of Scotland, CIBC, Alcan, EnCana Corp., Rio Tinto, TD Bank and BHP Billiton. The Harbour Fund gained 17.4% over the last year. Its MER is 2.34%....

UNITED CORPORATIONS $69.25 (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, 33.5% of the fund’s $950.7 million portfolio was invested in Canadian equities, 26.7% in the U.S., 19.6% in Europe, 7.7% in the UK and 10.9% in Asia. The fund’s largest holdings included Bank of Nova Scotia, Royal Bank of Canada, Manulife, Talisman Energy, Algoma Central Corporation, Shell Canada, TransCanada Corporation, Altria Group, TD Bank and Chevron....

ROYAL BANK OF CANADA $53 has invested $25 million U.S. for a 30% stake in a new joint venture that will offer asset management services in China. The amount is just 2% of its latest quarterly earnings. But the deal gives Royal a low-risk way to increase its exposure to a fast-growing market. Buy. EMERA INC. $22 earned $0.18 a share in the third quarter of 2006, up 28.6% from $0.14 a year earlier, due to higher electricity rates and profits from the resale of natural gas from the offshore project near Sable Island. Revenue fell 3.1%, to $272.4 million from $281.1 million, due to the temporary shutdown of a large industrial customer. This customer aims to re-start its operations in the fourth quarter. Best Buy. TRANSCANADA CORP. $38 continues to expand its electrical power operations, which have higher growth prospects than its gas pipeline business. Thanks mainly to higher profits at the power unit, earnings before unusual items in the most recent quarter rose 4.2%, to $0.50 a share from $0.48. Revenue grew 23.3%, to $1.85 billion from $1.5 billion. Best Buy.

ROYAL BANK OF CANADA $49 (Toronto symbol RY; Conservative Growth Portfolio, Finance sector; SI Rating: Above average) is taking advantage of the rising Canadian dollar to expand its operations in the United States, which now provide roughly 10% of its profit. For instance, it has just agreed to pay an undisclosed sum for American Guaranty & Trust, which administers trusts for over 1,000 high net worth individuals. While the deal will have little impact on Royal’s earnings, it should help the bank’s U.S. wealth management operations compete with more-established firms....