SAP

IBM’s shares fell from $190 in October 2014 to $150 in December. That’s because many businesses are shifting to cheaper cloud computing platforms and spending less on IBM’s mainframes and consulting services. That has forced it to abandon its ambitious 2015 earnings target of $20.00 a share. But the company has a long history of shifting from unprofitable businesses to fast-growing ones. And we feel its new plan to focus on cloud computing and analytics software will spur its earnings for years to come. To top it off, IBM’s strong balance sheet gives it lots of room to keep buying back shares and raising its dividend. INTERNATIONAL BUSINESS MACHINES CORP. $165 (New York symbol IBM, Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 985.0 million; Market cap: $162.5 billion; Price-to-sales ratio: 1.8; Dividend yield: 2.7%; TSINetwork Rating: Above Average; www.ibm.com) traces its history back to 1911. Today, it’s one of the world’s largest computer companies, with operations in over 175 countries....

INTERNATIONAL BUSINESS MACHINES CORP. $165 (New York symbol IBM, Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 985.0 million; Market cap: $162.5 billion; Price-to-sales ratio: 1.8; Dividend yield: 2.7%; TSINetwork Rating: Above Average; www.ibm.com) traces its history back to 1911. Today, it’s one of the world’s largest computer companies, with operations in over 175 countries. In the past few years, IBM has moved away from making computers to designing entire systems and managing them for businesses and government agencies. It provides these services under long-term contracts, which gives it predictable revenue streams. In 2014, computer services supplied 59% of the company’s revenue.

Meanwhile, IBM continues to build up its software business, which supplied 28% of its 2014 revenue.

Last year, the company sold its low-end server business to China’s Lenovo Group for $2.1 billion in cash and Lenovo shares.

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ISHARES MSCI GERMANY FUND $29.42 (New York symbol EWG; buy or sell through brokers) tracks the stocks in the MSCI Germany Index.

This index aims to replicate 85% of the market capitalization of the German stock market. The remaining 15% is unavailable for investment, partly due to limitations on foreign ownership.

The ETF’s top holdings are Bayer (diversified chemicals), 9.9%; Daimler (autos), 7.5%; BASF (chemicals), 7.3%; Siemens (engineering conglomerate), 7.9%; Allianz (insurance), 8.2%; SAP (software), 5.3%; Deutsche Telekom, 4.7%; Deutsche Bank AG, 3.7%; BMW AG, 3.4%; and Volkswagen AG, 3.1%.

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ENCANA CORP., $14.66, Toronto symbol ECA, fell 10% this week after the company issued 85.6 million common shares to a group of underwriters for $14.60 each. The company plans to use the $1.25 billion of proceeds to redeem $1.6 billion worth of notes. As of December 31, 2014, Encana’s long-term debt was $7.3 billion U.S., or a high 84% of its $10.9 billion (Canadian) market cap. If the underwriters exercise their option to buy an additional 12.8 million shares, Encana would receive $1.44 billion. Including this option, the extra shares would increase the total outstanding by roughly 13%....

We think conservative investors could hold up to 10% of their portfolios in foreign stocks. One way to do that is to buy carefully chosen exchange traded funds (ETFs) that have an overseas focus. The best ETFs offer very low management fees and well-diversified, tax-efficient portfolios of highquality stocks. Here’s a look at six international ETFs:...

SAPUTO INC. $36 (Toronto symbol SAP; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 391.1 million; Market cap: $14.1 billion; Price-to-sales ratio: 1.3; Dividend yield: 1.4%; TSINetwork Rating: Average; www.saputo.com) bought 87.92% of Warrnambool Cheese and Butter Factory, one of Australia’s largest dairy producers, for $449.6 million in February 2014. In April 2014, it added the fluid-milk operations of Nova Scotia dairy Scotsburn for $65.0 million.

These acquisitions increased Saputo’s revenue by 20.4% in its fiscal 2015 third quarter, which ended December 31, 2014, to $2.8 billion from $2.3 billion a year ago. Higher cheese and butter prices in the U.S. also contributed to the gain. Earnings rose 7.3%, to $154.6 million from $144.1 million. But earnings per share gained just 2.7%, to $0.38 from $0.37, on more shares outstanding.

The stock trades at 22.9 times the $1.57 a share Saputo will likely earn in fiscal 2015. That’s a high p/e ratio for a slow-growing dairy company that relies on acquisitions to expand.

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ISHARES MSCI GERMANY FUND $29.42 (New York symbol EWG; buy or sell through brokers) tracks the stocks in the MSCI Germany Index. This index aims to replicate 85% of the market capitalization of the German stock market. The remaining 15% is unavailable for investment, partly due to limitations on foreign ownership. The ETF’s top holdings are Bayer (diversified chemicals), 9.9%; Daimler (autos), 7.5%; BASF (chemicals), 7.3%; Siemens (engineering conglomerate), 7.9%; Allianz (insurance), 8.2%; SAP (software), 5.3%; Deutsche Telekom, 4.7%; Deutsche Bank AG, 3.7%; BMW AG, 3.4%; and Volkswagen AG, 3.1%....

SAPUTO INC. $36 (Toronto symbol SAP; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 391.1 million; Market cap: $14.1 billion; Price-to-sales ratio: 1.3; Dividend yield: 1.4%; TSINetwork Rating: Average; www.saputo.com) bought 87.92% of Warrnambool Cheese and Butter Factory, one of Australia’s largest dairy producers, for $449.6 million in February 2014. In April 2014, it added the fluid-milk operations of Nova Scotia dairy Scotsburn for $65.0 million. These acquisitions increased Saputo’s revenue by 20.4% in its fiscal 2015 third quarter, which ended December 31, 2014, to $2.8 billion from $2.3 billion a year ago. Higher cheese and butter prices in the U.S. also contributed to the gain. Earnings rose 7.3%, to $154.6 million from $144.1 million. But earnings per share gained just 2.7%, to $0.38 from $0.37, on more shares outstanding. The stock trades at 22.9 times the $1.57 a share Saputo will likely earn in fiscal 2015. That’s a high p/e ratio for a slow-growing dairy company that relies on acquisitions to expand....

ISHARES MSCI GERMANY FUND $28.57 (New York symbol EWG; buy or sell through brokers) tracks the stocks in the MSCI Germany Index. This index aims to replicate 85% of the market capitalization of the German stock market. The remaining 15% is unavailable for investment, partly due to limitations on foreign ownership.

The ETF’s top holdings are Bayer (diversified chemicals), 10.2%; Siemens (engineering conglomerate), 7.9%; BASF (chemicals), 7.2%; Daimler (autos), 6.7%; Allianz (insurance), 6.5%; SAP (software), 5.5%; Deutsche Telekom, 4.5%; Deutsche Bank AG, 3.8%; BMW AG, 3.1%; and Volkswagen AG, 3.1%.

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PLEASE NOTE: This is our last Hotline for 2014. Our next Hotline will go out on Friday, January 9, 2015.

ENCANA CORP., $16.41, Toronto symbol ECA, plans to invest more in its shale oil properties in 2015, even though lower oil prices will cut its cash flow.

In 2015, the company’s capital expenditures will be between $2.7 billion and $2.9 billion (all amounts expect share price in U.S. dollars), up from $2.6 billion this year.

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