spin off

Investing mainly in well-established companies is one of the three cornerstones of our investing philosophy (the other two are spreading your money out across the five main economic sectors, and focussing on investments that are outside the current media/broker limelight). Well-established companies generate enormous gains over periods that stretch into decades. But their pace of growth varies. They can and often do swing back and forth between stagnation and explosive growth. But even during lackluster times, they build their potential for gain, and pay dividends. H.J. HEINZ COMPANY $35 (New York symbol HNZ; WSSF Rating: Above average) rose more than 25-fold from the early 1980s through 1998. In the next couple of years, it dropped by nearly half. It has spent much of the current decade between $30 and $40. Its next big move is likely to be upward....

In the 1980s and 1990s, Alcan qualified as what you might call a cyclical growth stock. It was cyclical because demand for and prices of aluminum and aluminum parts generally rise and fall with the economy. But it had a growth element because aluminum’s strength and light weight make it ideal for use in car parts, to cut fuel consumption. In the first half of this decade, however, Alcan and aluminum went through a slump. Alcan faced regulatory hurdles and the need to integrate major acquisitions. Aluminum demand and prices suffered due to weak car sales, and weak oil prices (which relieved some of the pressure to improve fuel economy). Aluminum prices shot up by more than a third since last summer, thanks partly to rising oil prices, which spurred interest in improving gas mileage. Alcan is beginning to benefit. It is sure to remain volatile, but it is a highly attractive choice for the Resource & Commodities sector of your portfolio....

ALCOA INC. $35.99, New York symbol AA, aims to sell or spin-off its consumer aluminum products business, best known for Reynolds Wrap, by the end of 2007. It will also sell two of its smaller automotive parts operations. These businesses account for 16% of Alcoa’s total revenue, but only 3% of its earnings. These operations have less profit potential than Alcoa’s core aluminum production operations, so selling them makes sense. This will make Alcoa more sensitive to world aluminum markets, but aluminum demand and prices will probably remain high for at least the next several years. Alcoa is a buy....

When Canadian Pacific broke itself up into five separate companies this year, it gave investors an opportunity to fine-tune their investments. PANCANADIAN ENERGY $40 (Toronto symbol PCE; SI Rating: Average), formerly PanCanadian Petroleum, was already one of our favourites. We also like these four new companies. But some are better choices for your portfolio than others. You need to consider their SI Ratings (they range from Above-average to Extra risk) and sector (Fording belongs in Resources; the others are in Manufacturing & Industry.) You also need to consider your other holdings, to avoid unwanted concentration in any one business. CANADIAN PACIFIC RAILWAY LTD. $31 (Toronto symbol CP; SI Rating: Above average) operates a 14,000-mile railroad network that connects the main business centres of Canada and the U.S. Midwest and Northeast. Alliances with other railroads extend its reach to Mexico....