stanley

CGI GROUP INC., $16.68, Toronto symbol GIB.A, is Canada’s largest provider of computer-outsourcing services. The company’s services help its customers automate certain routine functions, such as accounting and buying supplies. That makes its clients more efficient, and lets them focus on their main businesses. This week, the company reported earnings that exceeded the consensus estimate. This caused the stock to gain 8%. On August 17, 2010, CGI paid $923.2 million for Stanley Inc., which provides computer-outsourcing services to military and civilian agencies of the U.S. government. If you exclude costs to integrate these new operations, the company earned $342.0 million in its 2010 fiscal year, which ended September 30, 2010. That’s up 14.0% from $300.0 million a year earlier....

ISHARES MSCI CANADA INDEX FUND $29.28 (New York symbol EWC; buy or sell through brokers; ca.ishares.com) is like a market-cap-based index fund, but its managers try to improve performance by tinkering with the index-fund formula. They do this through their Morgan Stanley Capital International Canada Index. The fund has an MER of 0.55%. The index’s top holdings are Royal Bank, 6.5%; TD Bank, 5.5%; Bank of Nova Scotia, 4.8%; Suncor Energy, 4.4%; Barrick Gold, 4.0%; Potash Corp., 3.7%; Canadian Natural Resources, 3.3%; Bank of Montreal, 2.8%; Goldcorp, 2.8%; CN Railway, 2.6%; CIBC, 2.5% and TransCanada Corp., 2.2%. If you want to own a Canadian index fund, you should buy the iShares S&P/TSX 60 Index Fund (see previous page). You’ll pay about a third of the management fees....

Exchange-traded funds (ETFs) may have a place in your portfolio. That’s because, unlike many other financial innovations, they don’t load you up with heavy management fees, or tie you down with high redemption charges if you decide to get out of them. Instead, they give you a low-cost, flexible, convenient alternative to mutual funds. ETFs trade on stock exchanges, just like stocks. Prices are quoted in newspaper stock tables and online. You’ll have to pay brokerage commissions to buy and sell ETFs. However, ETFs’ low management fees still give them a cost advantage over most conventional mutual funds. As well, shares are only added or removed when the underlying index changes. As a result of this low turnover, you won’t incur the regular capital-gains bills generated by the yearly distributions most conventional mutual funds pay out to unitholders....

CGI GROUP INC. $15 (Toronto symbol GIB.A; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 279.5 million; Market cap: $4.2 billion; Price-to-sales ratio: 1.1; No dividends paid; SI Rating: Extra Risk) is Canada’s largest provider of computer-outsourcing services. It also operates in 15 other countries. Canada provided 60% of CGI’s revenue in its latest fiscal quarter, followed by the U.S. (35%) and Europe (5%). CGI follows what it calls a “Build and Buy” strategy. The “Build” part refers to expanding relationships with its existing clients and attracting new ones. The company’s outsourcing contracts typically last 5 to 10 years. That gives it steady, predictable revenue streams. The “Buy” part of the company’s strategy involves making acquisitions. CGI cuts the risk of growing by acquisition by purchasing smaller companies that enhance its products, or expand its geographic reach....

As part of our portfolio management strategy, we put a lot of importance on the amount of goodwill that a company carries as an asset on its balance sheet.

(We provide personal, in-depth portfolio management services to a small group of investors through Successful Investor Wealth Management....

The investment industry has created all sorts of exchange-traded funds (ETFs) in recent years. However, quality varies. All too many exist to tap into popular, but risky, themes and fads, so you need to be highly selective with your ETF holdings. ETFs offer very low management fees. In addition to low fees, the best ETFs offer well-diversified, tax-efficient portfolios of high-quality stocks. Here are five foreign ETFs we like:...

SYMANTEC CORP., $12.97, Nasdaq symbol SYMC, reported earnings that matched the consensus estimate this week. However, weaker-than-expected revenue caused the stock to fall 14%. In its first quarter, which ended July 2, 2010, the software firm earned $284 million. That’s up 2.5% from $277 million a year earlier. Earnings per share rose 6.1%, to $0.35 from $0.33, on fewer shares outstanding. These figures exclude non-recurring items, such as costs to integrate acquisitions and writedowns of buildings Symantec plans to sell. Revenue was flat, at $1.43 billion. The company gets half of its revenue from international customers, so the higher U.S. dollar hurt the contribution of its overseas businesses. Without the negative impact of foreign-exchange rates, revenue would have risen 2%....

ISHARES MSCI CANADA INDEX FUND $25.44 (New York symbol EWC; buy or sell through brokers) is like a market-cap-based index fund, but its managers try to improve performance by tinkering with the index-fund formula. They do this through their proprietary Morgan Stanley Capital International Canada Index. The fund has an MER of 0.55%. The index’s top holdings are: Royal Bank, 7.1%; TD Bank, 5.6%; Suncor Energy, 4.5%; Bank of Nova Scotia, 4.4%; Barrick Gold, 3.9%; Canadian Natural Resources, 3.6%; Bank of Montreal, 3.1%; Goldcorp, 3.0%; Research in Motion, 2.9%; Potash Corp., 2.8%; Manulife, 2.8%; and CN Railway. If you want to own a Canadian index fund, you should buy the iShares S&P/TSX 60 Index Fund. You’ll pay about a third of the management fees....

FEDEX CORP., $78.70, New York symbol FDX, reported better-than-expected earnings this week. However, the stock fell 3% on a weaker-than-expected earnings outlook. In its 2010 fiscal year, which ended May 31, 2010, FedEx earned $1.2 billion, or $3.76 a share. That beat the consensus earnings estimate of $3.75 a share. The latest earnings are also a big improvement over the $98 million, or $0.31 a share, that FedEx earned in fiscal 2009. However, FedEx’s fiscal 2009 results included several unusual charges, including a $1.2-billion writedown of goodwill related to its 2004 purchase of Kinko’s Inc. (now called FedEx Office), a chain of stores that sell printing and copying services. Without these charges, FedEx would have earned $3.76 a share in fiscal 2009....

CGI GROUP INC., $14.90, Toronto symbol GIB.A, has agreed to buy Stanley Inc. (New York symbol SXE). Founded in 1966 by U.S. Navy Rear Admiral Emory Stanley, Stanley Inc. provides computer-outsourcing services, mainly to military and civilian agencies of the U.S. government. CGI aims to close the deal later this year. CGI is paying roughly $1.07 billion U.S. for Stanley. That’s equal to 26% of CGI’s $4.3-billion (Canadian) market cap. On March 31, 2010, CGI held cash of $419.1 million, or $1.47 a share, so it will need additional funds to complete this purchase. However, its long-term debt of $274.5 million is a low 6% of its market cap, so it can comfortably afford to borrow most of the price. Adding Stanley will diversify CGI’s U.S. operations. Following the purchase, defense and intelligence customers will represent 55% of its customer base, while the remaining 45% will come from civilian customers. CGI will also gain access to Stanley’s high-quality clientele, which should give it high-potential cross-selling opportunities....