stanley

We still think high-quality mutual funds with a long-term focus will beat indexes over long periods. If funds invest as we advise — sticking with well-established companies and spreading their assets out across the five main economic sectors — they will tend to lose a lot less than the market indexes in periods when the indexes fall sharply. That’s because big market slides are particularly hard on the hottest, most popular stocks of the preceding market rise, and investing as we do leads you to avoid excessive investment in the hot stocks. Index funds, in contrast, do tend to load up on the hottest, most popular stocks as they rise. That’s because, as they rise, these stocks make up a rising proportion of the index. The most recent example is Potash Corporation of Saskatchewan., which now has the highest market cap on the Toronto exchange on the strength of soaring fertilizer and agriculture prices....

ABB LTD. ADRs $33 (New York symbol ABB; Conservative Growth Portfolio, Manufacturing & Industry sector; ADRs outstanding: 2.3 billion; Market cap: $75.9 billion; WSSF Rating: Above average) earned $0.44 per ADR in the three months ended March 31, 2008, up 76.0% from $0.25 a year earlier. (Each American Depository Receipt represents one ABB common share.) Revenue grew 29.0%, to $8.0 billion from $6.2 billion, thanks to strong demand for electrical power infrastructure equipment in Asia and the Middle East. Orders rose 26.7%, to $10.9 billion from $8.6 billion. ABB has gained 37.5% since we first recommended it at $24 in our February, 2008 issue. Despite the rise, it still trades at a reasonable 19.4 times the $1.70 per ADR it will likely earn in 2008. ABB is a buy....

TEMPLETON INTERNATIONAL STOCK FUND $18.92 (CWA Rating: Conservative) (Franklin Templeton Management Limited, 1 Adelaide Street East, Suite 2101, Toronto, ON. M5C 3B8. 1-800-387- 0830; Web site: www.templeton.ca. Buy or sell through brokers) invests in stocks around the world. But unlike most international funds, the fund doesn’t invest in Canada and the United States. Geographically, the $2.4 billion Templeton International Stock Fund’s portfolio is distributed as follows: UK, 27.3%; France, 11.0%; Germany, 7.4%; China, 6.9%; Hong Kong, 5.3%; Japan, 5.1%; Switzerland, 4.4%; Spain, 3.7%; Taiwan, 3.3%; and Singapore, 2.9%. The fund’s five-year rate of return is 13.5% annually. That’s equal to the gain of 13.5% for the benchmark Morgan Stanley index. The fund’s MER is 2.74%....

IVY EUROPEAN FUND $14.39 (CWA Rating: Aggressive) holds mostly good quality stocks, although it has underperformed the longer-term benchmark Morgan Stanley indexes. We don’t see any reason to hold a mutual fund that concentrates in Europe. If you want European exposure, consider Ivy Foreign Equity Fund (see above), or the closed-end EUROPEAN EQUITY FUND $11 (New York symbol EEA; CWA Fund Rating: Conservative). Ivy European Fund is a sell.

IVY FOREIGN EQUITY FUND $28.85 (CWA Rating: Conservative) outperformed the Morgan Stanley benchmark international index over the last 10 years. The fund gained 4.1%, and that was better than the Morgan Stanley benchmark’s gain of 1.7%. Ivy Foreign Equity Fund lost 11.6% over the last year. The fund invests in companies based outside of Canada, but cuts risk by avoiding direct investment in emerging markets. Ivy Foreign Equity is one of our top foreign fund recommendations. Still, we think non-U.S. international funds should make up at most 10% of the holdings of a conservative investor. The fund’s top holdings are Reckitt Benckiser plc (UK household & healthcare products), McDonald’s Corp., L’Oreal SA (French cosmetics), Becton Dickinson (U.S. medical technology), Nestle SA, Henry Schein Inc., (U.S. healthcare), PepsiCo (U.S. food & beverage), William Demant (hearing health products) and Diageo plc (UK alcoholic drinks)....

At one time, mutual funds within a particular ‘fund family’ often shared some key investment characteristic, such as a conservative or aggressive investment approach, or a stress on value as opposed to growth. However, due to corporate mergers and takeovers in the mutual-funds industry, and more aggressive marketing, a fund’s membership in a fund family now has little bearing on its investment approach or appeal as an investment. Below, for instance, we analyse five funds from the Ivy Group. (Note that Ivy is now part of Mackenzie Financial, which in turn is part of IGM Financial. The contact information listed for Ivy Growth and Income also applies to the other four.)...

UNIVERSAL CANADIAN GROWTH FUND $20.93 (CWA Rating: Conservative) (Mackenzie Financial Corp., 150 Bloor St. West, Toronto, Ont. M5S 3B5. Web site: www.mackenziefinancial.com. 1-800-387-0780; Load fund — available from brokers) holds companies with strong management and sound business prospects. The fund holds fewer than 40 stocks at all times. Top holdings include TD Bank, Kinross Gold, Edwards Lifesciences, John Wiley & Sons, Shoppers Drug Mart, Corus Entertainment, EnCana Corporation, Martinrea International and Nova Chemicals Corp. The fund’s breakdown by economic sector is as follows: 15.9% in Consumer discretionary, 13.5% in Energy, 10.9% in Materials, 10.5% in Financials, 7.2% in Health Care, 7.1% in Industrials, 6.0% in Information technology, 4.5% in Telecommunications Services and 4.0% in Consumer staples....

TEMPLETON GROWTH FUND $10.62 (CWA Rating: Conservative) (Franklin Templeton Management Limited, 1 Adelaide Street East, Suite 2101, Toronto, ON. M5C 3B8. 1-800-387-0830; Web site: www.templeton.ca. Buy or sell through brokers) is invested 30.8% in the U.S., 17.5% in the UK, 6.7% in Japan, 6.6% in the Netherlands, 4.7% in Singapore, 4.5% in Spain and 3.9% in Germany. The $3.8 billion fund’s top holdings include Royal Dutch Shell plc, Cheung Kong Holdings, GlaxoSmithKline plc, Unilever NV, Merck & Co. Inc., ING Groep NV, El Paso Corporation, Siemens AG, DBS Group Holdings Ltd. and Banco Santander Central SA. The fund made 15.8% over the last year, compared to a loss of 15.0% for the benchmark Morgan Stanley Index. The fund’s MER is 2.23%....

CEDAR FAIR L.P. $24 (New York symbol FUN) lost $0.08 a unit in 2007. However, that figure included a $1.00 a unit charge related to the restructuring of its Geauga Lake amusement park in Ohio. The company earned $1.59 a unit in 2006. Revenue grew 18.7%, to $987.0 million from $831.4 million. Cedar Fair has also increased its quarterly distribution 1.1%. The new annual rate of $1.92 yields 8.0%. Best Buy. BUCKEYE PARTNERS L.P. $49 (New York symbol BPL) is evaluating a plan to build a pipeline to transport ethanol from production facilities in the Midwest to major markets such as Pittsburgh, Philadelphia and New York. Demand for renewable fuels such as ethanol is growing fast, and this line could become a major cash flow generator. If it proceeds, Buckeye would build the new pipeline with rival Magellan Midstream Partners, L.P., which would cut the project’s risk. Best Buy. THE STANLEY WORKS $51 (New York symbol SWK) continues to enjoy the benefits of its diversification plan, including acquisitions of industrial tool and building security systems businesses. In 2007, sales to home improvement retailers accounted for 17% of total sales, down from 40% five years earlier. Stanley’s improved business mix should expand its 2008 earnings to $4.30 a share. Buy.

TRIMARK FUND $29.02 (CWA Rating: Conservative) (AIM Funds Management Inc., 5140 Yonge Street, Suite 900, Toronto, Ontario M2N 6X7. 1-800-631-7008; Website: www.aimfunds.ca. Buy or sell through brokers) takes a value-seeking investment approach, and this cuts the fund’s risk. The $2.4 billion Trimark Fund’s top 10 holdings are Novartis AG, Grupo Televisa, Reed Elsevier plc, WPP Group plc, Adidas-Salomon AG, Anglo- Irish Bank Corp., Kinetic Concepts, WellPoint Inc., Willis Group Holdings and Accor. Regionally, the fund’s portfolio is now distributed 34.6% in the U.S., 16.7% in the UK, 10.2% in Switzerland, 8.9% in Ireland, 7.4% in Germany, 4.8% in Mexico and 3.9% in France. Trimark Fund’s MER is 1.61%....