stock prices

ROYAL BANK OF CANADA $79 (Toronto symbol RY; Conservative Growth and Income Portfolios, Finance sector; Shares outstanding: 1.4 billion; Market cap: $110.6 billion; Price-to-sales ratio: 3.0; Dividend yield: 3.6%; TSINetwork Rating: Above Average; www.rbc.com) is Canada’s second-largest bank, with $895.9 billion of assets.

Royal recently completed the sale of its moneylosing Jamaican operations, which included 13 branches. The bank will record a one-time loss of $97 million on the deal, up from its earlier estimate of a $60-million loss.

Meanwhile, Royal earned $2.2 billion in the quarter ended April 30, 2014, up 15.3% from $1.9 billion a year ago. Per-share earnings rose 17.6%, to $1.47 from $1.25, on fewer shares outstanding.

Overall revenue gained 7.2%, to $8.3 billion from $7.7 billion. Revenue at Royal’s retail banking division (which supplied 40% of the total) gained 5.1%, thanks to stronger loan demand in Canada. The lower Canadian dollar also improved the results of its U.S. and Caribbean operations.

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The U.S. Federal Reserve has indicated that it will probably end its bond-purchasing program, known as quantitative easing, as early as October 2014. After that, the Fed may raise interest rates, particularly if inflation becomes a problem. Higher interest rates in the U.S. would likely push up rates in Canada and elsewhere, slowing demand for mortgages and car loans. However, Canada’s big banks continue to expand into feebased services, like wealth management, which are less sensitive to interest rates. We continue to like all five banks, but we prefer TD and Bank of Nova Scotia for new buying....

Here’s the text of the quarterly letter I recently sent to our Portfolio Management clients: “We’ve been managing investment portfolios for 15 years, and doing a good job of it, judging by our investment performance, the clients we have attracted, and the funds they have entrusted to our care. Many of our clients credit our performance to our stock-picking ability. Stock-picking enters into it, of course. But I’d say our results also owe a great deal to our use of what I call the “Successful Investor method”. I call it that because it’s based on what I’ve learned over the years from people who have actually succeeded as investors. (For the same reason, I chose “Successful Investor” as the name for our organization and our flagship newsletter.)...

LEON’S FURNITURE LTD. (Toronto symbol LNF; www.leons.ca) has steadily opened new stores, growing from 27 in 2003 to 78 today. But the company more than quadrupled in size overnight with its March 28, 2013, purchase of its main rival, The Brick, for $700 million. The Brick has 228 outlets across Canada. Leon’s and The Brick will continue to operate as separate chains. As a result of the acquisition, Leon’s sales jumped to $426.0 million in the three months ended March 31, 2014, from $162.5 million a year earlier. Earnings fell sharply, to $818,000, or $0.01 a share, from $5.4 million, or $0.08....

LEON’S FURNITURE LTD. $14.30 (Toronto symbol LNF; TSINetwork Rating: Average) (416-243-7880; www.leons.ca; Shares outstanding: 70.9 million; Market cap: $1.0 billion; Dividend yield: 2.8%) has steadily opened new stores, growing from 27 in 2003 to 78 today. But the company more than quadrupled in size overnight with its March 28, 2013, purchase of its main rival, The Brick, for $700 million. The Brick has 228 outlets across Canada. Leon’s and The Brick will continue to operate as separate chains. As a result of the acquisition, Leon’s sales jumped to $426.0 million in the three months ended March 31, 2014, from $162.5 million a year earlier. Earnings fell sharply, to $818,000, or $0.01 a share, from $5.4 million, or $0.08....

Every Wednesday, we publish our “Investor Toolkit” series on TSI Network. Whether you’re a beginning or experienced investor, these weekly updates are designed to give you advice on specific investment advice. Each Investor Toolkit update gives you a fundamental piece of investing strategy, and shows you how you can put it into practice right away. Today’s tip: “Value investing’s good reputation owes a great deal to Warren Buffett, but he and other successful investors owe their success to much more than just one relatively narrow approach to the market.” In last week’s Investor Toolkit, I pointed out that learning what not to do can be the hardest and costliest part of an investor’s education (see the Toolkit here). I focused on how this applies to technical analysis—the practice of trying to base investment decisions on past trading and market history. This week I want to expand on what I said, since the idea applies to a wide range of narrow approaches to investing....

Wells Fargo and J.P. Morgan passed the Federal Reserve’s latest “stress test,” which measures how well financial firms would cope with a sharp jump in unemployment, falling stock prices and other unfavourable conditions. Here is our analysis of the two banks, both of which we cover regularly in our advisory on U.S. stocks, Wall Street Stock Forecaster....

On occasion, we come across an investment that provides a clear example of one or more investment principles. Global X Social Media ETF, which we analyze in this week’s first question, touches on several. ETFs. Exchange traded funds are a relatively recent and benign investment innovation. Unlike many investment innovations, ETFs can cut investor risk and cost. They are a little like conventional open-ended mutual funds, but fees and trading costs are much lower, since they only aim to duplicate the performance of a market index. However, not every index is a good model for investing. You might say that ETFs make it easier and cheaper to pursue a variety of investment ideas, regardless of whether the ideas are good or bad. Theme investing. This particular ETF gives you an easy and low-cost way of investing in stocks associated with the “Social media” investing theme. These stocks are now in the broker/media limelight (see next investment principle). That’s not a particularly good time to buy. By the time the media has identified an investment theme like social media, and the investment industry has begun offering ETFs and other short cuts to investing in it, the best opportunities may have already come and gone....

Global X Social Media ETF, $17.72 symbol SOCL on Nasdaq (Units outstanding: 7.8 million; Market cap: $138.2 million; www.globalxfunds.com), invests in companies that provide social networking, file sharing and other web-based media applications. This exchange traded fund holds 27 social media stocks. U.S. social media stocks make up 55.0% of assets. China is next with 25.6%; Japan, 11.0%; the Netherlands, 3.8%; Russia, 2.4%; Taiwan, 1.2%; and Germany, 1.0%. The fund’s MER is 0.65%. It began trading as a new issue on November 14, 2011. Since then, it has been far more volatile than the Standard & Poor’s 500 market index, and has consistently underperformed the index. Since it began trading, the fund has gained around 23%. In the same time, the Standard & Poor’s 500 Index has gained around 57%....

TORONTO-DOMINION BANK, $53.39, Toronto symbol TD, reported better-than-expected quarterly earnings this week, thanks to steady loan demand in Canada and the U.S. It’s also profiting from its recent deal with Aimia (Toronto symbol AIM) to become the main credit card issuer for the popular Aeroplan travel-reward program. In the quarter ended April 30, 2014, TD’s earnings rose 13.5%, to $2.1 billion from $1.8 billion a year earlier. Due to fewer shares outstanding, per-share earnings gained 14.7%, to $1.09 from $0.95. These figures exclude unusual items, such as costs related to the new Aeroplan card business. On that basis, the latest earnings beat the consensus estimate of $1.02 a share. Revenue rose 12.5%, to $7.4 billion from $6.6 billion. In addition to the new Aeroplan deal, TD is benefiting from last year’s purchase of retailer Target Corp.’s U.S. credit card portfolio. As well, higher debt-underwriting volumes and merger and acquisition fees pushed up revenue at TD’s wholesale banking division by 5.4%....