stock prices

In our February 2013 issue, we named Bank of Nova Scotia our #1 safety-conscious pick for 2013 at $58.80 a share. The stock has gained 10.1% since then, or 14.3% including dividends. We think it has further gains ahead.

BANK OF NOVA SCOTIA $64.40 (Toronto symbol BNS; Shares outstanding: 1.2 billion; Market cap: $77.9 billion; TSINetwork Rating: Above Average; Div....

Here’s the text of the quarterly letter I recently sent to our Portfolio Management clients: “In my last couple of quarterly letters, I talked about my belief that we’re in a secular bull market. This is a long-term stock-market rise that carries the market to successively higher levels over a period of a decade or two, if not longer. Secular bull markets generally start after a period of financial distress, when many investors feel at least somewhat negative toward the stock market. This period of financial distress may have lasted up to a decade, or longer. It’s a time when corporate earnings are weak or irregular, and investors assume they will stay that way indefinitely. Investor sentiment becomes extremely negative, and investors take it for granted that the market may be headed for another big downturn. The secular bull market begins around the time when investors begin to swing back to a more positive view of the stock market....

Our investment advice is that your in-the-limelight holdings are the ones you need to watch most closely. When investor expectations are high, it pays to be skeptical and wary.

Exchange traded funds (ETFs) are set up to mirror the performance of a stock-market index or subindex. They hold a more or less fixed selection of securities that represent the holdings that go into the calculation of the index or sub-index....

IGM FINANCIAL INC. $55 (Toronto symbol IGM; Conservative Growth Portfolio, Finance sector; Shares outstanding: 252.1 million; Market cap: $13.9 billion; Price-to-sales ratio: 5.4; Dividend yield: 3.9%; TSINetwork Rating: Above Average; www. igmfinancial.com) is Canada’s largest independent mutual fund company. Power Financial owns 58.7% of IGM.

Rising stock prices continue to spur mutual fund sales and the value of its clients’ holdings. As of September 30, 2013, IGM had $126.0 billion of assets under management, up 5.6% from $119.3 billion a year earlier. The company’s fee income rises and falls with the value of the securities it manages, so its revenue and earnings gain when the price of these assets rises.

In the third quarter of 2013, earnings rose 3.8%, to $193.4 million from $186.2 million a year earlier. Per-share earnings rose 5.5%, to $0.77 from $0.73, on fewer shares outstanding. Revenue increased 5.3%, to $667.5 million from $634.1 million.
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We continue to recommend that all investors aim to own two or more of Canada’s big five banks. In addition, conservative investors should diversify their Finance-sector holdings with Great-West and IGM. Investors who can accept more risk may also want to consider Home Capital (see box).

GREAT-WEST LIFECO INC....

BANK OF NOVA SCOTIA $59.16 (Toronto symbol BNS; Shares outstanding: 1.2 billion; Market cap: $71.5 billion; TSINetwork Rating: Above Average; Div. yield: 4.2%, www.scotiabank.com) is the third-largest of Canada’s five big banks, with assets of $742.6 billion.

In its fiscal 2013 third quarter, which ended July 31, 2013, the bank earned $1.30 a share, up 12.1% from $1.16 a year earlier.

Higher loan demand and an increase in deposits pushed up the Canadian banking division’s earnings by 13.2%. That includes the contribution from ING Direct, which Bank of Nova Scotia bought for $3.1 billion late last year. ING Direct offers a wide variety of no-fee banking services, mainly over the Internet. It has 1.8 million customers and $30 billion of deposits.
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Tesla Motors, $183.68, symbol TSLA on Nasdaq (Shares outstanding: 121.5 million; Market cap: $22.3 billion, www.teslamotors.com), develops and builds fully electric vehicles. The company makes the Roadster, the first commercially produced, federally compliant highway-capable electric vehicle in the U.S. According to the Environmental Protection Agency, the Roadster has a range of 236 miles on a single charge; the Model S, which was first sold in June 2012, can go 300 miles per charge. Tesla operates its own sales and service network and now has 32 locations in North America, Europe and Asia....

Many investors seem surprised at how calm the stock market has acted in the face of the U.S. government shutdown. These investors worried that the 800,000 laid-off federal employees may react to the shutdown by putting off plans for buying cars, homes and so on. They feared this could put a crimp in the hobbling U.S. economic recovery, and that weakness could spread throughout the world economy. However, 800,000 people only make up a little more than 0.5% of the total U.S. workforce of 155,000,000 people. Moreover, the U.S. House of Representatives voted unanimously this past Saturday to provide back pay to all furloughed federal employees once the shutdown ends. The Obama administration says it supports retroactive back pay for all affected workers. The Democratic-controlled Senate votes on the measure later this week. Meanwhile, the Department of Defense called back 350,000 of its civilian Pentagon workers. It did so under the authority of a law that President Obama signed into force a week earlier, just before the start of the shutdown....

Bank of Nova Scotia continues to see rising loan demand in Canada, Asia, Latin America and the Caribbean. Its bad loans are also down sharply. These strengths are boosting the bank’s earnings and letting it raise its dividend.

BANK OF NOVA SCOTIA $59.16 (Toronto symbol BNS; Shares outstanding: 1.2 billion; Market cap: $71.5 billion; TSINetwork Rating: Above Average; Div....