stock prices

GREAT-WEST LIFECO INC. $25 (Toronto symbol GWO; Conservative Growth Portfolio, Finance sector; Shares outstanding: 944.3 million; Market cap: $23.6 billion; Price-to-sales ratio: 1.0; SI Rating: Above Average) is Canada’s largest insurance company, with $441.9 billion of assets under administration. Great-West also provides retirement-planning and wealth-management services. It gets about 60% of its earnings from Canada, followed by Europe (25%) and the United States (15%). Power Financial Corp. (Toronto symbol PWF) owns 68.7% of Great-West’s shares. In August 2007, Great-West bought Putnam Investments Trust, a leading U.S. mutual-fund company. Great-West paid just $4.2 billion, even though Putnam had $182 billion U.S. in assets under administration. That’s because Putnam was coming off a mutual-fund trading scandal that spurred a wave of investor redemptions. Putnam’s assets have since dropped to $108 billion U.S., largely because of falling stock prices. Still, the purchase gave Great-West access to Putnam’s large client base. In the three months ended June 30, 2009, Great-West’s earnings fell 26.8%, to $413 million from $564 million a year earlier. In response to last year’s financial-market turmoil, the company sold $1 billion worth of common shares to shore up its already strong balance sheet. As a result, earnings per share in the latest quarter fell 30.2%, to $0.44 from $0.63....

One of the most concrete things about an investment is its dividend yield — the percentage you get when you divide its current yearly dividend payment by its price. It’s an indicator we pay especially close attention to when we select stocks to recommend in our Canadian Wealth Advisor newsletter. But yield, high yield especially, can give you a false sense of security. Investors in high dividend stocks have a natural tendency to think that all investment income is nearly as safe and predictable as bank interest. In fact, investment income can dry up in a heartbeat. Companies are sometimes unable to honour their commitments, and they sometimes spring the bad news on you with no warning. Rather than a sign of a bargain, high yield may be a danger sign. It may mean insiders are selling and pushing the price down. A falling price makes yield go up (because you use the latest dividend to calculate yield). When an investment does cut or halt its dividend, its yield collapses....

POTASH CORP. OF SASKATCHEWAN, $101.95, Toronto symbol POT, moved up 4% on speculation that Brazilian mining company Vale SA is preparing to launch a takeover offer for U.S.-based potash producer Mosaic Co. (New York symbol MOS). Potash Corp. is down from last July’s high of $227 due to falling potash prices and demand. However, Vale’s potential interest in Mosaic has spurred the stock prices of most fertilizer producers, including Agrium (see below). The Vale-Mosaic speculation also helped Potash Corp. overcome a drop earlier in the week on news that Russian potash producer Silvinit agreed to sell potash to Indian Potash Ltd. for $460 a tonne (all amounts except share price in U.S. dollars). Indian Potash imports and distributes about 70% of India’s potash needs. The $460 price is a lot less than the $700 that Canpotex will receive from its recent contracts to sell potash to buyers in Japan, South Korea and Taiwan. Canpotex is a potash marketing and exporting firm that is jointly owned by Potash Corp., Agrium and Mosaic. Still, Silvinit’s price is far above potash’s average 2003-2008 price of $270 a tonne....

Many people come up with unrealistic answers to the question of how much risk is right for them. For instance, when they’re young and just starting out, many investors decide to move away from safe investing principles and speculate. They expect to build a small portfolio into a big one in a hurry, then shift their money into boring, but more dependable safe investing selections. As a newcomer in any field, however, it’s easy to fall victim to ruses and snares that a veteran would spot right away. Later on, you’ll know better than to bid on an ugly painting just because it’s the work of a noted artist, or invest in a building that faces expensive repairs due to delayed maintenance, or buy a promotional stock due to rumours or touting....

The recession continues to drive down railway volumes and stock prices. However, both CN and CP have been cutting costs, which will help them increase their profits once the economy starts growing again. As well, both recently made acquisitions in the U.S. that should fuel their growth. CANADIAN NATIONAL RAILWAY CO. $45 (Toronto symbol CNR; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 468.4 million; Market cap: $21.1 billion; Price-to-sales ratio: 2.5; SI Rating: Above Average) operates the largest freight-rail network in Canada. It also serves 16 U.S. states. In the three months ended March 31, 2009, CN’s revenue fell 3.5%, to $1.86 billion from $1.93 billion a year earlier. The recession cut freight volumes, and CN lowered its fuel surcharges in response to the drop in oil prices. Earnings rose 0.7%, to $302 million from $300 million. Earnings per share rose 3.2%, to $0.64 from $0.62, on fewer outstanding shares. These figures exclude several one-time items, including a gain on the sale of a Toronto rail line and expenses related to CN’s recent takeover of a Chicago-area railway. Still, the company benefitted from a lower income-tax rate and a weaker Canadian dollar, which increased the contribution of its American operations....

United Technologies serves the aerospace and construction industries. These are highly cyclical businesses, and fears of a long recession caused the stock to fall 54.7%, from $82.50 in 2007 to $37.40 in March 2009. Since then, the stock has regained a third of this drop. We feel United Technologies has more gains ahead. That’s largely because all of its companies are market leaders with strong brands and loyal customers. As well, a new restructuring plan puts the company in a good position to rapidly increase its earnings when the economy begins to recover. UNITED TECHNOLOGIES CORP. $51 (New York symbol UTX; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 942 million; Market cap: $48 billion; Price-to-sales ratio: 0.9; WSSF Rating: Above Average) has six main businesses: Carrier makes heating and air-conditioning equipment (25% of 2008 revenue, 17% of profit); Otis makes and services elevators (22%, 32%); Pratt & Whitney makes aircraft engines (22%, 27%); Hamilton Sundstrand makes electronic controls for aircraft (11%, 13%); UTC Fire & Security sells burglar alarms and fire-protection services (11%, 6%); and Sikorsky makes helicopters (9%, 5%). The U.S. government is United Technologies’ biggest customer, and accounts for about 13% of its yearly revenue....

UNITED TECHNOLOGIES CORP. $51 (New York symbol UTX; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 942 million; Market cap: $48 billion; Price-to-sales ratio: 0.9; WSSF Rating: Above Average) has six main businesses: Carrier makes heating and air-conditioning equipment (25% of 2008 revenue, 17% of profit); Otis makes and services elevators (22%, 32%); Pratt & Whitney makes aircraft engines (22%, 27%); Hamilton Sundstrand makes electronic controls for aircraft (11%, 13%); UTC Fire & Security sells burglar alarms and fire-protection services (11%, 6%); and Sikorsky makes helicopters (9%, 5%). The U.S. government is United Technologies’ biggest customer, and accounts for about 13% of its yearly revenue. We feel that United Technologies’ diversification is one of its major strengths. All of its businesses are leaders in their industries. Plus, the company sells products to both original-equipment manufacturers and aftermarket customers. That cuts its risk. For example, when demand for new planes is weak, airlines will probably buy more replacement parts instead of new aircraft. When the economy improves, aircraft makers will order more new engines and electronics. This will offset lower sales of spare parts....

Every investor would like to find an easy-to-use market indicator that tells you when to buy and when to sell. Some look to technical analysis as a way of determining this. Technical analysis is the process of analyzing a stock’s past price movements in an attempt to determine its future price. It’s not concerned with financial statements, management or anything else that underlies a company’s business. It only studies how stock prices have behaved in the past, and the clues that could offer about future stock-price movements. In fact, an investor who uses only technical analysis might buy and sell a stock while knowing little or nothing about the underlying company. ...

Long-time Successful Investor readers may recall that a decade or two ago, we regularly reminded them that dividends could contribute up to a third of their long-term investment returns, without even considering the tax-cutting effects of the dividend tax credit (see below). Earlier in this decade, yields of dividend paying stocks were generally too low to provide a third of investment returns. But now that yields of dividend paying stocks have moved back up to their current level, it’s realistic to assume they will once again contribute as much as a third of your total return. That’s a good thing for investors, since dividends are more dependable than capital gains as a source of investment income. ...

IGM FINANCIAL INC. $42 (Toronto symbol IGM; Conservative Growth Portfolio, Finance sector; Shares outstanding: 262.5 million; Market cap: $11 billion; Price-to-sales ratio: 4.2; SI Rating: Above Average) is Canada’s largest independent mutual-fund company. It manages $108.5 billion of assets. Power Financial (Toronto symbol PWF) owns 56.4% of IGM. The sharp drop in stock prices has hurt IGM’s profits. In the three months ended March 31, 2009, its earnings fell 36.8%, to $133.5 million from $211.2 million a year earlier. Earnings per share fell 35.4%, to $0.51 from $0.79, on fewer shares outstanding. Revenue fell 21.7%, to $559.1 million from $714.2 million. The company continues to do a good job of hanging onto its clients. In the first quarter, the redemption rate at its main Investors Group division was 7.7%, among the lowest in the industry, and down from 7.9% in the last quarter of 2008....