stock prices

Economic turmoil over the past few months, and the sharp drop in stock prices, have rekindled investor interest in bonds. This is understandable, since bonds provide steady income streams and a guarantee to repay the principal at maturity. However, bond prices will likely fall over the next few years as interest rates inevitably rise again. Big government budget deficits could spur inflation and push up rates, for example. We continue to recommend that you invest only a small portion of your portfolio in bonds and other fixed income instruments. Instead, you should aim to build a diversified portfolio of well-established companies with long histories of rising dividends....

Slowing retail sales and weak consumer confidence have hurt most consumer stocks. Clothing is largely a discretionary purchase, so the downturn has been particularly hard on these three apparel-related companies. Based on the steep drop in their stock prices, it appears that investors feel they will not survive. We have a more optimistic view. All three are lowering their operating costs and shedding unprofitable businesses. That puts them in a good position to expand their earnings once the economy turns around. Their leading brands will also give them an advantage as conditions improve. All three should reward patient investors, but only two are buys right now....

IGM FINANCIAL INC. $33 (Toronto symbol IGM; Conservative Growth Portfolio, Finance sector; Shares outstanding: 262.4 million; Market cap: $8.7 billion; Price-to-sales ratio: 3.0; SI Rating: Above average) has dropped 31.9% from $48.43 in April, 2008. IGM’s fees vary with the value of the mutual funds and other securities it manages, and lower stock prices have shrunk its assets under management....

Many of our recommendations have dropped sharply in the past few months, along with the overall market. Here are 10 stocks that we feel have strong rebound potential in 2009. CANADIAN IMPERIAL BANK OF COMMERCE $49 (Toronto symbol CM; Conservative Growth Portfolio, Finance sector; Shares outstanding: 380.8 million; Market cap: $18.7 billion; Price-to-sales ratio: 1.5; SI Rating: Above average) is down 37.6% from its recent peak of $78.48 in May, 2008. That’s mainly because it has the most exposure to the problems in the U.S. mortgage market among the big five Canadian banks. CIBC has taken substantial writedowns in the past year, which should cover most of the damage. It also continues to expand its retail banking operations, as well as scale back its riskier operations. CIBC is a buy....

At times like this, when deciding what to do with your portfolio, you should resist the urge to dump high-quality investments just because you think they may get dragged down by a further decline in the market. After all, when things look bleakest (as they do today), the market often turns around and begins rising. That’s especially true of high-quality stocks that offer lots of hidden value and high yields. Keep this in mind when contemplating the unsettling outlook for Canadian bank stocks. The banks are a mainstay of the Canadian economy. Their slide since mid-2007 provides a powerful buying opportunity. But fed-up investors may wind up dumping these stocks just when prices and risk are near a low....

Japanese stock markets remain volatile, along with global markets. As well, a slowing U.S. economy continues to hurt Japan’s major export industries. However, we think that Japan’s interest rate cuts and $51 billion stimulus package will help stock prices rebound. JAPAN EQUITY FUND $4.51 (New York symbol JEQ; CWA Rating: Aggressive) invests mostly in large capitalization stocks on the Tokyo Stock Exchange. The fund’s top holdings include: Toyota Motor, Mitsubishi UFJ Financial Group, East Japan Railway Co., Shin-Etsu Chemical Co. and Takeda Pharmaceutical Co. Japan Equity Fund is available for 15% less than the current value of its assets. It’s a buy....

One of the brightest signs in today’s market is that many great stocks now trade below 10 times earnings. That’s especially true of high-quality technology issues, since they spend so heavily on research, which gets written off against earnings like a routine expense. Low p/e ratios are also particularly appealing at times when interest rates are low, as they are now. Of course, earnings could drop next year and push up those p/e ratios. Stock prices could move lower, for a variety of reasons. But that’s always a risk. To profit best, you need to invest mainly in well-established companies that are likely to recover from the economic downturn and go on to produce still higher earnings in the future. BCE INC. $25.25, Toronto symbol BCE, fell 34% on Wednesday on fears that the $42.75-a-share takeover offer from a consortium headed by the Ontario Teachers’ Pension Plan may be dead....

One of the brightest signs in today’s market is that many great stocks now trade below 10 times earnings. That’s especially true of high-quality technology issues, since they spend so heavily on research, which gets written off against earnings like a routine expense. Low p/e ratios are also particularly appealing at times when interest rates are low, as they are now. Of course, earnings could drop next year and push up those p/e ratios. Stock prices could move lower, for a variety of reasons. But that’s always a risk. To profit best, you need to invest mainly in well-established companies that are likely to recover from the economic downturn and go on to produce still higher earnings in the future. KINGSWAY FINANCIAL SERVICES, $5.98, symbol KFS on Toronto, met on November 21 with representatives of New York-based money management company and shareholder activists, The Stilwell Group....

One of the brightest signs in today’s market is that many great stocks now trade below 10 times earnings. That’s especially true of high-quality technology issues, since they spend so heavily on research, which gets written off against earnings like a routine expense. Low p/e ratios are also particularly appealing at times when interest rates are low, as they are now. Of course, earnings could drop next year and push up those p/e ratios. Stock prices could move lower, for a variety of reasons. But that’s always a risk. To profit best, you need to invest mainly in well-established companies that are likely to recover from the economic downturn and go on to produce still higher earnings in the future. CAMPBELL SOUP CO. $31.88, New York symbol CPB, earned $260 million in its first fiscal quarter ended November 2, 2008, down 3.0% from $268 million a year earlier. However, earnings per share rose 2.9%, to $0.71 from $0.69, on fewer shares outstanding. If you disregard restructuring costs and losses on commodity hedging contracts, earnings per share in the latest quarter would have grown 11.6% to $0.77. Sales grew 3.0%, to $2.25 billion from $2.19 billion, mostly due to a 7% rise in prices for the company’s products....

We think investors will profit most — and with the least risk — by buying shares of well-established, dividend-paying companies with sound business prospects. These are companies that have strong positions in a healthy industry. They also have strong management that will make the right moves to remain competitive in a changing marketplace. A well-established company with a long-term record of dividends provides a measure of safety for investors. Dividends, after all, are much more stable than earnings projections. More important, dividends are impossible to fake — either the company has the cash to pay dividends, or it doesn’t. That’s not to say that there won’t be surprises that affect every company in a particular industry. But well-established, dividend-paying stocks have the asset size and the financial clout — including solid balance sheets and strong cash flow — to weather market downturns or changing industry conditions....