stock split

COMPUTER MODELLING GROUP $19.31 (Toronto symbol CMG; SI Rating: Speculative) (403- 531-1300; www.cmgl.ca; Shares outstanding: 8.5 million; Market cap: $164.1 million) is a computer software technology and consulting company specializing in the oil and gas industry. Its software provides engineers with oil and gas reservoir simulation, and three-dimensional visualization and animation. The company has over 330 clients worldwide in 40 countries. Computer Modelling’s revenues in the three months ended March 31, 2008 rose 23.9%, to $9 million from $7.3 million. Earnings per share rose 33.3%, to $0.36 from $0.27. The company holds cash of $23.5 million or $2.76 a share and has no debt. Computer Modelling spent $1.8 million, or a high 20% of revenues, on research and development in the latest quarter. The company pays a quarterly dividend of $0.20 a share, for a high 4.1% yield. It also paid a special $0.25 a share dividend in June, 2008. Last year, the company added Petroleo Brasileiro S.A., Brazil’s state-owned oil company, as a partner in its project to develop leadingedge oil and gas reservoir simulation software. A unit of multinational oil giant Shell International is already a partner with Computer Modelling in this project....

Saputo has nearly tripled for us since we first recommended it in our April, 2003 issue at $11 a share (adjusted for a 2-for-1 stock split in November 2007). We liked its ability to quickly absorb new operations and improve their profits, which offset the risk of its aggressive growth-by-acquisition strategy. Despite its success, the company receives little broker/media attention. That may be because the dairy industry seems dull to many investors. We still like Saputo’s strategy, and its latest purchases should fuel its growth for years to come....

NVIDIA CORP. $38 (Nasdaq symbol NVDA; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 548.8 million; Market cap; $20.9 billion; WSSF Rating: Average) is the most specialized of these three chipmakers. It develops 3D graphics chips and related technology for computers, gaming consoles and other electronic devices. The company focuses on design, and outsources production to other chipmakers. Nvidia’s stock has nearly doubled in the past six months, despite concerns over the recent acquisition of chief rival ATI Technologies by Advanced Micro Devices (AMD). Although AMD-powered computers will probably only use ATI graphic chips in the future, Nvidia is doing a good job expanding into new fields such as graphics chips for cellphones and handheld video game players. Nvidia now has roughly 33% of the graphics market, up from 20% a year earlier....

Computer chip making is a highly competitive business, and requires heavy spending on research and new product development. That’s why we focus on industry leaders that can easily absorb these huge costs, like Intel, Nvidia and Texas Instruments. Although earnings at all three are rising strongly, we see only two as buys at current prices. INTEL CORP. $26 (Nasdaq symbol INTC; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 5.8 billion; Market cap: $150.8 billion; WSSF Rating: Above average) is the world’s largest maker of electronic chips. Microprocessors for personal computers and servers account for two-thirds of its revenues....

VERIZON COMMUNICATIONS INC. $44.38, New York symbol VZ, is starting to enjoy the benefits of its massive FiOS (Fiber-Optic Service) project, which will eventually replace the copper wires in its network with fiber optic cable lines all the way to its customers’ homes. This lets Verizon offer customers a wider variety of services, such as digital TV, and helps it compete with cable companies. Thanks to strong demand for FiOS and wireless services, Verizon’s third quarter earnings before unusual items rose 14.5%, to $0.63 a share from $0.55 a year earlier. Revenue grew 5.8%, to $23.8 billion from $22.5 billion. Besides the improving earnings, the stock moved up this week on speculation that 55%-owned Verizon Wireless plans to launch a new mobile phone that uses software from Internet search company Google Inc. That would help Verizon expand revenues from the wireless advertising market, which is still in its infancy. It would also help it compete with Apple’s iPhone....

A key part of our approach to investing is spreading your money out among the five economic sectors: Finance; Utilities; Consumer Goods & Services; Resources & Commodities; and Manufacturing & Industry. That way, you avoid overloading yourself with stocks that are about to slump simply because of industry conditions or changes in investor fashion. Generally speaking, stocks in the Resources & Commodities sector and the Manufacturing & Industry sectors are apt to expose you to above-average volatility, while those in the Finance and Utilities sectors involve below-average volatility. Consumer stocks are in the middle. Due to the recent market downturn, investors are now taking a closer look at Consumer stocks. But the Consumer sector is a two-tier market, where some stocks thrive while others stagnate. That’s why it pays to zero in on well-established companies with strong brands that are attractive in relation to current prices, like these three....

WASHINGTON MUTUAL INC. $35.07, New York symbol WM, bundles its mortgage loans into securities and sells them to other investors. That helps it raise cash to make more loans. However, increasing volatility and rising interest rates in some debt markets are making it harder for Washington Mutual to sell mortgage-backed securities. This lack of liquidity has hurt Washington Mutual’s stock price in the past few weeks. But the company has steadily cut its exposure to the housing market since the start of the year. Cost cuts, growth in its retail banking business and the expansion of its credit card operations cut its reliance on mortgages and should let it keep paying its $2.24 dividend, which provides a 6.4% yield. Washington Mutual is still a buy for long-term gains....

YUM! BRANDS INC. $34 (New York symbol YUM; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 520.0 million; Market cap: $17.7 billion; WSSF Rating: Average) operates over 34,000 restaurants in 100 countries. Banners include KFC (chicken), Pizza Hut, Taco Bell (Mexican food), Long John Silver’s (seafood) and A&W (hamburgers). Most of Yum’s recent growth has come from its overseas operations, particularly in China where it owns 2,300 KFC and 370 Pizza Hut outlets. This division now accounts for 20% of Yum’s revenue. Other overseas operations provide 30% of its revenue, while the United States accounts for 50%. Thanks to a 7% rise in same-store sales at its China division, plus a 5% gain at its other international operations, Yum’s sales in the second quarter of 2007 grew 9.1%, to $2.4 billion from $2.2 billion. Same-stores sales in the U.S. were flat due to a food safety scare at some Taco Bell restaurants in the northeast....

Fast-food stocks have been among our biggest gainers since the 2002 stock market slump. Despite increasing concerns over nutritional content, Americans are eating more of their meals outside of the home. Fast-food is also an increasingly affordable luxury in developing countries. However, rising gas prices could cut customer traffic and put a damper on profit growth. Rising food and labor costs will also squeeze margins. We designed our system to zero in on fast-food companies whose strong brands and market share will help them overcome these setbacks. Here are three top examples....

DUNDEE CORP. $25 (Toronto symbol DC.A; Aggressive Growth Portfolio, Finance sector; Shares outstanding: 75.3 million; Market cap: $1.9 billion; SI Rating; Average) provides a variety of financial services, including banking, wealth management and mutual funds through 56%-owned DundeeWealth Inc. (formerly Dundee Wealth Management Inc.). This business supplies roughly three-quarters of its total revenue. Through 78%-owned Dundee Realty Corp. and 16%-owned Dundee Real Estate Investment Trust, the company owns and manages residential and commercial real estate projects. Dundee REIT recently agreed to sell its properties in Central and Eastern Canada so it can focus on its more promising holdings in Western Canada. As part of the transaction, Dundee Realty will manage these properties for the new owners. The new arrangement should improve the long-term prospects of both investments....