Toronto-Dominion Bank

We still think high-quality mutual funds with a long-term focus will beat indexes over long periods. If funds invest as we advise — sticking with well-established companies and spreading their assets out across the five main economic sectors — they will tend to lose a lot less than the market indexes in periods when the indexes fall sharply. That’s because big market slides are particularly hard on the hottest, most popular stocks of the preceding market rise, and investing as we do leads you to avoid excessive investment in the hot stocks. Index funds, in contrast, do tend to load up on the hottest, most popular stocks as they rise. That’s because, as they rise, these stocks make up a rising proportion of the index. The most recent example is Potash Corporation of Saskatchewan, which had the highest market cap on the Toronto exchange in June, 2008, on the strength of soaring fertilizer and agriculture prices. The shares have since dropped 70%....

BANK OF NOVA SCOTIA $31.25, Toronto symbol BNS, expects to record charges totaling $595 million (after taxes) for its fourth fiscal quarter ended October 31, 2008. These charges include $370 million in writedowns of illiquid securities, $115 million of losses related to the bankruptcy of U.S. brokerage firm Lehman Brothers, and $110 million in writedowns of interest rate hedging contracts. The bank also still holds $348 million U.S. worth of securities that it may have to write down if conditions worsen. These charges are manageable considering that Bank of Nova Scotia earned $1.0 billion or $0.98 a share in the third quarter of fiscal 2008. Its main businesses are still profitable, and the bank is taking advantage of the turmoil in the financial markets to strengthen its domestic and international operations with acquisitions. Bank of Nova Scotia is a buy....

UNITED CORPORATIONS $47 (Toronto symbol: UNC) (165 University Ave., 10th Floor, Toronto, ON M5H 3B8. 416-947-2583. Buy or sell through a broker) invests in a wide variety of average-quality to above-average quality Canadian and foreign stocks. At last report, 35.3% of the fund’s $1.0 billion portfolio was invested in Canadian equities, 23.7% in the U.S., 20.2% in Europe, 6.3% in the UK, 12.5% in Asia and 1.0% in Mexico and Latin America. The fund’s largest holdings included Bank of Nova Scotia, EnCana, Royal Bank, Nexen, Potash Corp., Chevron, ConocoPhillips, Manulife, TD Bank, Pfizer and CN Railway....

SCOTIA CANADIAN GROWTH FUND $44.12 (CWA Rating: Conservative) (Scotia Securities, 40 King Street West, 6th Floor, Toronto, Ontario M5H 1H1. 1-800-268-9 269; Website: www.scotiabank.com. No load — deal directly with the company.) uses fundamental analysis to identify what the managers see as investments that have the potential for above-average growth. The $460.9 million Scotia Canadian Growth Fund’s largest stock holdings include Manulife Financial, Royal Bank, TD Bank, Research in Motion, Potash Corp., Canadian Natural Resources, Suncor Energy, Bank of Nova Scotia and EnCana Corp. Scotia Canadian Growth currently holds 39.9% of its portfolio in the Resources sector. Its next-largest holding is Financial services at 29.4%....

CIBC CANADIAN EQUITY FUND $18.87 (CWA Rating: Conservative) (CIBC Securities, 5140 Yonge Street, Suite 900, Toronto, Ontario M2N 6X7. 1-800-631-7008; Website: www.cibc.com. No load — deal directly with the company.) uses a “bottom-up” approach (using fundamentals such as earnings, cash flow and low debt) to identify companies that trade at reasonable valuations and also have growth potential. The $450.5 million fund’s top holdings are Manulife Financial, EnCana, Research in Motion, Bank of Nova Scotia, TD Bank, Potash Corp., Suncor Energy, Canadian Natural Resources and CN Railway. The fund’s MER is 2.20%. CIBC Canadian Equity holds 38.8% of its portfolio in Resource sector stocks and 33.5% in Financial services stocks....

BMO EQUITY FUND $24.41 (BMO Mutual Funds, 77 King Street West, Suite 4200, Royal Trust Tower, Toronto, Ont., M5K 1J5, 1-800-665-7700; Web site: www.bmo.com. No load — deal directly with the bank) (CWA Rating: Conservative) generally invests mostly in ‘blue-chip” Canadian companies. These stocks are selected based on the manager’s outlook for the industry they operate in, the earnings record of each company, the strength of management and the potential for growth. BMO Equity Fund’s 10 largest holdings are Bank of Nova Scotia, Royal Bank of Canada, TD Bank, Canadian Natural Resources, Suncor Energy, EnCana Corporation, Potash Corp., Manulife Financial, CIBC and Research in Motion. The $1.8 billion fund currently holds 40.5% of its portfolio in the Resources sector. Its next-largest holding is Financial services at 26.1%....

RBC CANADIAN EQUITY FUND $19.69 (CWA Rating: Conservative) (RBC Funds, P.O. Box 7500, Station A, Toronto, Ontario. M5W 1P9. 1-800-463-3863; Web site: www.royalbank.com. No load — deal directly with the bank) invests mostly in larger-capitalization stocks, but also looks for opportunities in small and mid-cap stocks. The fund’s 10 largest holdings are Royal Bank, Manulife, EnCana, TD Bank, Potash Corp., Bank of Nova Scotia, Canadian Natural Resources, Suncor Energy, Research in Motion and BCE Inc. The $4.2 billion fund holds 41.3% of its holdings in Resources stocks. It also holds 30.7% in Finance. Over the last ten years, RBC Canadian Equity posted a 9.5% annual rate of return. That’s just under the S&P/TSX’s gain of 9.7%. The fund lost 14.9% over the last year, compared to the loss of 14.4% for the S&P/TSX. The fund’s MER is 1.96%....

TD CANADIAN EQUITY FUND $19.01 (CWA Rating: Conservative) (TD Asset Management, P.O. Box 7500, Station A, Toronto, Ontario. M5W 1P9. 1-866-222-3456; Web site: www.tdcanadatrust.ca. No load — deal directly with the bank) uses a “bottom-up” approach (using fundamentals such as earnings, cash flow and low debt) to identify undervalued companies with strong growth potential. TD Canadian Equity Fund’s 10 largest holdings are Royal Bank, Brookfield Asset Management, TD Bank, Potash Corp., Crescent Point Energy Trust, Nexen Inc., Suncor Energy, Sun Life Financial, Manulife Financial and Research in Motion. The $2.6 billion fund currently holds about 47.6% of its portfolio in Resources shares. It also has a bias towards Financial services stocks at 28.2%....

The performance of these five large funds — one from each of Canada’s big-five banks — has suffered over the last year. That’s because they held high weightings in Financial services and Resources stocks. Financial services have dropped due to turmoil in credit markets. Resources have fallen along with commodity prices on fears that an economic slowdown will cut demand for resources. We still feel that the best way to profit in the stock market is to stick with high-quality, well-established companies, and to diversify among the five sectors, and within each sector. However, you won’t go too far wrong with these five funds. They continue to stick with high-quality issues with sound fundamentals, so their concentrations in certain sectors doesn’t add a lot of risk over the long term. Each has its quirks, but overall they are well positioned for low-risk returns....

RBC CANADIAN EQUITY FUND $19.69 (CWA Rating: Conservative) (RBC Mutual Funds, P.O. Box 7500, Station A, Toronto, Ontario. M5W 1P9. 1-800-463-3863; Web site: www.royalbank.com. No load — deal directly with the bank) invests mostly in larger-capitalization stocks, but also looks for opportunities in small- and mid-cap stocks. The fund’s 10 largest holdings are Royal Bank, Manulife, EnCana, TD Bank, Potash Corp., Bank of Nova Scotia, Canadian Natural Resources, Suncor Energy, Research in Motion and BCE Inc. The $4.2-billion fund holds 41.3% of its holdings in resource stocks. It also holds 30.7% in finance. Over the last ten years, RBC Canadian Equity posted a 9.5% annual rate of return. That’s just under the S&P/TSX’s gain of 9.7%. The fund lost 14.9% over the last year, compared to the loss of 14.4% for the S&P/TSX. The fund’s MER is 1.96%....