teck resources

TECK RESOURCES LTD. $37 (Toronto symbol TCK.B;Conservative Growth Portfolio, Resources sector; Shares outstanding: 586.0 million; Market cap: $21.7 billion; Price-to sales ratio: 2.0; Dividend yield: 2.4%; TSI Network Rating: Average; www.teck.com) is a leading producer of metallurgical coal, a key ingredient in steel making. Its six coal mines (five inB.C. and one in Alberta) should last from six to 75 years.

Asian customers buy 60% of the company’s coal. In 2011,coal accounted for 49% of Teck’s revenue and 57% of its earnings.

Teck also produces copper (27%, 28%), which its clients in Asia and Europe use to make electrical wire, auto parts and components for electronic devices. As well, Teck is a major supplier of zinc (24%, 15%), which prevents rusting when added to steel.

...

Dear Inner Circle member, As you probably know, last week we singled out Teck Resources. $36.70, symbol TCK.B on Toronto (Shares outstanding: 586.0 million; Market cap: $21.5 billion; www.teck.com), as our #1 Stock for 2013 for The Successful Investor. Our Stock of the Year has turned out to be one of our readers’ favourite features, even though you might say it goes against one of our key investing principles: you always need to diversify. Nobody gets it right on every one of their stock recommendations or purchases. Consequently, to succeed as an investor, you need to build a balanced portfolio of mainly well-established companies, with holdings spread out across most if not all of the five main economic sectors....

We’ve chosen Teck Resources as our “Stock of the Year” for2013.

Resource companies are highly cyclical. Teck fell to just $3.35in March 2009 as the credit crisis hurt its ability to refinance the$9.8 billion U.S. in short-term loans it took on the year before as part of its $13.6-billion (Canadian) purchase of Fording Coal....

TECK RESOURCES LTD., $36.93, Toronto symbol TCK.B, is our “Stock of the Year” for 2013. Resource companies are highly cyclical. Teck fell to just $3.35 in March 2009 as the credit crisis hurt its ability to refinance the $9.8 billion U.S. in short-term loans it took on the year before as part of its $13.6-billion (Canadian) purchase of Fording Coal. At that time, Teck’s market cap (the value of all outstanding shares) was just $1.6 billion. However, rising commodity prices helped it find new lenders, and Teck rose as high as $65 in January 2011. The stock has moved down since then due to the slowing global economy. However, we feel the company’s high-quality, long-lasting reserves and potentially higher commodity prices in 2013 make it a particularly attractive buy right now....

TECK RESOURCES LTD. $34 (Toronto symbol TCK.B; Conservative Growth Portfolio, Resources sector; Shares outstanding: 586.0 million; Market cap: $19.9 billion; Price-to-sales ratio: 1.8; Dividend yield: 2.6%; TSINetwork Rating: Average; www.teck.com) produced 6.3 million tonnes of metallurgical coal in the third quarter of 2012, up 6.2% from 6.0 million tonnes a year earlier. Copper production jumped 28.6%, to 99,000 tonnes from 77,000, thanks to Teck’s recent expansion projects.

However, slowing growth in China and India cut coal prices by 32.5% from a year earlier. Copper prices fell 14.0%. That’s why Teck’s earnings declined 53.0% in the quarter, to $349 million or $0.60 a share. A year earlier, it earned $742 million, or $1.26. Cash flow per share fell 42.7%, to $1.26 from $2.20. Revenue declined 25.9%, to $2.5 billion from $3.4 billion.

The company will probably lower its production in response to the weaker demand. It also aims to cut $200 million from its annual costs, mainly by making its rail shipments more efficient.

...

Some investors think the best way to profit in stocks is to buy them when they are just barely starting out on a growth phase they hope will last for years if not decades. Ideally, they want to buy the future top performers when they are still near or close to the penny stock range and have yet to be discovered by the broad mass of investors. And it’s true that when you buy penny stocks you could have a big payday if you make the right choice. But the odds against success are high. Penny stocks are almost always involved in riskier ventures, such as finding mineral deposits that can be mined at a profit, commercializing unproven technologies or launching new software....

TECK RESOURCES LTD. $34 (Toronto symbol TCK.B; Conservative Growth Portfolio, Resources sector; Shares outstanding: 586.0 million; Market cap: $19.9 billion; Price-to-sales ratio: 1.8; Dividend yield: 2.6%; TSINetwork Rating: Average; www.teck.com) produced 6.3 million tonnes of metallurgical coal in the third quarter of 2012, up 6.2% from 6.0 million tonnes a year earlier. Copper production jumped 28.6%, to 99,000 tonnes from 77,000, thanks to Teck’s recent expansion projects. However, slowing growth in China and India cut coal prices by 32.5% from a year earlier. Copper prices fell 14.0%. That’s why Teck’s earnings declined 53.0% in the quarter, to $349 million or $0.60 a share. A year earlier, it earned $742 million, or $1.26. Cash flow per share fell 42.7%, to $1.26 from $2.20. Revenue declined 25.9%, to $2.5 billion from $3.4 billion. The company will probably lower its production in response to the weaker demand. It also aims to cut $200 million from its annual costs, mainly by making its rail shipments more efficient....

Orbit Garant Drilling, $2.15, symbol OGD on Toronto (Shares outstanding: 33.3 million; Market cap: $71.6 million, www.orbitgarant.com), is a Canadian firm that provides both underground and surface drilling services to mining companies. It has 224 drills and 800 employees that serve clients in Canada and internationally. Orbit Garant’s customers range from major producers to junior miners. These firms use its services through their projects’ exploration, development and production phases. The company also provides geotechnical drilling services to miners, engineering and environmental consulting firms and government agencies. (Geotechnical drillers investigate the type and stability of soil. That helps determine how to mitigate conditions, such as soil movement or the presence of groundwater, that may damage existing or proposed structures, roads and other infrastructure.)...

LOBLAW COMPANIES LTD., $33.10, Toronto symbol L, has signed a new long-term deal with Towers Watson, a private firm that helps Canadian companies manage their employees’ health benefits. Under the agreement, Loblaw’s in-store pharmacies will offer special discounts to Towers Watson’s clients, which together employ over 30,000 people. These discounts should draw more shoppers to Loblaw’s stores and more than offset the lost revenue. Roughly half of Loblaw’s 1,000 supermarkets now have in-store pharmacies. Meanwhile, the company earned $222 million, or $0.79 a share, in the three months ended October 6, 2012. That’s down 5.9% from $236 million, or $0.84 a share, a year earlier. Even with the decline, the latest earnings beat the consensus estimate of $0.78 a share....

CANADIAN PACIFIC RAILWAY LTD., $80.03, Toronto symbol CP, continues to make progress with its plan to improve its efficiency with new trains and streamlined schedules. This week, the company launched its new transcontinental service for intermodal containers (which can be shipped by rail, ship or truck). This new service uses a more direct route with fewer stops. As a result, CP can now ship containers from Vancouver to Toronto in four days instead of five. Shipping to Chicago also takes four days, down from six. CP is our #1 buy for 2012....