teck resources

iShares Materials Capped Materials Index Fund, $21.19, symbol XMA on Toronto (Shares outstanding: 14.4 million; Market cap: $305.1 million; ca.ishares.com), holds 66 stocks in resource-related fields, such as mining, fertilizer production and forestry. This fund aims to mirror the performance of the S&P/TSX Capped Materials Index, which is made up of the largest resource stocks in Canada. The weight of any one company is capped at 25% of the index’s market capitalization. The fund’s MER is 0.55%. The fund’s top holdings are Potash Corporation of Saskatchewan at 13.5%; Barrick Gold, 13.3%; Goldcorp, 11.2%; Teck Resources, 6.9%; Kinross Gold, 5.1%, Agrium, 3.8%; Silver Wheaton, 3.5%; First Quantum Minerals, 3.3%; Agnico-Eagle Mines, 3.2%; and Yamana Gold, 2.6%....

We continue to advise against overindulging in oil stocks. That’s because the Resource sector (including oil) is highly volatile, and no one can accurately predict future oil prices. For instance, after rising to $115 U.S. a barrel, oil dropped 16% in the first week of May 2011, to $97 U.S., on fears that the global economic recovery may be stalling. That’s why investors should stick with well-established oil stocks with high-quality reserves and rising production.

Oil stocks: Suncor is Canada’s largest integrated-oil company

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SUNCOR ENERGY INC. $39 (Toronto symbol SU; Conservative Growth Portfolio, Resources sector; Shares outstanding: 1.6 billion; Market cap: $62.4 billion; Price-to-sales ratio: 1.7; Dividend yield: 1.1%; TSINetwork Rating: Average; www.suncor.com) merged with Petro-Canada in August 2009 to become Canada’s largest integrated-oil company. The company recently formed a joint venture with French oil company Total S.A., to develop two oil-sands projects. Under the terms of the deal, Suncor acquired 36.75% of Total’s Joslyn oil-sands project, which should begin operating in 2017. In exchange, Total received 49% of Suncor’s Voyageur facility, which converts tar-like bitumen from the oil sands into synthetic crude oil. Total also got part of Suncor’s stake in the Fort Hills oil-sands project....

CANADIAN PACIFIC RAILWAY LTD. $61 (Toronto symbol CP; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 169.4 million; Market cap: $10.3 billion; Price-to-sales ratio: 2.1; Dividend yield: 2.0%; TSINetwork Rating: Above Average; www.cpr.ca) transports freight between Montreal and Vancouver. It also connects with major hubs in the U.S. Midwest and Northeast. In the three months ended March 31, 2011, CP’s earnings per share fell 66.7%, to $0.20 from $0.60 a year earlier. That’s mainly because a strike at Teck Resources Ltd. (Toronto symbol TCK.B) cut coal shipments (CP is Teck’s main railway). Bad winter weather in B.C. and a 28% jump in fuel prices also weighed on its earnings. CP’s revenue was unchanged at $1.2 billion. CP’s operating ratio worsened to 90.6% from 82.3% a year earlier. The company feels it can lower its operating ratio to around 70% in the next two to four years, mainly by increasing the speed and length of its trains. CP is also introducing new surcharges to help offset its higher fuel costs....

We continue to advise against overindulging in oil stocks. That’s because the Resource sector (including oil) is highly volatile, and no one can accurately predict future oil prices. For instance, after rising to $115 U.S. a barrel, oil dropped 16% in the first week of May 2011, to $97 U.S., on fears that the global economic recovery may be stalling. That’s why investors should stick with well-established oil producers with high-quality reserves and rising production, such as these three. All three should also benefit from the election of the Conservative majority government, which has promised not to impose onerous new carbon taxes or environmental regulations on oil-sands operators....

Canada’s two main railways face many unpredictable challenges, like bad weather and rising fuel costs. However, both have streamlined their operations. That helps them quickly respond to sudden setbacks. Both should continue to benefit as the improving economy pushes up freight volumes. We like both, but prefer CP for new buying. CANADIAN NATIONAL RAILWAY CO. $73 (Toronto symbol CNR; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 461.8 million; Market cap: $33.7 billion; Price-to-sales ratio: 4.1; Dividend yield: 1.8%; TSINetwork Rating: Above Average; www.cn.ca) operates Canada’s largest freight-rail network, and serves 16 U.S. states. Microsoft co-founder Bill Gates is CN’s largest shareholder, with just over 10% of the shares. In the three months ended March 31, 2011, CN earned $668 million. That’s up 30.7% from $511 million a year earlier. The company spent $340 million on share buybacks in the latest quarter. Because of fewer shares outstanding, earnings per share rose 34.3%, to, $1.45 from $1.08....

CANADIAN PACIFIC RAILWAY LTD. $62.57 (Toronto symbol CP; Shares outstanding: 169.4 million; Market cap: $10.6 billion; TSINetwork Rating: Average; Dividend yield: 1.7%; www.cpr.ca) reported that its earnings per share fell 66.7% in the three months ended March 31, 2011, to $0.20 from $0.60 a year earlier. Bad winter weather and a 10-week strike at major customer Teck Resources’ Elkview coal mine in B.C. hurt results. Still, profits should rebound now that these one-time events have passed. As well, CP is increasing the speed and length of its trains. The company is also introducing new surcharges to help offset its higher fuel costs....

PLEASE NOTE: Our next Hotline will go out on Friday, April 29, 2011. TECK RESOURCES LTD., $53.83, Toronto symbol TCK.B, rose 8% this week after the company reported better-than-expected first-quarter earnings. In the three months ended March 31, 2011, Teck’s earnings jumped 123.5%, to $0.76 a share from $0.34 a year earlier. These figures exclude several unusual items, such as gains on asset sales. On this basis, the latest earnings beat the consensus forecast of $0.75 a share. Revenue rose 24.9%, to $2.4 billion from $1.9 billion....

PLEASE NOTE: Our next Hotline will go out on Friday, April 15, 2011. TECK RESOURCES LTD., $55.06, Toronto symbol TCK.B, rose 8% this week after the company reached a new deal with the union at its Elkview metallurgical coal mine in B.C. The deal should end a two-month strike. Elkview is the second-largest of Teck’s six coal mines in B.C., so settling this dispute will help the company take advantage of rising demand for its coal by steelmakers in Asia. As well, the company continues to benefit from higher copper prices. It should also see higher demand for its coal and zinc as Japan rebuilds following last month’s earthquake and tsunami....

ENCANA CORP. $33.69 (Toronto symbol ECA; Shares outstanding: 735.3 million; Market cap: $24.9 billion; TSINetwork Rating: Average; Dividend yield: 2.4%; www.encana.com) is paying an undisclosed sum for a 30% stake in a proposed liquefied natural gas (LNG) terminal in Kitimat, B.C. Pipelines will pump gas from big new discoveries in the Horn River area of northeastern B.C. to the Kitimat terminal, which will then convert the gas into a liquid form. From there, tankers will ship the LNG to markets in Asia. Regulators must still approve the project, but exports could start in 2015. Encana is a buy....