Bank of Canada governor Mark Carney has been complaining recently that Canadian businesses are not doing their fair share to boost the economy. He is demanding that they spend some of their cash hoards, or return it to shareholders in the form of dividends so that they can spend it.
About 70 percent of all economic growth is from personal consumption, so the governor's words are warranted in the sense that cash sitting in corporate bank accounts cannot exactly help you and I go buy more stuff to boost national GDP. But what is the other alternative? Raise corporate taxes and use the increased government revenue to pay for infrastructure development and other government programs... Most business leaders, however, would protest at the prospect of tax increases so loudly that any common sense would be quickly thrown aside.
So who are the cash-rich Canadian companies referred to so much by Mark Carney? Below I have listed some of the biggest:
George Weston Ltd. ($3.6 Billion)
Air Canada ($2.38 Billion)
Research in Motion ($1.9 Billion)
Suncor ($5.1 Billion)
Teck Resources ($3.64 Billion)
Bombardier ($2.47 Billion)
For the Intelligent Investor, try to always keep a nice portion of your portfolio concentrated in cash-rich enterprises. As a shareholder, their bank account is your bank account, and you want to make sure to avoid businesses with a poor record of accumulating and saving cash on the side for emergencies.
Cheers, and Happy Investing!
Monday, September 17, 2012
Wednesday, September 12, 2012
Acquisitions are Good Investment Catalysts for Canadian Investors. Shoppers Drug Mart, Bell Alliant, Manitoba Telecom, and Corus Could be Potential Targets.
One of the most important things to examine regarding a potential investment opportunity is whether or not there might be a catalyst in the coming months or years. What do I mean by a catalyst? Something that will cause the price of the stock, and the associated value of your investment, to change. Potential catalysts might be a dividend increase, an upward revision or increase in a company's earnings guidance, a new product development et. cetera. Another key catalyst, and one which will be examined in this posting is that of a potential acquisition.
A potential acquisition generally causes an upward movement in the price of the company being acquired, and often a downward movement in price for the company making the purchase. Why? Existing shareholders of the company being acquired need to be compensated enough to encourage them to want to sell their stock, and the company making the purchase often has to pay well-over fair or book value for the company it is buying in order to get the shareholders to agree to the offer.
Are there any Canadian companies that might be the target of an acquisition going forward?
Below I have listed four Canadian companies that appear to be nice targets for a number of large and cash-rich businesses:
1) Shoppers Drug Mart (TSE:SC)
Shoppers is a healthy and profitable company with a loyal following. U.S. Based Walgreen Company (NYSE:WAG) is poised for Canadian expansion.
2) Bell Alliant (TSE:BA)
A declining land-line revenue stream, but an acquisition hungry and cash-rich partner in Bell Canada Enterprises (TSE:BCE).
3) Manitoba Telecom (TSE:MBT)
With limited growth, and a declining land-line revenue stream, Manitoba Telecom management could look kindly to cash-in and take a healthy buyout from Telus (TSE:T) or Bell (TSE:BCE).
4) Corus Entertainment (TSE:CJR.B)
With the rampant media consolidation happening in Canada right now, Shaw Communications (TSE:SJR.B) would be a likely suitor for Corus.
Full Disclosure: Matthew Clarke owns or indirectly controls shares in Shoppers Drug Mart and Bell Canada.