Sunday, May 29, 2011

Target Announces Canadian Store Locations. Kingston's Zellers to Close in 2013 & HBC to use Money to Revamp The Bay.

Target Corp. (NYSE: TGT) recently announced the list of its first 105 Canadian stores when it formally takes over for Zellers in 2013. Kingston's Cataraqui Town Centre Zellers will be involved in the first wave of store closures when it converts to the Target banner, as will 44 other Zellers locations in Ontario. The second wave of store conversions will be announced in September. 

In the next few days, Target will also pay HBC owner Richard Baker half of the $1.82 Billion price that is due for the 220 leases he sold to the American retailer. Money that Mr. Baker has stated will partially be used to revamp some of the corporation's struggling The Bay stores, and expand the successful Home Outfitters franchise into the United States.   

Many analysts have now begun speculating which American chain will be the next to make its Canadian foray. J.C. Penny (NYSE: JCP), Kohl's, (NYSE: KSS), and Macy's (NYSE: M) have all been mentioned, but it is doubtful any of them will make as large a splash as Target intends. Zellers was long viewed, and widely known, as a takeover candidate, but other Canadian chains are less obvious. 

As many investors know, the Canadian retail landscape is largely dominated by foreign enterprises and multinationals, but there are still a few companies, like Loblaw (TSE: L), Metro (TSE: MRU.A), etc. who own large amounts of valuable real-estate that could be sold to a hungry international retailing firm like Tesco from the UK. To be sure, Intelligent Investors must be mindful of the underlying value that some traditional Canadian firm's like Loblaw and Metro hold under their stores.

Happy Investing : )

Saturday, May 21, 2011

CPP Generates Big Returns. What Should Canadian Investors Learn from the Canada Pension Plan's Results?

The assets of the Canada Pension Plan, or the CPP, now sits at a whopping $148.2 Billion. For the year, it returned 11.9 percent, or about $15.5 Billion. This is good news for young Canadians, as the albatross hanging around their necks will soon be the hordes of baby-boomers seeking to collect pension payments all around the same time. To make these payments, younger Canadians will have to make larger and ever-increasing contributions into the plan to ensure that their parents and future generations will continue to be able to draw sustainable support payments. As long as the plan continues to experience higher returns, hopefully younger Canadians will be able to keep more of their hard earned money. Importantly, the Intelligent Investor must now ask how the plan generated such positive results?

CPP management said that their time horizon and investment views extended to the longer-term, with many investments made for the next 50-75 years! This long-term thinking has helped the plan to snap up a number of bargains during recent economic and financial turmoil around the world. These bargains should help the fund to remain positive in the coming decades.

Importantly, most of the opportunities for the fund were found outside of Canada. Presently, 51.7 percent of the fund's holdings are outside of the country, which is very interesting considering Canadians are apt to invest the vast majority of their hard earned wealth within domestic boundaries. With the rise of the Canadian dollar over the last year, foreign assets have become cheaper and the fund is utilizing this fact to Canadians' long-term advantage. The Intelligent Investor must do the same with their own portfolios so as to ensure that their risk and exposure is not so concentrated in Canada, which, by any stretch of the imagination, is not a large country for investment purposes. When you limit your opportunities to the Canadian marketplace, you eliminate the possibly to take advantage of investing in thousands of companies in other countries, which are often growing much faster than one's at home.

On the whole, stocks make up about half of the CPP, bonds 30 percent, and real-estate and infrastructure the remainder. Clearly, therefore, the management at the CPP trusts in the long-term opportunities to be found in the international stock markets, where many Canadians fear to tread. Most recently, the CPP has entered into an arrangement with the other members of a new entity titled "Maple Group," in the hopes of buying the Toronto Stock Exchange for $3.6 Billion. As an owner of TMX Group, (TSE: X), the operator of the Toronto Stock Exchange, I think this deal is a very good offer, and personally, believe that it is superior to a merger with the London Stock Exchange.

It is always a good idea to pay attention to what the large pension funds are doing with their money, as it is often pension funds that higher the savviest and most astute investors, especially the CPP. To be sure, international equities are clearly going to form the basis of the fund going forward, and this should be a lesson for many Canadians to personally increase some of their exposure in this area, as it is often badly neglected.

Happy Investing : )

Matthew Clarke.

Friday, May 13, 2011

TMX Group Posts Great Results, but Merger with London Exchange Still Ahead.

The Intelligent Investor Top 10 Pick, TMX Group (TSE: X), the operator of the Toronto, Montreal, and Boston Exchanges, today announced positive and well-received financial results. For the first quarter of 2011, revenue for the exchange group was $175 million, up 17 % over last year. Net income was $64 million, up 13 percent, and earnings per share was $0.84, up 9 percent. 

Many investors have been worried that TMX Group's business is slowly being eaten away by Canada's major banks, which began their own competing stock trading platform recently. These fears, though somewhat true, have clearly not materialized as seriously as many thought. TMX is posting strong trading volumes and has developed a number of key growth areas, such as options, futures, and natural resource exchanges. To be sure, in the company's quarterly report, it states that its "energy business continued to flourish," and that volumes at its Boston Options Exchange soared 79 percent... very good news!

The huge question to be answered regarding the TMX Group, of course, is its merger with the London Stock Exchange. Would this merger be a good deal for shareholders? It would allow the companies to experience greater economies of scale and realize substantial cost savings, while at the same time allow it to expand internationally in Europe and developing countries that will be in need of financing for natural resource development, a speciality of both London and Toronto.

For the Intelligent Investor, TMX Group's recent results should be seen as a sign of the company's continued viability, profitability, and success in both Canada, and hopefully international markets as well. Not to mention, with its healthy dividend of almost 4 percent, owning this company pays. 

Happy Investing, and for more information on this topic:

Wednesday, May 11, 2011

The World's Most Valuable Brands. Apple, Google, and IBM Take the Lead.

Reuters news agency has released a list of the world's most valuable brands. The annual BrandZ study reveals that Apple (NASDAQ: AAPL) now leads its rivals Microsoft and Google by a wide margin. The iPad maker's brand is now worth an estimated $153 billion dollars, which amounts to about half of the company's market capitalization. Simply put, consumers are now far more apt to pay more for many of Apple's products due to the company's brand name recognition.

Like most successful luxury brands, Apple has been able to use higher prices to reinforce the value of the brand in the consumer's eyes. Hype and effective marketing of its products have now left consumers clamouring for every new gadget or device the company releases, which has allowed the company to reap profit margins in the range of 20 - 30 % after taxes and all other expenses have been paid. That is a healthy margin that leaves the company with lots of room for shareholders to breathe.

The Top Brands by Value:

1. Apple
2. Google
3. IBM
4. McDonald's
5. Microsoft
6. Coca-Cola
7. AT&T
8. Marlboro
9. China Mobile
10. General Electric

Clearly, technology companies dominate the ranking this year, with old stalwarts like McDonald's, Coke, Marlboro, and GE rounding out the rest. 

Why cigarette maker Marlboro? There are still many loyal cigarette consumers in North America and Europe, and though it is declining slowly here, the popularity of smoking is booming in Asia, where there is often a fascination for everything American. The same is very much the case for McDonald's, which is seeing a rise in the value of its brand as Asian consumers develop a taste for unhealthy fast-food of the North-American variety.

As a shareholder or investor, it is always important to pay close attention to the brand awareness of consumers. Brands provide a moat, or a defensive wall around your business that is often very powerful at preventing competitors from stealing away your customers.

Happy Investing and be sure to own some top brands in your portfolio's. 

Thursday, May 5, 2011

Queen's University Develops PaperPhone, a new Paper-Thin Computer / SmartPhone / E-Reader!

Queen's University in Kingston has announced the development of a new paper-thin and bendable computer/smartphone/e-reader. The school's Human Media Lab has named it the "PaperPhone" and it measures 9.5 centimetres diagonally. Interestingly, it can even be rolled up and stored like a regular piece of paper. 

Queen's has stated that the device is probably about five years away from being available to the mass market, but this is surely a game-changing technology that many companies will love to get a hold of. RIM, Apple, Microsoft, and others will undoubtedly be paying close attention to how this develops.

The prototype cost $7,000 for Queen's to make, but within a few years the school should have that number way down. The key to the future prosperity of this invention is that the price needs to come down low enough so that consumers and businesses will conceivably own multiple e-paper sheets of many sizes. They could utilize them to cover desks, office walls, and board room tables. To be sure, the possibilities in the institutional and corporate environments for this type of technology are immense.

Eventually, the devices will even be able to be folded into your pocket so that you can carry around a huge screen for presentations etc.

For more information, check out the link from Queen's University below:

Wednesday, May 4, 2011

Loblaw Earnings Rise $30 Million, but Supply Chain Investments Hurt Results.

According to Reuters News Agency, Loblaw Companies Ltd (TSE: L), owner of Loblaws, No Frills, Zehrs, PC Bank, and other ubiquitous brands, posted a higher quarterly profit on Wednesday. Canada's leading grocer, however, said investments in information technology and supply chain infrastructure weighed on its operating income for the year.

First-quarter earnings rose to C$162 million, or 58 basic Canadian cents a share, from C$132 million, or 48 basic Canadian cents a share, a year ago, but revenue fell 0.6 percent to C$6.87 billion. The quarter, essentially, was not bad, but the company seriously needs to get its infrastructure and supply problems under control as it has been weighing on earnings and disappointing shareholders for years. Rivals, such as Metro (TSE: MRU.A) and Wal-Mart (NYSE: WMT) have not been experiencing the same disruptions in business as of late, and Loblaws' shareholders are suffering as a result. If you are a Loblaws shareholder, the company is still generating reasonable enough profits to maintain your shares, but be careful about more impending supply-chain and management problems going forward.

Tuesday, May 3, 2011

Suncor Generates Huge Profits From the Oilsands, but Might Have to Take a Loss on Libya.

When Suncor (TSE:SU) bought Petro-Canada, it is doubtful that they anticipated the amount of trouble their Libyan assets would cause the company and its shareholders. Having announced huge profits today of 1.02 billion dollars for the last three months, the company is increasing its dividend by a penny per share. And with cash-flow coming in at 2.4 billion dollars for the quarter, the company has plenty of money to still invest in the expansion of its oil-sands operations. So why is the stock down almost five percent on the news? 
Trouble at its operations in Libya due to the uprising have forced them to reduce production in the country and perhaps even "write-off" or record a loss on the value of its assets there. On it's balance sheet, the Libyan operations are currently valued at about 900 million dollars, but if turmoil in the country continues or gets worse, Suncor will be forced to re-evaluate the value of those holdings.
Essentially, Suncor, operationally, is doing great, and money is pouring into the company, but assets that it holds in both Libya, and now Syria, could be in serious trouble. For investors, this means that on a cash basis, there is nothing to worry about, but there might be an accounting loss in the near future if Libya does not turn around soon. 

BlackBerry to use Bing as Microsoft Contends with Google's Android now Leading the Smartphone Market.

Research in Motion (NASDAQ: RIMM, TSE: RIM) has announced that Microsoft's Bing search engine, the perennial loser in the struggle for search engine market share, will be the default engine on it's BlackBerry devices. This announcement was made by Microsoft (NASDAQ:MSFT) CEO Steve Ballmer at BlackBerry World, the industry conference hosted by RIM in Orlando, Florida.

Rival Google (NASDAQ: GOOG) dominates the search market and this move by Microsoft is hoping to take away some of Google's dominant market share. Google's Android phones, however, are beginning to take hold of the smartphone market as well, which has been bad for RIM and many other handset makers. Many industry watchers say that the Android phones are more user-friendly and open to third-party apps than are the phones of their rivals.

According to recent Nielson surveys, Android now has a 29% market share of smartphones in the US. Blackberry is now at 27%, while Apple's sits at 27% as well. Of course, it is important to note that Apple and Blackberry are also handset makers, while Google is not, they simply generate the operating system or OS.