Tuesday, June 28, 2011

Harper Government Starts Privatization Program. Atomic Energy Sold to SNC-Lavalin of Canada.

The Conservative government's privatization program has begun with the sale of Atomic Energy of Canada Ltd. (AECL). Soon the Harper government will be announcing that Canadian owned SNC-Lavalin (TSE: SNC) will be the buyer of the country's nuclear assets.

Long an albatross for the Canadian taxpayer, AECL has cost billions of dollars in subsidies to remain afloat as contracts for the sale of its equipment have not come in nearly high enough to cover the organization`s huge costs for research, development, and maintenance. It experienced massive cost over-runs on most of its projects and in the last two years alone has milked the taxpayer to the tune of $493 million.

Sadly, under the terms of the deal, Canadians will be on the hook for any cost over-runs that are experienced at projects that are currently under development. These would be projects in New Brunswick, South Korea, and the renovations at Chalk River.

Of course, many industry observers are wondering whether or not SNC-Lavalin, as a shareholder owned private corporation, will be able to maintain the existing fleet of CANDU reactors, and whether they will be able to conduct enough research to compete with the global leaders in nuclear energy, like General-Electric. The short answer... of course not. Under government watch, the program soaked up tax dollars to remain afloat, under SNC-Lavalin's watch, costs will have to be slashed if it ever hopes to make the unit profitable. How can they slash costs? Reduce maintenance, begin layoffs, and slash R&D!

To be sure, this is probably the slow end to AECL and Canada's experiment in the nuclear energy business. Good news for any hope to get this deficit under control.

Happy Investing, for more info:

Sunday, June 26, 2011

Getting Back to Business for Research in Motion (RIM).

Saturday's Globe and Mail contained an excellent article about some of the problems at Research and Motion (TSE: RIM) and how they might get back on track in terms of advertising, development, and, most importantly, share price. 

"It has been a miserable year for Canada’s most important tech company. Almost everything that could have gone wrong has: A series of sub-par quarterly earnings and profit warnings, coupled with delays in new product launches, have hammered RIM’s share price, which started the year at about $60 and now trades at less than $30. The company’s two bosses have faced pressure from some investors and analysts to shake up RIM’s management structure, and perhaps even hand control to someone else."

Read the rest of the article below:

Happy Investing.

Friday, June 24, 2011

Wal-Mart Invading Urban Canada. New "Wal-Mart Urban 90 Stores" to Attract Even More Buyers.

Wal-Mart (NYSE: WMT) recently announced that it is going to begin opening urban stores in Canada. The first concept store will be opened on an old Zellers property that it will be acquiring from Target. The format of the store will be named "Urban 90," and it will be located in the east-end of Toronto.

The new Wal-Mart's are intended to fill a gap that Wal-Mart experiences in Canada currently. Since the company is usually located on very large suburban lots, they have been unable to reach many dense urban buyers. They hope that the new stores will allow them to expand further into a Canadian marketplace that they have largely saturated.

The new Urban 90 format, being located in dense urban environments, is going to hit the traditional retailers and grocers the hardest. Many Giant Tiger, Loblaws (TSE: L), Metro (TSE: MRU.A), and Sobeys banners are located in urban environments that currently are free from Wal-Mart's tentacles. Soon, however, the ubiquitous yellow smiley face will shower Canada's urbanites as well. Canadian retail investors beware!

Happy Investing, and for more info:


J. Crew Coming to Canada. Reitmans, Le Chateau, and Others Beware... Consumers are Fickle.

American clothing retailer J. Crew will be opening its first Canadian store this August. The new location will be in Toronto at the Yorkdale Shopping Centre. In addition to Target, there is going to be a slew of U.S. retailers heading north to take advantage of a more stable and seemingly robust consumer base.

Other Canadian clothing retailers like Reitmans, Joe Fresh, (TSE: RET) and Le Chateau (TSE: CTU.A) are really going to start feeling the pinch as there is only so much consumer spending power to go around in a country of 33 or so million people. Both stocks have been hammered as of late and could pose a potential buying opportunity to any adventuresome investors who dare to enter the clothing space, which is notorious for being fickle and difficult for investment consultants like myself to predict. To be sure, Reitmans has a large dividend of about 5 percent, but a clothing company can burn through money very quickly with advertising and price wars a constant threat.

So Intelligent Investors beware, another competitor in the clothing space means more hands in the consumers' pockets.

Happy investing, and for more info go to:


Thursday, June 23, 2011

Research in Motion (TSE: RIM) Decline Way Overblown. Should You Buy RIM Before it is Taken-Over?

I must admit, as a recent owner of Research in Motion, I am a little biased in saying that the recent sell-off in the stock is overblown. Down from over $60 per share in March of 2011, to the high $20's, on the announcement of slower growth and late product development is more than a bit much. Of course, there are many bears in the proverbial Wall Street woods that claim Research in Motion is about to go the way of Palm and other early device makers, but this is not just another dog stock with terrible fleas.

The usual story for defunct technology companies is that they begin to burn cash quicker than they can make it. To be sure, many even have to borrow hordes of cash from investors and banks just to stay current with new developments and recent trends. RIM does not fit this bill. It has over $2 billion of cash in the bank, and it earned almost $700 million in the last quarter alone! To be sure, growth is slowing... but that does not mean everyone should just abandon ship and find the nearest lifeboat. They are at the end of a product cycle and it will take some time for them to release and market their new QNX operating system products, like those similar to the Playbook.

The other reason, which is clearly starting to gain traction, is that investors are starting to really smell a takeover target. When this happens, a floor starts to be created in the price of a stock. According to the CBC, potential "suitors mentioned in the past have included the likes of Microsoft, Oracle, Cisco, IBM and Hewlett-Packard." Each of these companies has deep pockets that could gobble up and enjoy RIM for breakfast. In addition, there are many great technology companies that would love to seize all of RIM's technology in one fell swoop. Why spend billions inventing your own systems when RIM's could be had for much less... plus you get the cash in their bank account remember. Most estimate the cost of buying all of RIM at around $20 billion. This is a large number, but not that large for the technology giants of the world's stock markets.

Happy Investing and be sure to give RIM a look in the near future.

Here is some additional information on this story:


Wednesday, June 22, 2011

LSE Special Dividend for TMX Shareholders. Hopes to Fend off Maple Group.

In its attempt to woo reluctant TMX Group (TSE: X) shareholders, the London Stock Exchange Group has announced that, should they agree to merge, TMX Group shareholders will receive a one time special dividend in the amount of $4 per share.

This is great news for current holders of the stock as it is evidence that the LSE's battle with Maple Group, a consortium of Canadian financial heavyweights, is intensifying and that it will undoubtedly result in a higher amount of cash in the pockets of TMX Groups' owners.

The key proxy vote to decide whether or not TMX and LSE will merge is to occur at the end of the month, and if it does, the cash payment will be made in the Autumn of 2011. Previously, I had been siding with Maple Group, believing that the cash portion of the LSE's offer was too low. This new announcement changes the equation and definitely makes LSE's offer more compelling. To be sure, this website must now steer its Intelligent Investors toward voting yes to the merger. Now it offers a reasonable amount of cash and growth in a future international and domestic enterprise... you can, as they say, "have your cake and eat it too," with this deal.

Happy Investing, and to read more:


Wednesday, June 15, 2011

Suncor to Abandon Gaddafi's Libya, and Air Canada Strike to Forcibly End.

Top News Stories for the Day:

Suncor (TSE: SU) has announced that it will be pulling out of Libya indefinitely until the departure of Omar Gaddafi from power. To be sure, it will have to take a write-down on its assets in the country should it take longer than the NATO Allies expect to gain power for the rebels. However, it is probably only a matter of time, whether it be from old-age or unnatural causes, until Suncor can get its pumps in Libya going again and returning cash to shareholders. It is, of course, probably no coincidence that Canada has a number of aircraft bombing Gaddafi's compound and that Canada also has a significant monetary interest in getting the country into Allied-friendly hands.

Air-Canada's (TSE: AC.B) striking workers will soon probably be forced back to work by federal government legislation. Clearly, this would be a huge blow to the union and its activists as the right to strike is the biggest bargaining tool that a union and its workers possess. Our current pro-business Conservative government is making a strong indication to the labour community that it is on the side of big business and the country's shareholders. National business and employee profits first, employee rights, secondary. For investors, this is a huge win as labour costs for airlines, as in most businesses, eat into profits. If you can force labour to work, regardless of their decision to strike, then you have, for all intents and purposes, destroyed the labour movement in the country. Air Canada is a PRIVATE business, and thus its labour situation should be the company's concern, not an issue involving government legislation. 

More information on these two stories from the CBC:

Happy Investing : )

Sunday, June 12, 2011

Telus and Microsoft Team up to Offer Skype Phones.

Telus, (TSE: T), realizing the growth in the market for data fees on its cellular network, is teaming up with Microsoft's (NASDAQ: MSFT) Skype to permit smartphone users to use the once derided service.
The partnership, announced this week, is the first such partnership to exist in Canada. Previously, carriers, such as Telus, Bell, and Rogers, had feared allowing Skype to be used on their networks because it has the potential of reducing their revenues, especially for long-distance calls. But the rapidly changing landscape of the telecommunications industry, with the advent of social networking and text-messaging, has forced carriers to consider new ways to ensure that customers stay tied to their telephones in an era of less voice communication. 
To be released this summer, the Skype branded phone will be an LG Optimus Black phone that comes pre-loaded with international Skype calling credits for users to enjoy. Of course, as many users of Skype already know, Skype-to-Skype calls will be free, but traditional calls to other carriers will require a monthly subscription or a per-minute payment. 
Some benefits that Telus customers will enjoy with the new Skype plan will be having Skype credits added directly to their Telus bills and free technical support to help Telus customers use Skype.
Of course, to utilize the Skype service, a conventional Telus plan is still required... so they are not losing anything here, it will generally only be a net-addition to total revenues as there is undoubtedly a revenue sharing agreement between both Microsoft and Telus. 
The conclusion for the Intelligent Investor: A big thumbs up to both Telus and Microsoft on this one. A great new revenue stream for both of them in an era of intense and ever-increasing competition. It allows both of them to offer something new and different in a highly crowded marketplace.