RiskGrade Chart - Oct-07

Below is a RiskGrade chart for stocks that currently pass my various screens. Only Samuel Manutech and Domtar fall below the red line and thus should not be considered further.



Below is a RiskGrade chart for stocks that currently pass my "buy-and-hold for two months" screens.

Table of Key Values

Below is a table which provides key values for some of the Canadian stocks I currently own.

Analyst Recommendations

Following are the analyst recommendations for Canadian stocks which I have recently purchased or am about to purchase. A value of 1.0 is assigned to stocks which are rated as a "Strong Buy" and a 5.0 is assigned to stocks which are rated as a "Sell".

Energy Savings Income (SIF.UN) ... 1.00
Trinidad Energy Services Income Trust (TDG.UN) ... 1.25
Focus Energy Trust (FET.UN) ... 1.33
Major Drilling (MDI) ... 1.38
Celtic Exploration (CLT) ... 1.50
Martinrea (MRE) ... 1.58
Domtar (UFS) ... 1.82
Toromont (TIH) ... 2.17
Canadian Western Bank (CWB) ... 2.50
Stella Jones (SJ) ... 2.67
Newalta Income Fund (NAL.UN) ... 2.75
North West Company Fund (NWF.UN) ... 3.00

It will be interesting to look back a year from now to see how valuable the analysts rankings were.

Out of curiosity, I put the above noted stocks in a RiskGrade chart so I can look at it in twelve months to see if there is any value in the chart in terms of predicting whether a stock is reasonably priced given the risk associated with it.

Recent Purchases

This week I have added to my holdings in Stella Jones (SJ) and Martinrea (MRE). Also, I purchased shares of Le Chateau (CTU.A). Le Chateau is a leading Canadian brand in specialty retailing offering a broad array of contemporary fashion apparel, accessories and footwear for women and men. The Le Chateau brand is sold exclusively through the Company's 195 retail locations across Canada, except for five locations in the New York City area. The Company's outlets are primarily found in major urban shopping malls and complemented with high pedestrian-traffic, street-front locations. The Company has a 47-year tradition of vertical integration from design and manufacturing to retailing.

Le Chateau was trading at a P/S of 1.08, a P/E of 12.78, has interim revenue growth of 15.7% and interim earnings/share growth of 36.4%. Add to that a 3.5% dividend. Earnings per share has increased every year since 2002.

Another Canadian addition to my portfolio this week is BFI Canada Income Fund. BFI Canada Income Fund, through its subsidiaries, is one of North America's largest full-service waste management companies, providing non-hazardous solid waste collection and disposal services for municipal, commercial, industrial, and residential customers in five Canadian provinces and nine states in the United States. The Fund serves over one million customers with vertically integrated collection and disposal assets. BFI has increased its payout every year since 2002 and currently yields 6.6%. Interim revenue is up 15.2% and interim earnings/share is up 43.5%. On September 07, 2007, ScotiaCapital issued an Outperform rating for BFI.

Aggressive Small Cap Purchases

I recently purchased shares of Sino-Forest, Allen Vanguard, Timminco, ADF Group, Migao and Red Back Mining. Fortunately, I purchased Timminco just before it jumped 30%. I have a 49% profit in Timminco already. Too bad they all don't work out that way!

Energy Savings Income Fund

Today I added to my holdings of Energy Savings Income Fund. Energy Savings' business involves the sale of natural gas and electricity to residential, small to mid-size commercial and small industrial customers under long-term, irrevocable fixed price contracts (price protected for electricity). Energy Savings offers natural gas in Manitoba, Quebec, British Columbia, Illinois and Indiana and both gas and electricity in Ontario, Alberta and New York and, effective May 2007, electricity in Texas. By securing the price for natural gas or electricity under such contracts for a period of up to five years, Energy Savings' customers reduce or eliminate their exposure to changes in the price of these essential commodities.

Energy Savings recently announced is 18th distribution increase and currently yields 8.1%. Its earnings are stable (r2 = 0.90)

Highlights for the quarter ended June 30, 2007 included:

- Customer base reached 1,678,000, up 6% year over year. Gross additions through marketing were 95,000 up from 62,000 in Q4 and 65,000 in Q3.

- Sales (seasonally adjusted) up 17% reaching $374.3 million year over year.

- Gross margin (seasonally adjusted) of $55.3 million up 15%.

- Distributable cash after gross margin replacement of $30.8 million ($0.29 per unit) down 2%.

- Distributable cash of $26.7 million after all marketing expenses up 24%.

- Net income of $25.9 million, up 135% from $11.0 million year over year.

- Distributions up 19% year over year ending the quarter at $1.165 per unit with a subsequent increase to $1.21 per unit announced effective the September 30th payment.

September RiskGrade Chart

Below is the RiskGrade vs Return chart for my current holdings. Falling below the line are Domtar, Chemtrade Logistics, Molson Coors, Innvest Real Estate Investment Trust and Toromont. Stocks below the red line are generating insufficient return for the amount of risk.

RiskGrades for Aggressive US Stocks

Below is a RiskGrade vs Return chart for a number of US stocks that I considering purchasing. By posting these charts here I hope to review the returns from the stocks at some point in the future to determine if there is any value in the chart.

Wajax Income Trust

Today I purchased shares of Wajax Income Trust (WJX.UN) which meets one of my value screens.

Wajax Income Fund is a leading Canadian distributor and service support provider of mobile equipment, industrial components and power systems. The Fund was created to indirectly invest, on June 15, 2005, in substantially all of the assets and business formerly conducted by Wajax Limited.

Wajax has three core distribution businesses engaged in the sale and after-sales parts and service support of mobile equipment, power systems and industrial components, through a network of over 100 branches across Canada. Its customer base spans natural resources, construction, transportation, manufacturing, industrial processing and utilities.

My average cost per share was $34.06. Wajax has had increasing return on equity (ROE) for the past three years, has had increasing revenue for the past three years, is reasonably priced and increased its monthly payout to $0.33 ($3.96 annualized) for a yield of 11.6%. Today's closing price of $34.03 is 9.1% below its July high of $37.45.

The weakness of the stock price is the result of overall market decline plus news that earnings in the past quarter were a little weak. Had one-time items not been included, Wajax's earnings per share would have been marginally better than the same quarter in 2006.

Canadian Western Bank

Canadian Western Bank has passed my value screen and I decided to increase my holdings. As I focus on small and mid-cap stocks, I chose not to purchase any of the larger banks even though there seems to be a consensus that now is a great time to buy them.

Given the strength of the economy in western Canada, I believe that shares of CWB will outperform the big banks in the coming year.

Canadian Western Bank has 33 branch locations and is the only Schedule I chartered bank headquartered in and regionally focused on Western Canada. The Bank, which has total assets of $7.3 billion, specializes in mid-market commercial lending and offers a full range of retail services. Trust services to independent financial advisors, corporations, income trusts and individuals are also provided through the Bank's wholly owned subsidiaries, Canadian Western Trust Company and Valiant Trust Company. Canadian Direct Insurance Incorporated is a wholly owned subsidiary providing personal automobile and home insurance directly to customers in British Columbia and Alberta.

North West Company Fund

The North West Company is a leading retailer of food and everyday products and services to rural communities and urban neighborhoods across Canada and Alaska. The Company operates 203 stores under a number of trading names, including Northern, NorthMart, Giant Tiger and AC Value Center, and provides catalogue shopping services through its Selections catalogue in northern Canada.

While the TSX shed 222 points today, shares of North West Company Fund (NWF.UN) gained 0.78%. Shares of NWF.UN are currently yielding 4.2%, interim revenue is up 9.7%, interim ea/sh is up 15% and the P/S is 1.04.

From yesterday's press release: The North West Company Fund (TSX:NWF.UN) and Cost-U-Less, Inc. (NASDAQ:CULS) jointly announced today that they have entered into a definitive agreement under which The North West Company will acquire Cost-U-Less, a leading operator of mid-size warehouse stores in remote island communities in Hawaii, the South Pacific and the Caribbean, for US $52.2 million, or US $11.75 per share in cash. Based on how well NWF.UN shares held up today, it appears that the market has reacted favourably to the announcement.

Late today, I added to my holdings of North West Company Fund.

Covestor

I recently learned about a new site called Covestor. The following information is taken from the Covestor site.

What is Covestor?
Covestor is:

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A real-trade sharing service for proven self-investors. To share your real investment decisions, gain recognition and earn fees by helping others
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Where all data is private, normalized and anonymous, and membership is free.

With Covestor, you can:

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Build a track record. Professional grade tools measure and display your normalized results. These validate your performance and build you a track record comparable to professional hedge funds. Our secure broker link makes it effortless to upload and update your holdings.
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Choose how widely to share your activity. You choose whether to share your track record publicly or just with other Covestor members. Covestor 'widgets' also let you export your verified performance and rankings to your personal blog. Members get free access to all Covestor profiles, transactions, and commentary.
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Get feedback and ideas from other Members. See what other members are investing in and why, in near real time. In addition you can benchmark your own performance, and see where you rank.
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Earn financial rewards. Covestor will be adding a regulated investment service. If you choose to be compensated you will receive an annual data fee for every follower you have. Find out more.


I have an account at Marketocracy.com but I can never earn a cent from it unless an investment firm offers me a position. With Covestor, the participants can earn money if their stock selections prove to beat the market and they acquire followers. I am considering joining.

Increasing Dividend Stocks

Following is a list of Canadian stocks which have had increased dividends for each of the past three years, have TTM earnings/share greater than the dividend/share, have enterprise multiples less than 9 and have positive interim revenue growth. The dividend yield is based on the closing price on August 17, 2007.

RiskGrade Update

I neglected to enter my cash holdings in RiskGrades earlier. Now that my cash holdings have been entered my RiskGrade is 62 which puts my holdings in the "Balanced Plan" category.

RiskGrades

I just became aware of the RiskGrades site which you will find here. After registering on the free site, you can enter your stock holdings and view a risk analysis of same. You can enter both Canadian and US stocks. As well as analyzing the risk of your assets, the site will also perform "What If" analysis. For example, it will calculate the theoretical loss your assets would incur if we experience another Black Monday.

I entered my stock holdings and learned that my portfolio has a RiskGrade of 82 and is 1.01 times as volatile as the S&P 500.