matisse capital management

Highlights from Toronto Dominion Bank's 2009 Report

I recently reviewed Toronto Dominion Bank's (TD) annual report, year-end 2009.  I am a shareowner, so I receive a copy each year.  The president writes that while "there are some positive signs we are in a recovery...we expect the underlying economic conditions will remain lackluster for the foreseeable future." Here are some of the report's highlights:

-Tier 1 Ratio = 11.3%, up from 9.8% at year-end 2008.  The bank issued 35 million shares in 2009 at C$39.50 per share to boost this.

-Total shareholder return was 14% for the year. 

-Dividends were unchanged from 2008 at C$2.44 per share, annually; the payout ratio was 46%.

-Net income was C$3.8 billion, down 15.4% from C$4.5 billion.

-Earnings per share  were $C3.47, down from C$4.87 in 2008, due to a decrease in the fair value of derivatives, restructuring charges, and a decrease in the value of credit default swaps.

-Total impaired loans = C$1.75 billion, of which more than half was in the US, however less than 25% of this was real estate related.

-Total assets were C$557 billion at year-end 2009, down from $563 billion in 2008.

-TD is one of only a few global banks to retain an Aaa-rating from Moody's

Disclosure:  The author is long Toronto Dominion Bank (TD).

Highlights from Royal Bank of Canada's 2009 Report

I recently reviewed Royal Bank of Canada's (RY) annual report, year-end 2009.  I am a shareowner, so I receive a copy each year.  The bank projects modest growth in income for this year, and forecasts Canada's economy to grow by 2.6% and the US economy by 2.5% in 2010.  Credit quality is expected to remain an issue, particularly in the US, although RY projects modest improvements in the US housing market for 2010.  Generally 2010, is expected to be a year of stabilization.  Here are some of the report highlights:

• Tier 1 Ratio = 13.0%, up from 9.0% at year-end 2008
• 2009 Return on Equity (ROE) was 11.9%
• Dividends were unchanged from 2008 at C$2.00 per share, annually; the payout ratio was 78%
• Net income was C$3.8 billion, down 15.4% from C$4.5 billion
• Total market capitalization was $C77.7 billion (it is currently $C79 billion).   The company issued both common and preferred shares in 2009 to boost its Tier 1 ratio.
• EPS = $C2.59, down from C$3.41 in 2008, due to increased provision for credit losses, increased expenses, and a one time goodwill impairment charge
• The C$1 billion impairment charge was taken against US operations for declines in the housing market and in the market value of US banks.

Analysis Brief: Xilinx Inc. (XLNX)

Xilinx (XLNX) beat the Street consensus in the second quarter.  It has also raised its dividend from $0.14 to $0.16, and currently has a 3.0% yield, high for the tech industry.  Xilinx is a semiconductor company and the global leader in programmable logic solutions with a 51% market share.  The company was founded in 1984.  More after the jump:

Reliving the 70's Stock Market?

Wall Street Journal has a great article titled "Flashbacks of the 1970's"  (see chart, left) interviewing brokers working then.  To many, it feels like we are reliving that period.  The Dow entered the 70's at 800 and left them near 850, after two 1,000+ rallies.  It "hit an all-time high of 1051.70 in January 1973 but from there it was all downhill as the oil crisis...sent stocks into a 45% tailspin." A broker added: "There was almost no interest in being in the stock market...It felt like just about any stocks bought in 72-73 turned to dust."

Dollar Cost Averaging the Recession

Can you call the bottom to the Dow or S&P?  I know I can't.  Of course the bottom is the best place to buy, but if you're not sure about exactly when it will occur, dollar cost averaging can be your ally.  I believe this might be a good time to start accumulating shares of industrials, and other companies that have been beaten down, and if you think stocks will go down over the near term, i.e. the next one to two years, or that they will be range bound, this can be a good way to buy.  (Note this is a repost, but more appropriate now than ever).

Analysis Brief: Sysco Corp. (SYY)

Sysco Corporation (Ticker: SYY) recently announced that it was increasing its quarterly dividend from $0.22 per share to $0.24 per share, left.  As there aren't many companies increasing dividends these days, I decided to take a detailed look at Sysco, to see if I might be interested in investing.   The company was founded in 1969 and is headquarter in Houston, Texas.  More after the jump.

Canadian National (CNI) - Best Railroad for This Recession

Canadian National Railway (CNI) reported its second quarter results on July 21; earnings per share declined 6% from last year to $0.94 (US) and net income was down 11%.  Even so, CNI shares are up 4% since last week and up 12% since the beginning of the year, while the Dow is down about 12%.  Why is CNI so steadfast in this recession; aren't railroads sensitive to the economy?  One reason could be the just-announced buyback of 25 million shares.  But I believe there are many other important factors that make this stock a compelling long-term value play.

Analysis Brief: Syngenta AG (SYT)

Recently, Forbes posted the following headline: “Food Crisis Spurs Calls for More Research.” The article raised questions about agricultural sustainability and food shortages around the world.  Because of these shortages, many countries are increasingly looking to agribusiness for ways to increasing productivity, so the long term prospects for this industry are bright.  In fact, Syngenta expects the global seeds industry to grow 60% in the next 10-12 years.

Analysis Brief: McCormick & Company

McCormick's (MKC) recently anounced its second quarter results and net income was up 32% over the second quarter 2007, at a time when many companies are seeing their incomes decline.  Since the beginning of the year, the stock is up 2.8%, while the Dow is down about 13%. McCormick & Company (MKC) is the global leader in the production and distribution of spices, seasonings and flavors for the food industry.  It has the number one market share in the US, UK, Canada, France and China.  Here are some of its brands, other than the spices sold under its own name: Schwartz Herbs (UK), Ducros (Europe), Zatarain’s, Club House (Canada), and soon, Lawry’s, when its acquisition from Unilever is complete. 

Analysis Brief: Companhia de Bebidas Das Americas (ABV)

Are the shares worth the price? No doubt you recognize many of the beer brands pictured to the left:  Bohemia, Labatt’s, Brahma, Stella Artois.  They are all products of AmBev (ABV), the world’s fifth largest brewer and the leader in Latin America.  In 2004, AmBev joined forces with Interbrew of Belgium, creating InBev, the world’s largest brewer, or brewing "cooperative."  I have considered buying ABV shares for some time and decided to do some research.