Friday, September 28, 2007

Investing Based on Demographics - SC

Shoppers Drug Mart - SC

“Provides pharmacy products and services through retail drug stores across Canada. The company licenses its drug stores to pharmacists or associates who operate a retail drug store at a specific location in Canada using the company's trademarks, Shoppers Drug Mart”

Dividend Yield: 1.2%
ROE: 16.53%
PE: 26X
Estimated 2007 PE: 24X
Estimated 2008 PE: 21X

THESIS: the thesis behind this company is the same as WAG and CVS: older people take more drugs and fill more prescriptions. SC should also benefit from seniors buying more beauty items in an effort to keep looking young as well as more impulse items simply because they’ll be in the store more. SC is also now has cosmetic consultants that are placed right by the entrance of many of their stores to target older women who want to stay looking good. I think SC is a great company but would not be a buyer at these valuations.

Wednesday, September 26, 2007

On Vacation

I’ll be on vacation from tomorrow until October 9th. However, I’ll try get at least a few post in over that time there’s no need to cancel your internet subscription and sell your computer.

Monday, September 24, 2007

Thompson Corp. (TOC)

I wanted to take another break from the demographics theme to talk a little bit about TOC.

"The Thomson Corporation is a leading global provider of integrated information-based solutions to business and professional customers.
Thomson provides value-added information, with software tools and applications that help its customers make better decisions, faster. We serve professionals in the fields of law, tax, accounting, financial services, scientific research and healthcare."

Thompson Corp. is the kind of company I want to own and would fit perfectly into my conservative, dividend growth oriented portfolio. I’ve been watching TOC for a number of years and just haven’t been able to pull the trigger based solely on valuation. As you can see from the below numbers they do still appear expensive from both an earnings and cash flow perspective. However, I believe that their recent acquisition of Reuters could allow the company to capitalize on the synergies between the two companys and really allow them to break out of the sideways trend they’ve been in for the last 2 years. The merger also makes them the largest provider of information to the financial service sector which will really gives the company a global presence.

Other positives of TOC include:
-many steady streams of income from a number of subscription based medical, legal, scientific and financial professions.
-history of increasing dividends.
-positioned for growth as our economy (and economies around the world) are rapidly becoming information based where knowledge and information is required 24/7 and on demand.

Dividend Yield:2.3%
5 year Avg. Dividend Yield: 2.0%
ROE: 9.04%
PE: 26X
Estimated 2007 PE: 25.9X
Estimated 2008 PE: 23.2X
Price/Cash Flow: 16.23

This company has never been cheap however, it currently appears cheap based on it’s historical trading range. I think there is potential here and for the first time in a long time TOC seems to have a catalyst that could push the stock higher in a year or two. Despite the valuations I’m contemplating taking a position in TOC. Any thoughts?

Thursday, September 20, 2007

Investing Based on Demographics – DIS, RET.A

Disney (DIS)
I think everyone basically knows Disney...Mickey Mouse, Donald Duck etc… However there is a lot more to Disney than their famous classic characters. Although, their roots are certainly in animation they are now a massive international media company that operates in four major business units:

1. Studio Entertainment - Pixar Animation Studios, Touchstone Pictures, Miramax Films
2. Parks and Resorts – 5 Disney Land resorts in 4 different countries, Disney Cruise Lines
3. Consumer Products – Disney stores, largest publisher of childrens books
4. Media Networks – ABC, ESPN as well as a many broadcast, cable, radio, publishing and Internet businesses

I’ve listed some of the brands in each of the 4 categories but to view their entire holdings please follow this link.

Dividend Yield:0.9%
Dividend Yield 5yr Avg: 1.0%
ROE: 14.27%
ROI: 10.45%
PE: 16X
Estimated 2007 PE: 18X
Estimated 2008 PE: 16.3X
S&P Rating: 5 stars, strong buy, $45 price target
Argus Rating: buy, $41 price target

THESIS: A fellow blogger “The Money Gardener” who is the author of has provided the thesis behind investing in Disney as a demographics play. His thesis is as follows:

“My thesis on Disney is that if there is one thing that boomers over 55 value, it’s their Grandkids. My parents were absolutely ecstatic when they found out they were going to be Grandparents. Kids today have more people, and wealthier people willing to purchase toys, movies, trips, etc. for them. Also, because today’s society is based more on dual income families they tend to buy their kids affection with Disney products, and have more income and wherewithal to take a vacation to Disney Resorts. Disney has become somewhat of a status symbol for the middle class. I once heard a Father say ‘my goal is to earn enough money this year to take my family to Disneyland’.”

Reitmans (RET.A)
“Reitmans Canada Ltd. has grown to include over 800 stores operating under eight divisions: Reitmans, Smart-Set, RW & CO., Penningtons, MXM, Thyme Maternity, Addition-Elle and Cassis. Today there are 343 Reitmans stores across Canada, offering a full line of ready-to-wear clothing and accessories that cater to the active woman and her daughter-everything from careerwear to casual wear, all available in petite to full sizes. At Reitmans, you'll always find friendly service, stylish clothing, quality products and unbeatable prices that all add up to great value. To view their website please click here.

Dividend Yield:3.30%
Dividend Yield 5yr Avg: 1.5%
ROE: 19.96%
PE: 14.3X
Estimated 2008 PE: 14.18X

THESIS: Well...the thesis is easy here...women like to shop and women like to look good (regardless of how old they are). Although Reitman’s does have some banners that appeal to the 35 and under age group (Smart Set, RW & CO, Thyme Maternity) they have recognized the upcoming shift in Canadian demographics and lifestyle and have a number of divisions that will be huge beneficiaries of both the aging, and fattening, of the Canadian population (let’s face it as a society we tend to fatten up with age) as both Penningtons and Addition-Elle cater specifically to plus sized women. While Cassis is designed to appeal to older women who want to look great but at the same time more mature and sophisticated. The banner on the front of their website reads “WE’RE GETTING YOUNGER EVERYDAY”. In my opinion this is going to be a huge growth market and RET.A is positioning itself to capitalize on it. This post was basically my first look at RET.A but it is definitely one that I’m am going to add to my personal watch list (and maybe even my portfolio.)

Wednesday, September 19, 2007

Home Renovations Update III

I thought I’d take a break from the “Investing Based on Demographics” theme for a day to give a quick update on my home renovations (as a couple of people have emailed me wondering how they're progressing). Basically, I haven’t really done much since my last update in July. However, this weekend I primed and applied the first two coats of melamine paint to our outdated kitchen cabinet doors. Three more coats will result in us having updated, new looking kitchen cabinets. The total cost for this project will be:

Melamine Paint: $80
New Hardware: $110 (estimate)

By simply painting our existing cabinets I’ve essentially saved 1 to 2 thousand dollars, as that’s what it would cost to replace the kitchen cabinet doors with brand new ones. As I’ve already spent $880 on home updates this will bring my total spent to $1070 leaving me $930 to spend on the remaining fix ups.

Monday, September 17, 2007

Investing Based on Demographics - IGM, TROW

IGM Financial (IGM)

“Provides financial products and financial planning services to individuals and corporations, including the sale of mutual funds, investment certificates and insurance programs. Also offers trust and management services to mutual and pension funds. “

Other Fact:
-Canada's largest independent mutual fund.
-Owned by PWF (Power Financial) which in turn is owned by POW (Power Corp) which is controlled by the Desmarais family.
-Over $123 billion in total assets under management.
-Over $110 billion in mutual fund assets under management.

Dividend Yield: 3.6%
-20.1% average compounded annual dividend growth over the last 10 years
ROE: 21.39%
PE: 16.8X
Estimated 2007 PE: 15.97X
Estimated 2008 PE: 13.69X
TDNewcrest: Buy, $64 target
-17.7% average compounded annual EPS growth over the last 10 years

THESIS: As the population ages they’ll increasingly start to put funds aside for retirement. As IGM is the largest mutual fund company in Canada they’ll certainly start to see their share of the action. I am a huge fan of this company and think it should be accumulated on dips. I don't personally own it as I already have 10% of my portfolio invested in the Desmarais family through POW and GWO but I would not hesitate to recommend this company (on dips) to Canadian investors…especially those pursuing a dividend growth strategy. However, it’s important to note that although the dividend is secure mutual fund companies are cyclical so be prepared for a stable dividend but not necessarily a stable share price.

T. Rowe Price Group Inc. (TROW)
“T. Rowe Price has very strong positions in two of the larger markets in the asset-management industry: the 401(k) market, and directly distributed mutual funds. The company is the third-largest manager of directly sold no-load mutual funds in the United States and is among the top 10 in 401(k) assets under management. These two markets now represent approximately 65%-70% of all mutual fund assets. While the company is primarily a U.S. asset manager, it is also expanding its business abroad. T. Rowe Price has approximately $380 billion in assets under management.”

Dividend Yield:1.28%
ROE: 24.34%
ROI: 25.08%
PE: 25.56X
Estimated 2007 PE: 22.44X
Estimated 2008 PE: 19.05X
S&P Rating: 3 stars, hold, $57 price target
Argus Rating: buy, $64

THESIS: The thesis is the same for this company as IGM as the population ages they will be putting more money aside for retirement and thus purchasing more funds and investment products. A great company however, I would hold off on purchasing based solely upon valuation.

Friday, September 14, 2007

Investing Based on Demographics - SMG & FO

The Scotts Miracle Gro Company (SMG)
“The Scotts Miracle-Gro Company is the world's leading lawn and garden company with trusted brands in every category in which we compete”

Dividend Yield: 1.14%
ROE: 13.9%
ROI: 25.89%
PE: 25X
Estimated 2007 PE: 18.47X
Estimated 2008 PE: 16.35X
S&P Rating: 3 stars, Hold, $46 target price

THESIS: The consumer lawn and garden industry is now one of the worlds leading outdoor leisure activities and is currently around a $7 billion global business. As the population ages they will be home more and presumably be spending more time and therefore money on their lawn and gardens. The only flaw that I can see with this thesis is the fact that there is a push in many of the industrialized countries to limit or ban herbicides/fertilizers and most other chemicals used to beautify lawns.

Fortune Brands (FO)
“Fortune Brands is a leading consumer brands company sharply focused on shareholder value. With our foundation of powerful and trusted consumer brands, industry-leading innovation and proven strategy for growth, we're consistently delivering strong results...for consumers and for our shareholders.”

FO has multiple growth and premium brands in 3 main categories.
1. Home and Hardware – Moen, Home Crest, Simonton
2. Spirits and Wine – Knob Creek, Jim Beam, Sausa, Clos du Bois
3. Golf – Fitleist, Pinnacle, Cobra

There were too many brands to list but for a complete list please visit the Fortune Brands website by clicking here.

Dividend Yield: 2.07%
ROE: 15.96%
ROI: 8%
PE: 16.5X
Estimated 2007 PE: 15.94X
Estimated 2008 PE: 14.63X
S&P Rating: 3 stars, hold
Argus Rating: Hold

THESIS: The thesis behind this is easy. FO basically only markets brands that appeal to the older segment of the population. To my great people age they tend to drink less beer and more wine and spirits, they have more time (being retired) so they golf more and generally have more disposable income to buy luxuries around the home. In my opinion this company is perfectly positioned to capitalize on the aging population and will definitively be added to my watch list.

Thursday, September 13, 2007

Investing Based on Demographics - WAG, CVS

Walgreens (WAG)
“Walgreen Co., based in Deerfield, Illinois, filled 529 million prescriptions in fiscal 2006, and pharmacy business accounted for 64.3% of its $47.4 billion in sales. Walgreen also sells over-the-counter medicines which accounted for 11% of sales, as well as general merchandise (which accounted for about 25% of sales), ranging from digital photos to pinto beans. The company's Walgreen's Health Initiatives business manages pharmacy benefit plans for companies and other organizations. As of the end of, August, Walgreen operated 5,992 drugstores in 48 U.S. states and Puerto Rico.”

Dividend Yield: 0.86%
ROE: 19.88%
ROI: 18.68%
PE: 21.6X
Estimated 2007 PE: 21.3X
Estimated 2008 PE: 18.87X
S&P Rating: 5 Stars, Strong Buy, $56 price target
Argus Rating:Buy $53 price target
-paid a dividend for 299 straight quarters
-raised its dividend for 32 consecutive years.

THESIS: the thesis behind this company is obvious: older people take more drugs and fill more prescriptions. WAG should also benefit from seniors buying more beauty items in an effort to keep looking young, as well as more impulse items simply because they’ll be in the store more.

CVS Caremark Corporation (CVS)
“CVS Caremark is the #1 provider of prescriptions and related healthcare services in the nation. The Company fills or manages more than 1 billion prescriptions annually. Through its unmatched breadth of service offerings, CVS Caremark is transforming the delivery of healthcare services in the U.S. The Company is uniquely positioned to effectively manage costs and improve healthcare outcomes through its 6,200 CVS/pharmacy stores; its pharmacy benefit management, mail order and specialty pharmacy division, Caremark Pharmacy Services; its retail-based health clinic subsidiary, MinuteClinic; and its online pharmacy,”

Dividend Yield: 0.64%
ROE: 8.95%
ROI: 6.95%
PE: 21.75X
Estimated 2007 PE: 19.78X
Estimated 2008 PE: 16.27X
S&P Rating: 5 Stars, Strong Buy, $46 price target
Argus Rating: Buy, $40 price target

THESIS: is the same as with WAG: older people take more drugs and fill more prescriptions. CVS should also benefit from seniors buying more beauty items in an effort to keep looking young, as well as more impulse items simply because they’ll be in the store more.

Wednesday, September 12, 2007

Investing Based On Demographics

Ok it took a while for me to post it...but here is the compiled list of companies that should benefit from the aging of the North American population. During the rest of the week (and possibly into next week) I’ll provide a brief description of each name as well as a few of the “vital stats” on each. I’d also just like to thank nurse,b and the MoneyGardner who contributed many of the names.

Walgreens (WAG)
CVS Caremark Corporation (CVS)
The Scotts Miracle Gro Company (SMG)
Fortune Brands (FO)
IGM Financial (IGM)
T. Rowe Price Group Inc. (TROW)
Disney (DIS)
Reitmans (RET.A)
Chartwells Seniors Housing (CSH.UN)
Shoppers Drug Mart (SC)
CML Health Care (CLC.UN)
Johnson & Johnson (JNJ)
Teva Pharmaceutical (TEVA)
Allergan, Inc. (AGN)
Rite Aid Corp. (RAD)
Pfizer (PFE)
Glaxo (GSK)
Callaway Golf (ELY)
National Dentex (NADX)
Baxter (BAX)
Haemonetics (HAE)
Kimberly Clark (KMB)

Tuesday, September 11, 2007

Retirement NestEgg at the Close of Sept 4, 2007

-Up 1.7% from last month
-Up 8.6% in 2007

TRP – 4.04%
ABX – 4.19%
CSH.UN –3.38%
GWO – 4.96%
PFE – 3.87%
POW – 4.52%
BA.UN – 0.4%
L – 3.75%
UNS – 2.81%
GZ – 2.25%
TD – 13.8%
EIT.UN – 2.81%
JNJ – 5.68%
MMM -4.22%
ZED – 0.55%
GO.A – 3.03%
ATD.B – 4.04%
O'Shaughnessy’s Global Fund – 3.95%
American Growth Fund – 1.01%
Canadian Value Fund – 3.67%
Small Cap Growth Fund – 4.1%
Chou Associates Fund – 10.41%
Health Science Fund – 0.89%
Money Market Fund – 7.6%

There were no big changes (either up or down) in my portfolio this month. Stocks that I am watching this month are WAG, BMO, BNS and IPL.UN.

Friday, September 7, 2007

Sold Barrick (ABX)

I sold ABX yesterday after the large rise in gold prices. I’m the first to admit that I don’t really understand in this day and age what drives gold prices. I originally bought ABX because fundamentally it appeared to be good value and it provided some diversification in my portfolio. Historically gold has always been viewed as a safe haven, a place to park your money during times of uncertainty with the US dollar and during times of political and economic instability. I decided to sell because personally, I don’t think we are in a less stable environment than we were a month ago and I get a little worried when any commodity rises rapidly during a short time period. Additionally, the price move appeared to be driven primarily by funds and investors and not by demand for the physical commodity. This means the price of gold could fall whenever the funds and investors decide to take profits.

Investing in gold stocks is certainly not part of my core strategy of dividend growth. However, whether it’s justified or not investors still flock to gold for safety and then pile out of it when they perceive it’s safe again. I may have sold to early (which is a common theme of mine)... but I guess time will tell. If ABX slides back to the low 30’s I’ll certainly start taking another look at it.

Tuesday, September 4, 2007

Bank Dividend Growth 2000 to 2007

I came across this interesting chart while doing my daily read at This chart really reinforces the power of the dividend growth strategy. It nicely summarizes the dividend growth of the big Canadian banks over the last seven years. I know nothing is too good to be true but historically the bank stocks sure look like it.

For the complete story please click here.