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Buy RBC shares now while they're down, urges Desjardins

Royal Bank of Canada shares have slid about 15 per cent since late March and, in the eyes of Desjardins Securities analyst Michael Goldberg, that's flashing a buying opportunity.

RBC's latest quarterly earnings last week were viewed by the Street as a slight disappointment and sparked further selling in the stock. The bank made $1.56-billion, down 7 per cent from last year due to a $202-million writedown.

But Mr. Goldberg notes that the bank's core business remains strong and has managed to post two quarters of solid earnings in a slow-growth economic environment. Excluding the writedown in the fiscal second quarter, profit rose 5 per cent to $1.77-billion.

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The outlook for the third quarter improved somewhat this morning as RBC announced it has resolved several outstanding tax matters and will release $180-million, or 12 cents per share, of tax-related gains for the three-month period.

RBC has taken several steps recently to improve its bottom line, including exiting its money-losing U.S. retail branches and expanding its global wealth management business.

"On balance, we were encouraged by Royal's latest results and believe that the recent pullback represents a good buying opportunity," Mr. Goldberg said in a note.

Upside: Mr. Goldberg reiterated a "buy-average risk" rating and $66.50 (Canadian) price target.


Shares in Héroux-Devtek Inc. , which slightly exceeded Street expectations last week when reporting fiscal fourth-quarter results, are trading at attractive valuations, said Desjardins Securities analyst Benoit Poirier. "We continue to believe that Héroux-Devtek provides investors with an interesting way to play the recovery in the aerospace cycle," he said. "Furthermore, we believe that an acquisition -- which in our view is one of the key catalysts for the stock going forward -- is likely in fiscal year 2013."

Upside: Mr. Poirier maintained a "buy" recommendation and $11 price target.

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Gran Tierra Energy Inc.'s Costayaco field, which is the largest discovery in Colombia in the last decade and represents about 70 per cent of the company's production, is outperforming all expectations, notes Dundee Securities analyst Alex Klein. This will be the seventh year of continuous year-over-year production growth at the company, he adds, and "if an investor wants a defensive name, we can't think of a better name to own."

Upside: Mr. Klein reiterated a "buy, high risk" rating and 12-month price target of $9.


DirectCash Payments Inc. has taken "a big leap to prime its business model" by acquiring U.K.-based InfoCash Holdings Ltd., operator of 4,700 ATM sites, for $19.1-million, said Acumen Capital analyst Brian D. Pow. "DCI is quickly reconfiguring itself and while we expect it may take some time for the individual parts to be brought together, we expect the cumulative total business should provide a big step up in valuation," he said.

Upside: Mr. Pow raised his price target by $1.30 to $28.30 and maintained a "buy" rating.

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Desjardins Securities analyst Keith Howlett upgraded Alimentation Couche-Tard Inc. to "buy" from "hold," believing that "the interests of the owner-managers of Couche-Tard are well aligned with those of long-term investors." He thinks there is a 75 per cent chance that Couche-Tard's offer for Statoil Fuel & Retail will be completed, which would bolster the company's reach into Europe. So far, only 66.7 per cent of shares have been tendered (90 per cent approval is required) but he believes more shareholders will approve the deal this week given the recent weakness in equities.

Upside: Mr. Howlett raised his price target by $5 to $47.

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About the Author
Investment Editor

Darcy Keith is The Globe and Mail's Investment Editor. He has been a business journalist since 1992 and joined the Report on Business in 2010 from Yahoo! Canada, where he was the senior editor of finance. More

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