On one hand is a new Aggressive Holding that provides the parts that make machines that contribute to the “global warming” phenomenon. On the other is a longtime Conservative Holding, a power producer that owns and operates hydroelectric plants and wind farms that ideally will mitigate that phenomenon.

Together we have solid growth prospects and predictable cash flow.

Magna International Inc (TSX: MG, NYSE: MGA) is a leading automotive supplier with a strong financial profile based on conservative policies and solid operating results in the aftermath of the Great Recession. Conditions in the company’s North American market have remained favorable, reflecting an ongoing automotive recovery worldwide.

Magna, which designs and manufactures systems and parts for automakers, is joining the Canadian Edge Portfolio this month based on its solid growth profile and shareholder-friendly capital management program, including regular dividend increases and robust share buybacks.

Innergex Renewable Energy Inc (TSX: INE, OTC: INGXF) is an invest-to-grow story, with every new hydroelectric, solar and wind power plant adding to cash flows that are locked in for decades by contracts at premium prices.

Customers are primarily government entities and regulated entities, virtually eliminating the risk of default no matter how bad times get.

The key variable to profitability is how quickly new projects can be brought on stream, keeping them under budget and financing them favorably.

Innergex has been a member of the CE Portfolio since the December 2008 issue; this is its fifth anniversary as a Conservative Holding. It’s generated a total return of 177 percent in US dollar terms during our holding period, besting both the S&P/Toronto Stock Exchange Composite Index (129 percent) and the S&P 500 Index (127 percent).

We Magna added the stock to the How They Rate coverage universe under Business Trusts in the July 2013 issue as a buy under USD80. The stock was trading at around CAD76 on the Toronto Stock Exchange (TSX) and USD72 on the New York Stock Exchange (NYSE) when we picked up coverage.

Even after a strong run in 2013–the stock has produced a US dollar total return of more than 60 percent–Magna is trading at 12.2 times earnings and 1.88 times book value.

On Dec. 5, 2013, Magna closed at CAD85.04 on the TSX and USD79.93 on the NYSE. We’re moving it to the Transports segment of How They Rate, making it an Aggressive Holding and raising our buy-under target to USD90.

Global vehicle sales climbed 7.8 percent year over year to 7.2 million units in October, with nearly all regions reporting gains from the corresponding period of 2012.

North America rebounded from a 3.1 percent decline in September, with deliveries up 10 percent versus October 2012. Every country in the region posted year-over-year increases.

Sales in the US rose 10.6 percent to 1.2 million units, while Mexico saw deliveries climb 5.4 percent to 91,761. Canada sold 148,848 vehicles in the month, up 7.2 percent, the largest year-over-year growth for the country since April.

North America held a 20.5 percent share of the world market in October, third behind the Asia-Pacific region and Europe.

Europe has been a drag, burdened by overcapacity, exacerbated by a decline in light vehicle demand as volumes have fallen to multi-decade lows in several markets, aggravated by the Continent’s economic challenges. But Europe is also a source of potential upside should signs of stabilization in the macro situation evolve into a real recovery.

Vehicle deliveries in Europe remained relatively flat in October 2013, up 1.7 percent over the year-ago period. The second straight month of increases for the region could indicate a slight economic recovery. The last time Europe posted sales growth for two consecutive months was in 2011.

Many of Europe’s larger countries reported modest increases compared with October 2012. France and Germany posted gains of 2.9 percent and 2.3 percent, respectively, while the UK recorded an increase of 7 percent. Declines in other countries such as Italy (6.4 percent), Russia (8.5 percent) and Belgium (5.7 percent) offset much of this positive growth.

Europe’s share of the world market fell 1.3 percentage points compared to October 2012 to 21.9 percent.

In markets included in Magna’s Rest of World, the Chinese automotive industry continues to grow, while volumes in South America have been sluggish.

Asia-Pacific sales surged 10.9 percent to 3.3 million units in October, accounting for 45.3 percent of global volume.

China, the region’s largest market, delivered 1.9 million units in October. This was up 20.2 percent from October 2012, the largest year-over-year gain for the country since January’s 46.7 percent increase. Japan sales jumped 17.4 percent, while India saw volume fall for the 11th consecutive month, down 5.8 percent.

South America was the only region to report a drop in sales in October. The region fell 0.2 percent to 522,000 units, with a majority of the countries posting declines from year-ago levels.

Brazil sales dropped 3.4 percent in October but still posted their highest monthly volume in three months. Deliveries in Chile also fell, down 7.7 percent, the first year-over-year drop for the country since September 2012. Argentina reported a 20.4 percent gain.

Through October 70.9 million vehicles were sold worldwide, up 4 percent from the corresponding period of 2012.

Magna is making progress in its effort to become more geographically diversified, but North America remains the key driver of results, accounting for approximately three-quarters of total operating earnings over the past four years.

Results for the RoW segment are impacted by management’s efforts to grow in markets such as China and Brazil.

Third-quarter results were solid, highlighted by more progress in Europe. Sales for the period rose to USD8.34 billion from USD7.41 billion a year ago, topping expectations.

North American, European and RoW production sales, as well as complete vehicle assembly sales and tooling, engineering and other sales, were all higher on a year-over-year basis.

Margins were also better than expected. European margin expanded by 170 basis points.

Earnings per share excluding the impact of restructuring charges were USD1.53, beating a consensus estimate of USD1.34.

Magna also bumped up slightly its sales guidance for the year. It’s now expecting 2013 sales of USD33.9 billion to USD34.8 billion, just ahead of guidance issued last quarter for USD33.3 billion to USD34.7 billion.

Along with third-quarter results management announced that its board of directors had approved a new buyback plan for up to 12 million shares, or about 5.4 percent of its outstanding shares, over the next 12 months. This continues the company’s aggressive approach to share buybacks following the repurchase of USD298 million during the third quarter.

A traditionally shareholder-friendly company, Magna has raised its dividend five times since it resumed its payout following the Great Recession. Management announced a 16.4 percent dividend increase in March 2013, to CAD0.32 per share, the third year in a row it included such news along with its fourth-quarter and full-year earnings report.

If this pattern holds Magna will announce another dividend increase in late February 2014.

Strong operating cash flow also enables the company to invest in growth while funding its capital management activity.

The company’s balance sheet is solid, and there are no debt maturities until 2018.

On Dec. 6, 2013, Standard & Poor’s raised its rating on the company to A- from BBB+, removing it from “CreditWatch” and upgrading its outlook to “stable” based on growing revenue, strong cash flow generation and economic recovery in end-markets.

Magna’s North American business should be able to modestly outperform industry production, and management expects strong revenue growth in Asia, led by China.

In the short term European revenue growth will likely underperform underlying production changes as the company adjusts operations to meet demand and lets contracts with unfavorable economics expire. Based on recent sales trends Magna will be in position to benefit from faster growth on the Continent by 2015.

Management right now is very focused on internal manufacturing improvements, which should help reduce costs and boost margins. Magna is also increasingly asking for volume guarantees when bidding for new business, which should build in some revenue visibility.

Magna’s diversified portfolio of products and ability to combine components into higher content systems and modules are key differentiators. Its aggressive buyback program and solid dividend history in the aftermath of the Great Recession are also positives. With a solid business in North America complemented by strong growth in Asia and an emerging recovery in Europe, Magna is poised for further upside even after a huge run for the stock in 2013.

Magna International, a new addition the CE Portfolio Aggressive Holdings, is a buy under USD90.

Innergex reported solid third-quarter results, with production rising 26 percent to 706.4 gigawatt hours (GWh), 6 percent higher than the long-term average due to better-than-average water flows, wind conditions and solar irradiation.

That drove a 23 percent increase in operating revenue to CAD58 million, as adjusted earnings before interest, taxation, depreciation and amortization (EBITDA) improved by 27 percent to CAD46.7 million.

Cash flows from operations was CAD38.8 million, more than double the CAD16.8 million for the prior corresponding period.

Innergex accomplished several key development benchmarks during and subsequent to the third quarter that underline the invest-to-grow nature of its business.

Work at the Kwoiek Creek hydro project during the third quarter culminated with the facility beginning to produce electricity at the end of October. The company completed the upgrade at the Miller Creek hydro facility on time and on budget, with production due to restart this month.

And Innergex closed the acquisition of the 40.6 megawatt (MW) Magpie hydro facility on July 25.

The Northwest Stave River hydro project and the Viger-Denobnville wind project are on track for commissioning during the fourth quarter. Project financing of CAD61.7 million for Viger-Denonville closed on Aug. 7.

Innergex also started construction at the Tretheway Creek, Upper Lillooet River and Boulder Creek hydro projects in British Columbia in early October.

Construction at Big Silver Creek is now expected to start in the spring of 2014 versus the previously announced target of late 2013, but management expects no change on the commissioning date of 2016.

In August the Quebec government announced a draft regulation of 450 megawatt wind procurement at a proposed price of CAD0.095 per kilowatt-hour. And management continues to evaluate hydro opportunities in British Columbia as well as wind and solar investments in the US.

Management also started a CAD210 million hedging program to fix the interest rate on construction debt for the Upper Lillooet River, Boulder Creek, Tretheway Creek and Big Silver Creek projects. Ninety-seven percent of Innergex’ outstanding debts are now protected from interest rate hikes.

Geographic diversification, a favorable mix of renewable generation assets and ample opportunities to expand the portfolio make this a solid bet for long-term growth and income.

Innergex Renewable Energy, currently yielding 5.9 percent, is a strong buy under USD10.

For more information on Magna International, go to How They Rate under Transports. Innergex Renewable is tracked under Electric Power. Click on their US symbols to see all previous writeups in Canadian Edge and Maple Leaf Memo.

Click on the Toronto Stock Exchange (TSX) symbol to go to their Google Finance pages for a wealth of information, ranging from news releases to price charts. Click on their names to go directly to company websites.

Magna International, one of the biggest automotive suppliers in the world, has a market capitalization of CAD19 billion. Innergex Renewable, a more regional clean power producer, is valued at CAD942 million.

Both stocks have plenty of liquidity on both sides of the border, both in TSX and US-listed symbols.

Magna trades on the TSX under the symbol MG and on the New York Stock Exchange (NYSE) under the symbol MGA. Innergex trades on the TSX under the symbol INE and on the US over-the-counter (OTC) market under the symbol INGXF.

Magna is covered by 19 Bay Street and Wall Street analysts. Ten rate the stock a “buy,” six rate it a “hold” and three rate it a “sell.” The average 12-month price target among the 12 analysts who provide such a figure is CAD95.44, implying upside from a CAD85.04 closing price on Dec. 5, including annual dividends of CAD1.28, of 13.7 percent.

Innergex is covered by 10 analysts, five of whom rate the stock a “buy,” four of whom rate the stock a “hold” and one of whom rates it a “sell.” The average 12-month price target among the eight analysts who provide such a figure is CAD10.43, implying upside from a CAD9.85 closing price on Dec. 5, including annual dividends of CAD0.58, of 11.8 percent.

As is the case with all stocks in the Canadian Edge coverage universe, you get the same ownership whether you buy in the US or Canada. These stocks are priced in and pay dividends in Canadian dollars. Appreciation in the loonie will raise dividends as well as the value of your shares.

Dividends paid by Magna and Innergex are 100 percent qualified for US income tax purposes. Both companies’ dividends are taxed at the now-permanent Bush-era rates of 5 percent to 15 percent for investors’ first USD450,000 a year of income for couples and USD400,000 for single filers. Above that the maximum tax rate is 20 percent.

Canadian investors enjoy favorable tax status for Magna and Innergex. For US investors, dividends paid by both companies into IRAs aren’t subject to 15 percent Canadian withholding tax, though they are withheld at a 15 percent rate if held outside of an IRA.

Dividend taxes withheld from US non-IRA accounts can be recovered as a credit by filing a Form 1116 with your US income taxes. The amount of recovery allowed per year depends on your own tax situation.