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Patrick McKeough is one of Canada’s top safe-money advisors. The Wall Street Journal, Forbes and The Hulbert Financial Digest have all recognized his ability to find stocks with hidden value. He is editor and publisher of The Successful Investor, Stock Pickers Digest, Wall Street Stock Forecaster and Canadian Wealth Advisor; inventor of the Quick Profit/Value System and the ValuVesting System™. A best-selling Canadian author, he wrote Riding the Bull, the book that predicted the 1990s stock-market boom.

Updating Our Current Recommendations for McDonald’s Corp., J.C. Penney Co., Inc., International Business Machines and Toyota Motor Co.

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MCDONALD’S CORP. $54 (New York symbol MCD; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 1.1 billion; Market cap: $59.4 billion; Price-to-sales ratio: 2.6; WSSF Rating: Above Average) plans to open 500 new restaurants in China over the next three years. It opened 146 restaurants in 2008, and now operates about 1,015 restaurants in China out of about 32,000 worldwide. Expanding in China makes sense for McDonald’s, despite the country’s slowing economy. Demand for low-cost fast food is still strong, and construction and labour costs are falling.

McDonald’s is a buy.

J.C. PENNEY CO., INC. $16 (New York symbol JCP; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 222.2 million; Market cap: $3.6 billion; Price-to-sales ratio: 0.2; WSSF Rating: Average) earned $2.57 a share in its fiscal year ended January 31, 2009, down 47.9% from $4.93 in the prior year. Sales fell 6.9%, to $18.5 billion from $19.9 billion. Same-store sales fell 8.5%. The drop was largely the result of lower consumer demand for jewelery and home furnishings, although sales of women’s clothing and cosmetics held steady.

The company continues to do a good job managing its inventories in a difficult economy; inventories fell 13.5% in the latest year. This reduces Penney’s need to move unsold merchandise through clearance sales. It holds cash of $2.4 billion, or $10.59 a share. Its long-term debt of $3.5 billion is a high 97% of its market cap, but Penney has no debt due in the current fiscal year.

J.C. Penney is a buy.

INTERNATIONAL BUSINESS MACHINES CORP. $86 (New York symbol IBM, Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 1.3 billion; Market cap: $111.8 billion; Price-to-sales ratio: 1.1; WSSF Rating: Above Average) secured 4,186 patents in the U.S. in 2008, up 33% from the prior year. In 2008, pre-tax income from IBM’s intellectual property rose 20.4%, to $1.15 billion from $958 million in 2007. That helped increase IBM earnings for 2008 by 18.4%, to $12.3 billion, or $8.93 a share from $10.4 billion, or $7.18 a share, in 2007.

IBM is a buy.

TOYOTA MOTOR CO. ADRs $66 (New York symbol TM; Conservative Growth Portfolio, Manufacturing & Industry sector; ADRs outstanding: 1.7 billion; Market cap: $112.2 billion; Price-to-sales ratio: 0.4; WSSF Rating: Above Average) has cut production at its plants in Japan and North America because of declining car sales. Toyota expects to lose $2.33 per ADR in the fiscal year ending March 31, 2009. (Each American Depositary Receipt represents two Toyota common shares.) However, its focus on cheaper, fuel-efficient cars should give it an advantage over the big three U.S. carmakers during the economic downturn.

Toyota is a buy.

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