Discover how Pat McKeough and his team of investment experts can help you maximize your returns — and cut your risk — in today’s volatile markets

Read on to learn about…

• Step-by-step strategies for seeking solid gains in uncertain markets
• 9 questions you MUST ask before you buy any stock
• How you can get a full-year subscription (12 issues plus weekly updates) and 6 FREE Special Reports for only $72— or even better, take advantage of our Easy-Pay Plan ($18 every 3 months) and get your first month absolutely free. That’s only $0.20 a day!

Here at The Successful Investor Inc., we believe in transparency and accountability. We dedicate ourselves to delivering responsible investing ideas and independent financial advice in an easy-to-read format. While all investments involve some risk, our investing philosophy is designed to help you reduce that risk.

The Successful Investor is one of four investment advisories published by The Successful Investor Inc., owner of tsinetwork.ca. You can sign up for free daily email updates, subscribe to one of our 4 investment advisories for as little as $0.20 a day, or even hire us to manage your portfolio for you — which is what we do for many Canadian millionaires.

You’ve no doubt been affected by the extraordinary changes of the past two years.

You’ve seen big daily swings in the Dow. Canadian resource stocks briefly collapsed, then revived with scary vigour. Some of the longest-standing investment banks in the U.S. went under.

More recently, unrest in Libya and other Middle Eastern countries has sent oil prices higher and the crisis in Japan has created further uncertainty.

But no matter what happens in the global economy, I know that select stocks will continue to profit far more than others.

In light of these events, you may be tempted to throw up your hands and sell your stocks. However, if you do you’re likely to miss out on strong gains in the coming months and years.

My simple, three-part investment strategy can help you tap into these gains without the sickening ups and downs that many investors have suffered. It works especially well in difficult markets like today’s. (See below for more on how you can apply these three simple principles to your own portfolio.)

My investing system is based on the experience I’ve built up in more than three decades in the investment business (starting with a part-time job in high school). In that time, I’ve learned that above all else, investing with a conservative, reduced-risk strategy consistently and reliably beats other approaches.

At The Successful Investor, our mission is to give you sound investment advice and information that will help you earn higher returns on your stock-market investments. The advice you get in The Successful Investor is always clear, concise, 100% independent and untainted by commissions or other undisclosed influences.

When you subscribe to The Successful Investor, you not only benefit from my long experience in the investment industry, you also get exclusive access to in-depth research provided by my in-house team of investment experts.

Our staff includes CFA charterholders with many years of experience in the investment industry. The CFA (Chartered Financial Analyst) designation is internationally recognized as the highest standard of education and ethics for investment professionals.

As well, unlike most other investment-newsletter publishers, we also manage, every day, the portfolios of a number of Canadian investors through Successful Investor Wealth Management Inc. It is an affiliate of The Successful Investor Inc. (I own 100% of both companies, but keep them separate for regulatory reasons.)

This two-part business model gives subscribers to The Successful Investor a very special extra benefit: The investing problems we encounter as money managers, and the solutions we come up with, help us give our readers unbiased, practical advice. This serves as a counterweight to advice you may encounter elsewhere that is based on misapplied theory, or tainted by conflicts of interest.

Of course, the proof of my stock-picking success lies in the numbers. Since 1995, The Successful Investor’s Conservative Growth Portfolio has increased a stunning 383.9%*. That’s 164.1% above the 219.8%* gain of the S&P/TSX.

The Conservative Growth Portfolio is one of three published portfolios you will be able to follow yourself in the pages of The Successful Investor. (The other two are the Portfolio for Income-Seeking Investors and the Portfolio for Aggressive Growth.) Plus, all three portfolios are tracked and rated by the independent Hulbert Financial Digest.

In fact, according to Hulbert, The Successful Investor is Canada’s top-performing investment advisory over the past 5 years. What’s more, The Successful Investor ranked fifth among all 147 newsletters Hulbert tracks. Hulbert has been following The Successful Investor since 2002.

According to Hulbert, The Successful Investor beat the Wiltshire 5000 (an index that aims to measure all publicly traded stocks in the U.S) between the end of 2001 and April 30, 2011 by a margin of 13.7% to 3.4% annualized.

It’s important to note that The Successful Investor posted these returns in one of the most tumultuous periods in stock-market history — a time that included the real-estate meltdown, the credit crisis, and, of course, the stock-market crash of 2008/2009.

And by the way, 26 of the 29 stocks in the Conservative Growth Portfolio have had returns of 100% or more since I first recommended them.

My three-part strategy forms the core of all the advice you get in The Successful Investor. My system is designed to find stocks whose built-in value gives them the potential for strong gains — and helps protect those gains during market downturns.

First, let me introduce you to each key part of my approach separately. Then I’ll take you behind the scenes and reveal some of the actual tools I use to find stocks that combine high upside potential with limited downside risk.

1. Invest mainly in well-established companies. When the market goes into a lengthy downturn, these stocks generally keep paying their dividends, and they are among the first to recover when conditions improve.

2. Spread your money out across the five main economic sectors (Manufacturing & Industry; Resources & Commodities; Consumer; Finance; and Utilities). This helps you avoid excess exposure to any one segment of the market that is headed for trouble. Diversifying across the five sectors will also dampen your portfolio’s volatility in the long term, without the shrivelling in its potential you get if you invest significantly in bonds yielding little more than 4%.

   By spreading your money across the five sectors, you also increase your chances of stumbling across a market superstar — a stock that does two or three (or more) times the market average.

3. Avoid or downplay stocks in the broker/public-relations limelight. That limelight tends to raise investor expectations to excessive levels. When companies fail to live up to expectations, these stocks can plunge. Remember, when expectations are excessive, occasional failure to live up to them is virtually guaranteed, in the long term if not in the short.

Naturally, I’m hoping you’ll realize the most convenient way to apply my three-part strategy is to let me do the number crunching for you. That’s why I’ll be offering you an opportunity to sample The Successful Investor without risk or obligation. But first let’s take a closer look at what makes my investing philosophy so successful.

By the time you’re finished, I think you’ll understand why the tools revealed here are the key to constructing a portfolio that delivers consistent returns regardless of what the rest of the market is doing.

Naturally, I’m hoping you’ll realize the most convenient way to use these tools is to let me do the number crunching for you. That’s why I’ll be offering you an opportunity to sample my investment advisory service without risk or obligation.

But even if you decide not to take me up on my offer, I hope you’ll start to use the investing tools explained in this online report. I guarantee they’ll make you a more successful investor.

A portfolio is more than just a collection of individual investments. It’s a combination of investments that work together over time to achieve your financial goals.

This is critical for making money in good times and protecting your wealth in a decline. The key, of course, is finding the right combination of investments.

Stocks can be classified according to the many categories supplied by the stock exchanges, fund companies and bond rating companies. Categories like small caps, cyclicals, consumer nondurables and so on, ad infinitum.

The problem with labels like these is that they’re designed for ease of classification, or to sell you something.

We use a reality-based approach, which aims to cut your losses in a downturn and build your wealth when markets rise. Using this approach, we classify stocks into 1 of 5 easy-to-identify economic sectors:

1. Manufacturing & Industry
2. Resources & Commodities
3. Utilities
4. Finance
5. Consumer

As I explain more fully in your 7-volume Investor’s Guide, How to Cut Your Risk and Generate Outsized Profits in Uncertain Markets, each sector has its own distinct characteristics. (The five sectors are covered in Volume 2, How to Build a Rock-Solid Portfolio.) Finance and utilities are the most stable and offer some of the highest yields. The manufacturing and resources sectors expose you to above-average volatility, but offer strong growth prospects. Consumer stocks are somewhere in the middle.

Generally speaking, you should have holdings in all 5 economic sectors, with the proportion in each depending on how much risk you’re willing to accept and how much current income you need. But above all, you need to stick to high-quality stocks while avoiding stock promotions.

I help you do this in each issue of The Successful Investor. To ensure steady gains, my starting point is to immerse myself in financial statements.

Like many investors, I start my search for stocks with strong growth potential by looking at a company’s income statement and balance sheet. But unlike the typical investor, I don’t accept the figures that appear there, especially those that purport to show the company’s earnings, and here’s why…

A company’s earnings are inherently unreliable for a couple of reasons. First, they’re usually based on estimates of unit sales, costs and a variety of other factors, all of which are subject to constant revision. Second, earnings are adjusted (cynics would say manipulated) in accordance with a variety of accounting rules that frequently do more to distort than to clarify.

For example…

• I recommended Bombardier Inc. in December 2010 at $4.98, despite the fact that the company had reported a 27.2% drop in earnings in its latest quarter.

  Bombardier is the world’s third-largest commercial-aircraft maker, behind Boeing and Airbus. Its aerospace division supplies roughly half of its revenue. The other half comes from its transportation division, which is the world’s largest maker of passenger railcars.

  Bombardier’s profits were suffering, mainly because the uncertain economy continued to hurt demand for the company’s jets.

  However, cash flow was still strong. As well, Bombardier had received orders for 29 new planes (net of cancellations) in the quarter. A year earlier, it had negative 38 net orders. The railcar division received $4.3 billion of new orders, up 43.3% from $3.0 billion a year earlier.

  When investors realized that Bombardier’s shares were cheap in relation to its booked orders and forecast earnings, and in light of the company’s stellar international reputation for quality products, the stock began a steady rise. In fact, it gained 46% in just 3 months!

• I issued a “buy” recommendation on auto parts maker Linamar Corporation in April 2009 at $2.20, after falling auto sales in a time of economic uncertainty pushed the share price way down. Plus, one-time charges for goodwill writedowns, cost cuts and restructuring were likely to move the company to report a loss.

  Cash flow was still positive, however, and I felt the setbacks were temporary. Less than three months later, Linamar announced better-than-expected results. As well, the company’s market share had moved up as it managed to attract customers from some of its weaker competitors as a result of the recession.

  That pushed the share price up to $8.24 a share, for a gain of 274.5%. Since then Linamar has climbed steadily. A year after my original recommendation, it hit $19.64. That’s a gain of 792.7%!

One way to overcome the distortions caused by deductions for goodwill, purchased R&D (research and development), depletion allowances, depreciation, etc., is to disregard them. You do that by adding these items back to earnings.

This results in “cash flow per share,” which gives you an idea of how much cash a company has available for investment or dividends.

Cash flow can reveal hidden value, but it can also hide problems…

As you saw with Bombardier and Linamar Corp., cash flow is often a better indicator of a company’s fortunes than earnings. But that’s not true for all companies in every sector. In some instances, cash flow can be terribly misleading.

The bottom line is that the calculations you’ll need to properly determine cash flow vary from industry to industry. Using the same formula for all companies in all economic sectors will likely fill your portfolio with losers.

You’ll find the tools you need to properly calculate a company’s cash flow, including specific adjustments needed for particular industries, in your 7-volume set of the Investor’s Guide—How to Cut Your Risk and Generate Outsized Profits in Uncertain Markets. (These calculating tools are in Volume 4, Finding the Real Bottom Line.) Read on to learn how you can receive your copy absolutely FREE.

Once you have a company’s “earnings” (whether you take the easy way and use reported earnings or calculate a more accurate cash flow figure), you can combine that number with the stock’s price to get the P/E (Price/Earnings) ratio.

This is one of the most widely used investing tools on Earth. Unfortunately, it doesn’t work the way most people think it does…

The P/E ratio appears in the stock tables of just about every North American newspaper and is used by a great majority of investors. But although the P/E ratio seems easy to use, it’s much more complex than most investors realize…

• What number should you use for the “E” part of the ratio? Earnings for the preceding year, the current year or the next year?
• Is it more meaningful to compare a company’s P/E ratio to that of other companies in its sector or to its own P/E ratio over various periods?
• How does the business cycle affect the P/E ratio of various kinds of companies, and what adjustments do you have to make to compensate for this phenomenon?
• Should you sell a stock if its P/E ratio gets too high? If so, how do you decide what’s “too high”?

You’ll find answers to these questions (and several more that may not have occurred to you) in Volume 5 of the Investor’s Guide, The Uses and Abuses of P/E Ratios. I’ll tell you how you can receive a FREE copy of this 7-volume set in a moment. But first, I’d like to share with you one of the most important points that Volume 5 of the Investor’s Guide makes…

One of the biggest mistakes investors make is buying a stock with a low P/E ratio, thinking that this ensures that they’re getting a “bargain.” Sometimes that’s true, but sometimes a low P/E stock is a sign of danger. Here’s why…

When a profitable company is headed for a long period of losses, its share price usually drops far more quickly than its earnings. That’s because well-informed investors and insiders sell before the bad news becomes widely known.

So, before the “E” shrinks (i.e., before earnings disappear), the stock passes through a low P/E period. Buying at this point is like getting on a train just before it derails.

Analyzing a company’s income statement is the key to determining the quality of its earnings. Analyzing its balance sheet is the key to finding stocks that have the potential for strong gains.

Just as reported earnings don’t really tell us how profitable a company is, its balance sheet doesn’t always reveal the true value of its assets. Some of a corporation’s most valuable assets—its so-called intellectual property—are carried on the books at nominal amounts.

This would include patents, customer lists, brand names, etc. The classic example, of course, is the secret formula for Coca-Cola, which is reputedly carried on the company’s books at one dollar.

In addition, many companies own assets that never appear on their balance sheets at all. These include such things as a crucial market position, or a long-standing customer base to which a company can sell new products and services.

For example, here are some companies with hidden assets that we’ve recommended:

• Teranet Income Fund soared 31% in one month on a takeover bid after the Ontario Municipal Employees Retirement System recognized the value of its exclusive license from the Ontario government to operate the government’s land registry.
• Canadian Pacific doubled when it started to liquidate its real estate holdings, freeing up more than a billion dollars, cutting its debt and allowing it to focus on its core businesses.
• Canadian Tire tripled in price as its investments in technology and new-format stores began to pay off.
• Alcan, a Canadian aluminum producer, soared 68.7% in just 2 months when Rio Tinto Ltd. made a successful takeover bid for the company after recognizing it had access to cheap electricity, a key component in aluminum production, at a time of soaring energy prices.

As you can see, hidden value takes many forms. So it should come as no surprise that you can’t uncover it using just one tool or technique.

In your FREE 7-volume Investor’s Guide, How to Cut Your Risk and Generate Outsized Profits in Uncertain Markets, you’ll find multiple ways to assess the real value of a company’s assets.

In addition, you’ll discover the best ways to find the answers to the 9 most important questions you need to ask before you buy any stock.

As you saw earlier, a key part of our three-part investing system is to avoid or downplay stocks that are in the broker/public-relations limelight.

That’s because, in investing, familiarity can breed excessive feelings of comfort, security and performance.

Brokers get information from the media, investment journalists spend a lot of time talking to brokers, and company managers listen to both. A feedback loop can develop that spurs high expectations, derails criticism, and leads companies (and their investors) to make devastating mistakes.

You may get the feeling that these are can’t-miss investments, and that it’s safe to add them to your stock portfolio and forget them. That’s exactly the wrong thing to do with these stocks. Your “in-the-limelight” holdings are the ones you need to watch most closely.

Needless to say, lots of smart people work in the public relations and brokerage businesses. Many broker/public relations favourites go up more-or-less steadily for years at a time. But when they come down, they take a lot of people by surprise, and they can fall much further than you ever thought possible.

For example, solar-power silicon maker Timminco saw its stock drop nearly 95% in nine months as it failed to meet overly optimistic sales and profit projections in a competitive market. As well, the company faced a class-action lawsuit that accused it of making fake and misleading claims about its silicon-production process.

Instead of familiarity, we think you should focus on investment quality and diversification. At any given time, lots of prosperous, well-established companies are out of investor fashion. Some of the biggest profits you ever make will come from buying these stocks, many of which will never be in the limelight.

The Successful Investor advisory service is much more than just a monthly advisory. It’s a comprehensive approach to investing in today’s tumultuous markets. The service consists of the following:

• Monthly advisory filled with honest buy and sell recommendations. In addition, each issue provides you with a plain-English explanation of what’s happening with the market and the economy.

I work hard at making The Successful Investor an “easy read.” Perhaps that’s why the Toronto Star described my writing style as “a cross between the gentle instruction in fundamental analysis of a Benjamin Graham and the folksy but trenchant wit of a Mark Twain.”

• Monthly Portfolio Updates that track the progress of previous recommendations so you can see at a glance how well you’re doing and how each investment fits into your overall portfolio strategy. There are three separate portfolios to accommodate different levels of risk tolerance.

1. The Conservative Growth Portfolio is the core of our service. This is where you should invest the bulk of your stock market money. It includes many major Canadian companies, although there are some glaring omissions. (It takes more than mere size or popularity with brokers to win a place in this portfolio.)
2. The Portfolio for Income-Seeking Investors: Income investors trust our income portfolio because they know the high safety standards and stringent tests that apply to all the stocks in the portfolio. And the results have been impressive. Yields on each stock range from 1.0% to 7.0%. Each stock rose in price as well, with gains of up to 759.3%.
3. The Aggressive Growth Portfolio consists of companies with many of the attributes of the stocks in the Conservative Growth Portfolio, but which require additional seasoning before they’re ready to be upgraded to that portfolio. Although these stocks are more uncertain than those in the Conservative Growth Portfolio, they have the potential for truly mind-boggling returns. For example, Limamar Corp. soared a spectacular 792.7% in just 1 year.

• 24-hour Email or Telephone Hotline. Although my ValuVesting System avoids frequent trading, it’s entirely possible that events will occur between issues of the advisory that require you to take immediate action. If that happens, all you have to do is check your email anytime day or night, or pick up the phone and call the Hotline if you prefer. I’ll record a new message 50 times a year (or more often if circumstances warrant).

• My new Investor’s Guide. In this online report, I’ve provided just a small sample of the information you’ll find in Triple Your Wealth & Slash Your Risk: How to Generate Outsized Profits in Uncertain Markets. The 7-volume set provides complete details about all the points I’ve touched on here, plus a wealth of examples, explanations, tools and worksheets to help you profitably apply my ValuVesting System to your own portfolio.

• Volume 1: How the McKeough ValuVesting System Uncovers Hidden Value
• Volume 2: How to Build a Rock-Solid Portfolio
• Volume 3: Cash Cows that Are Better than Bonds
• Volume 4: Finding the Real Bottom Line
• Volume 5: The Uses and Abuses of P/E Ratios
• Volume 6: How to Earn Big Profits in the New 2-Tier Market
• Volume 7: Obamanomics: What it Means to Every Canadian Investor

Plus you get 5 additional Special Reports free:

• Exclusive Special Report #1: How a “Conservative” Broker Can Send You to the Poorhouse. If your wealth isn’t growing as fast as you think it should even though your broker is “doing everything right,” you’ll want to read this eye-opening report. It’s the true story of what happened to one of my clients when he put his faith in a supposedly reputable broker.
• Exclusive Special Report #2: 5 Strategies for Beating Rising Interest Rates and Inflation While Increasing Your Wealth. Governments around the world have been spending heavily and expanding the money supply in an effort to grow their economies. These moves are likely to come with a hefty price tag … in the form of much higher inflation. This exclusive report is your step-by-step guide to protecting your wealth in this changing market.
• Exclusive Special Report #3: 5 Stocks to Hold in Your Retirement Portfolio. In this report, I offer my most conservative recommendations to help you protect and grow your wealth.
• Exclusive Special Report #4: 20 MORE Stocks You Need to Dump Now. Last season’s list of 20 losers all posted sharp declines. In this new updated version, I reveal the names of stocks that must be dumped right away.
• Exclusive Special Report #5: 5 Resource Stocks for Conservative Investors. In this report, I name 5 natural resource-related companies that I see as bargains waiting to rise sharply as the economy continues to recover and demand from emerging markets heats up.

And now… for a really pleasant surprise…

When you subscribe today, you can get The Successful Investor, Canada’s top-performing investment advisory, for as little as $0.20 a day.

Now you can save $67 off the regular subscription price of $139 and subscribe for 1 year for just $72. Plus you’ll get all 6 Special Reports absolutely FREE.

That’s a total value of $179.70 for the 6 Special Reports, yours FREE when you try The Successful Investor for 1 year for just $72 + GST/HST.

If you prefer, you can subscribe for 6 months for just $39 + GST/HST, a $40.50 savings off the regular subscription price of $79.50. This short-term trial subscription entitles you to Volumes 1 and 2 of my Investor’s Guide, plus a FREE copy of my new Special Report, How a “Conservative” Broker Can Send You to the Poorhouse.

Or for the very best deal, I offer an Easy-Pay Plan — a 1-month FREE trial, then just $18 + GST/HST every 3 months. That’s right. Simply try The Successful Investor for 1 month absolutely FREE. Plus, I’ll also send you, without cost, all 6 Special Reports absolutely FREE — without further obligation.

Regardless of the subscription length you select, you risk absolutely nothing, thanks to my personal, money-back, TRIPLE guarantee.

1. If The Successful Investor ever disappoints you in any way, you may cancel anytime during the first 90 days and receive a 100% refund of every penny you paid.

2. Cancel anytime after the first 90 days and receive a prorated refund for the remainder of your subscription.

3. Should you cancel anytime, all the FREE Special Reports and issues you’ve received are yours to keep. I’ll even give you back your GST/HST.

Send for your no-risk trial subscription and start protecting your hard-earned savings right away.


Yours for safe and profitable investing,

Pat McKeough
Editor,
The Successful Investor

P.S. When you subscribe online right now I’ll send you my special quick-response bonus report, 3 Little-Known Strategies to Help You Thrive in Today’s Volatile Markets (A $29.95 value — FREE). Even with the current stock market volatility, you’ll likely do better with your money in stocks than if you just sit on the sidelines. And you won’t get far with most coupon bonds, which are averaging a paltry 4%. I’ll share my insight on the coming market changes in my new Special Report, 3 Little-Known Strategies to Help You Thrive in Today’s Volatile Markets (a $29.95 value).

That’s right. I’ll be happy to send you a FREE copy when you begin your no-risk subscription, right now, to The Successful Investor. This is in addition to the FREE 7-volume Investor’s Guide and FREE Special Reports described above.

* – Figures updated April 29, 2011