Pat McKeough

A professional investment analyst for more than 30 years, Pat has developed a stock-selection technique that has proven reliable in both bull and bear markets. His proprietary ValuVesting System™ focuses on stocks that provide exceptional quality at relatively low prices. Many savvy investors and industry leaders consider it the most powerful stock-picking method ever created.

As early as 1980, Pat was recognized as #1 in the world of published investment advice by the Washington, DC–based Newsletter Publishers Association, and he was the first multi-year winner of The Globe and Mail’s stock picking contest.

Both CBS MarketWatch and The Hulbert Financial Digest recognized Pat as one of North America’s top stock analysts. The Wall Street Journal called him “one of only four investment newsletter advisors who have managed to serve their readers well over the long haul.”

A best-selling Canadian author, he wrote Riding the Bull, his 1993 book that predicted the stock-market boom of the last half of that decade. Through his many television appearances, he is well-known to investors for his insightful analysis and his candid, unpretentious style.

Bottom line: Pat’s conservative, reduced-risk strategy is a proven approach to safe investing.

MANITOBA TELECOM SERVICES INC. $32 (Toronto symbol MBT; Conservative Growth and Income Portfolios, Utilities sector; Shares outstanding: 79.3 million; Market cap: $2.5 billion; Price-to-sales ratio: 2.5; Dividend yield: 4.1%; TSINetwork Rating: Average; www.mts.ca) recently completed the sale of its Allstream division to U.S.-based Zayo Group Holdings (New York symbol ZAYO). Prior to the deal, Allstream, which offers telephone, Internet and other communication services to businesses across Canada, supplied 40% of Manitoba Telecom’s revenue. The remaining 60% came from its MTS division, which has 1.3 million telephone and wireless customers in Manitoba. Manitoba Telecom received $420.0 million, net of transaction costs, for Allstream. The company will use $200.0 million to buy back roughly 8% of its outstanding shares. It will put a further $190.0 million to its total debt of $1.1 billion, which is equal to 44% of its market cap. The company will hang on to the remaining $30.0 million for now....
POTASH CORP. OF SASKATCHEWAN $21 (Toronto symbol POT; Aggressive Growth Portfolio, Resources sector; Shares outstanding: 836.5 million; Market cap: $17.6 billion; Price-to-sales ratio: 3.2; Dividend yield: 6.6%; TSINetwork Rating: Average; www.potashcorp.com) earned $1.52 a share in 2015, down 16.5% from $1.82 in 2014 (all amounts except share price and market cap in U.S. dollars). Revenue declined 11.7%, to $6.3 billion from $7.1 billion. High global potash inventories have cut demand, while record North American harvests have hurt crop prices, leaving farmers with less to spend on fertilizers. In response, Potash Corp. has suspended production at its $2.2-billion (Canadian) potash mine in Picadilly, New Brunswick, which only started up in early 2015. It also cut its dividend by 34.2%; the new annual rate of $1.00 U.S. a share yields 6.6%....
ROYAL BANK OF CANADA $66 (Toronto symbol RY; Conservative Growth and Income Portfolios, Finance sector; Shares outstanding: 1.5 billion; Market cap: $99.0 billion; Price-to-sales ratio: 2.9; Dividend yield: 4.8%; TSINetwork Rating: Above Average; www.rbc.com) is selling its RBC General Insurance subsidiary to Aviva Canada. This business mainly sells home and auto insurance. As part of the sale, Royal’s customers can also access all of Aviva’s insurance products for the next 15 years. The sale makes sense, as regulators prevent Canadian banks from selling insurance policies through their branches. That limits Royal’s ability to expand this business. However, the bank will continue to sell life and health insurance through separate offices and online....
SUNCOR ENERGY INC. $30 (Toronto symbol SU; Conservative Growth Portfolio, Resources sector; Shares outstanding: 1.4 billion; Market cap: $42.0 billion; Price-to-sales ratio: 1.5; Dividend yield: 3.9%; TSINetwork Rating: Average; www. suncor.com) is Canada’s largest oil producer. It also operates four refineries and 1,500 Petro-Canada gas stations, which supply 63% of its revenue. The company produced an average of 577,800 barrels of oil equivalent a day in 2015, up 8.0% from 534,900 barrels in 2014. Suncor’s oil sands projects accounted for 80% of its output. However, Suncor lost $2.0 billion, or $1.38 a share, mainly because it wrote down the value of its reserves in response to the oil-price drop. It also wrote down its operations in Libya and some of its offshore projects. But without unusual items, Suncor earned $1.01 a share. In 2014, it earned $4.6 billion, or $3.15 a share....
IMPERIAL OIL LTD. $41 (Toronto symbol IMO; Conservative Growth and Income Portfolios, Shares outstanding: 847.6 million; Market cap: $34.8 billion; Price-to-sales ratio: 1.4; Dividend yield: 1.4%; TSINetwork Rating: Average; www.imperialoil.ca) gets about 90% of its crude oil from its Alberta oil sands operations, including its 25% stake in the Syncrude project. In addition, it has conventional oil and natural gas operations, also in Western Canada, and owns stakes in projects off the coast of Atlantic Canada. Imperial also owns three refineries, petrochemical plants and 1,700 gas stations, which operate under the Esso banner....
PENGROWTH ENERGY CORP. $0.91 (Toronto symbol PGF; Aggressive Growth and Income Portfolios, Resources sector; Shares outstanding: 543.0 million; Market cap: $494.1 million; Price-to-sales ratio: 0.8; Dividend suspended in January 2016; TSINetwork Rating: Speculative; www.pengrowth.com) has suspended its $0.01-a-share quarterly dividend in response to the sharp decline in oil prices. It will also reduce its capital spending to between $60 million to $70 million in 2016, from $184 million in 2015. The company has also laid off workers, which should save it $25 million in 2016, and aims to sell $600 million of less important properties. It will probably put these funds toward its $2.1-billion debt, which is now a high 4.3 times its depressed market cap. Pengrowth is a hold.
CENOVUS ENERGY INC. $14 (Toronto symbol CVE; Conservative Growth Portfolio, Resources sector; Shares outstanding: 833.2 million; Market cap: $11.7 billion; Price-to-sales ratio: 0.9; Dividend yield: 1.4%; TSINetwork Rating: Average; www.cenovus.com) gets 35% of its revenue from its Western Canadian oil sands properties and conventional oil and gas wells. Chief among these assets are its 50%-owned Christina Lake and Foster Creek oil sands projects; ConocoPhilips (New York symbol COP) owns the remaining 50%. Refining supplies the remaining 65% of Cenovus’s revenue. The company ships its oil to its 50%-owned refineries in Illinois and Texas. Phillips 66 (New York symbol PSX) owns the other 50%. Low crude prices have prompted Cenovus to cut its capital spending by 26.5%, to about $1.25 billion in 2016 from $1.7 billion in 2015....
ENCANA CORP. $4.86 (Toronto symbol ECA; Conservative Growth Portfolio, Resources sector; Shares outstanding: 849.8 million; Market cap: $4.1 billion; Price-to-sales ratio: 0.8; Dividend yield: 1.7%; TSINetwork Rating: Average; www.encana.com) plans to spend $1.5 billion to $1.7 billion upgrading its properties in 2016, down 25% from 2015 (all amounts except share price and market cap in U.S. dollars). Even with the drop, it expects production at its four main oil projects—Montney (B.C.), Duvernay (Alberta) and Eagle Ford and Permian (both in Texas)—will rise 12% this year. It has also cut its annual dividend rate by 78.6%, to $0.06 a share from $0.28. In addition, Encana has eliminated the 2% price discount it offered to shareholders who chose to reinvest their dividends in new shares. In all, these moves will save $185 million a year. Encana is still a buy for long-term gains.
CGI GROUP INC. $57 (Toronto symbol GIB.A; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 313.4 million; Market cap: $17.9 billion; Price-to-sales ratio: 1.7; No dividends paid; TSINetwork Rating: Extra Risk; www.cgi.com) is one of eight firms the U.S. Navy has chosen to help it upgrade its computer systems. CGI hasn’t yet said how much it would receive under its initial one-year contract. However, the Navy has set aside a total of $809.5 million U.S. for this project, which it expects to complete in 2020. The company’s strong reputation should continue to help it win more contracts from military clients. Moreover, CGI’s $21.5-billion backlog of contracts (at December 31, 2015) is equal to 2.1 times its annual revenue....