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.

Posts by the author
GENERAL ELECTRIC CO. $29 (New York symbol GE; Conservative Growth and Income Portfolios, Manufacturing & Industry sector; Shares outstanding: 10.1 billion; Market cap: $292.9 billion; Priceto- sales ratio: 2.0; Dividend yield: 3.2%; TSINetwork Rating: Above Average; www.ge.com) continues to shrink its GE Capital subsidiary as part of a plan to focus on its industrial businesses, including jet engines, medical equipment, appliances, lighting and locomotives.

Including its recent deal with Wells Fargo (see left), the company has now sold $126 billion worth of GE Capital’s assets. It should reach its goal of shrinking this business by $200 billion by the end of 2016.

After these sales, the financing business will supply just 10% of GE’s earnings, down from 42% in 2014. The Federal Reserve considers GE Capital a “systemically important financial institution,” so reducing its size should let GE avoid the tougher capitalization requirements and stress tests the Fed imposes on big lenders.

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STATE STREET CORP. $70 (New York symbol STT; Aggressive Growth Portfolio, Finance sector; Shares outstanding: 403.8 million; Market cap: $28.3 billion; Price-to-sales ratio: 2.6; Dividend yield: 1.9%; TSINetwork Rating: Average; www.statestreet.com) sells accounting and administrative services to large institutional investors, such as mutual funds and pension plans.

State Street’s fee income rises and falls with the value of the mutual funds and other securities it manages. Recent stock market weakness reduced the value of its assets under custody and administration by 4.2%, to $27.3 trillion, as of September 30, 2015, compared to the same date a year ago. Assets it manages, including exchange traded funds, fell 9.0% to $2.2 trillion.

These declines lowered the company’s revenue by 1.2% in the third quarter of 2015, to $2.65 billion from $2.68 billion a year earlier.

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J.P. MORGAN CHASE & CO. $66 (New York symbol JPM; Income Portfolio, Finance sector; Shares outstanding: 3.7 billion; Market cap: $244.2 billion; Price-to-sales ratio: 2.6; Dividend yield: 2.7%; TSINetwork Rating: Average; www.jpmorgan chase.com) has four main divisions: Consumer and Community Banking, which includes branches and credit cards (45% of 2014 revenue, 44% of earnings); Corporate and Investment Banking, including brokerage and underwriting services (36%, 33%); Asset Management (12%, 10%); and Commercial Banking (7%, 13%). About 75% of Morgan’s revenue comes from the U.S.

The bank is selling some operations and scaling back in other areas. These moves are in response to the Federal Reserve’s plan to impose tougher capital requirements on banks it feels are too big or complex.

For example, it recently agreed to sell its Canadian credit card businesses to Bank of Nova Scotia (Toronto symbol BNS).

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WELLS FARGO & CO. $55 (New York symbol WFC; Conservative Growth and Income Portfolios, Finance sector; Shares outstanding: 5.1 billion; Market cap: $280.5 billion; Price-to-sales ratio: 3.3; Dividend yield: 2.7%; TSINetwork Rating: Average; www.wellsfargo.com) operates through three divisions: Community Banking provides mortgages, loans, credit cards and other financial services (57% of 2014 revenue, 59% of earnings); Wholesale Banking supplies business loans (27%, 32%); and Wealth, Brokerage and Retirement offers wealth management, brokerage and trust services to individuals and institutions, such as pension plans (16%, 9%).

The bank gets 95% of its revenue from the U.S.

Wells Fargo recently agreed to buy the commercial lending and leasing operations of GE Capital, the financing division of General Electric (see box). These businesses offer loans to help manufacturers boost their inventory, as well as other forms of financing.

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ALPHABET INC. (Nasdaq symbols GOOG $713 [class C: non-voting] and GOOGL $737 [class A: one vote per share]; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 680.2 million; Market cap: $491.0 billion; Price-tosales ratio: 6.8; No dividends paid; TSINetwork Rating: Above Average; www.abc.xyz) is the new parent company for Google’s Internet search business (still called Google) and other operations, such as self-driving cars and home thermostats. Each of these subsidiaries will function independently.

In the three months ended September 30, 2015, earnings gained 18.7%, to $5.1 billion from $4.3 billion a year earlier. Per-share profits rose 17.6%, to $7.35 from $6.25, on more shares outstanding. Revenue rose 13.0%, to $18.7 billion from $16.5 billion.

The number of paid clicks on advertisers’ads rose 23% in the latest quarter, helping offset an 11% drop in the average cost advertisers paid per click. More users are accessing the Internet with mobile devices, but advertisers pay lower rates for mobile ads because they’re harder to see on smaller screens.

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VISA INC. $79 (New York symbol V; Conservative Growth Portfolio, Finance sector; Shares outstanding: 2.4 billion; Market cap: $189.6 billion; Price-to-sales ratio: 13.9; Dividend yield: 0.7%; TSINetwork Rating: Above Average; www.visa.com) operates the world’s largest electronic payments network, through which it processes credit, debit, prepaid and commercial transactions. The company’s systems can process over 56,000 transactions per second.

Visa gets most of its revenue from fees it charges the card issuers and merchants that use its network. These are based on transaction volumes and other factors. The banks that issue the credit cards are responsible for evaluating customer creditworthiness and collecting payments, not Visa.

The company’s revenue jumped 57.5%, from $8.1 billion in fiscal 2010 to $12.7 billion in 2014 (fiscal years end September 30). Revenue likely rose to $13.9 billion in 2015. Earnings gained 83.3%, from $3.0 billion in 2010 to $5.4 billion in 2014. Visa is an aggressive buyer of its own shares, which is why its earnings per share soared 131.6%, from $0.98 to $2.27.

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