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
TECK RESOURCES LTD. $9.15 (Toronto symbol TCK.B; Conservative Growth Portfolio, Resources sector; Shares outstanding: 576.2 million; Market cap: $5.3 billion; Price-to-sales ratio: 0.6; Dividend yield: 3.3%; TSINetwork Rating: Average; www.teck.com) and Goldcorp Inc. (Toronto symbol G) have agreed to merge their copper projects in Chile into a new 50/50 joint venture by the end of 2015.

The new venture will hold Teck’s proposed Relincho mine and Goldcorp’s El Morro project. The two properties are just 40 kilometres apart, so there are plenty of opportunities to cut overlapping costs. For example, the partners plan to transport ore from El Morro to Relincho for processing.

It would cost $3.5 billion U.S. to build these mines and related infrastructure (Teck’s share is $1.75 billion U.S.). However, their combined reserves would last 32 years.

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CANADIAN TIRE CORP. $121 (Toronto symbol CTC.A; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 72.8 million; Market cap: $8.8 billion; Price-to-sales ratio: 0.7; Dividend yield: 1.7%; TSINetwork Rating: Above Average; www.canadiantire.ca) owns 495 Canadian Tire stores, which sell automotive, household and sporting goods. Franchisees run most of these outlets. Other operations include 297 gas stations and 91 PartSource auto parts stores. Canadian Tire has acquired a number of specialty retailers in the past few years.

These chains include Mark’s Work Wearhouse (since shortened to Mark’s), which sells casual and work clothing through 378 stores, and the Forzani Group, which sells sporting goods and athletic clothing through 433 stores, mainly under the Sport Chek and Sports Experts banners.

As part of a new growth plan, Canadian Tire is upgrading its stores and growing online. It plans to spend $575 million a year on these initiatives from 2015 to 2017.

The cost of these upgrades, plus higher wages, cut the company’s earnings by 2.3% in the three months ended July 4, 2015, to $166.0 million from $169.9 million a year earlier. Earnings per share gained 1.3%, to $2.15 from $2.12, on fewer shares outstanding.

The latest quarter also included just 80% of the company’s financial services division after it sold a 20% stake to Bank of Nova Scotia (Toronto symbol BNS) last year. The deal cut $0.18 a share from Canadian Tire’s latest earnings.

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METRO INC. $35 (Toronto symbol MRU; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 245.5 million; Market cap: $8.6 billion; Price-to-sales ratio: 0.6; Dividend yield: 1.3%; TSINetwork Rating: Average; www.metro.ca) operates 600 grocery stores and 250 drugstores in Quebec and Ontario.

The company is benefiting from the 75% of privately held bakery Première Moisson it bought last year. Metro paid $101.6 million for its stake in this business, which has 23 stores and three plants in Quebec. Rising food prices are also boosting its sales and earnings.

In its fiscal 2015 third quarter, which ended July 4, 2015, Metro’s earnings gained 13.1%, to $163.5 million from $144.5 million a year earlier. It spent $203.0 million on share buybacks in the quarter, causing earnings per share to rise at a faster pace of 18.5%, to $0.64 from $0.54.

Sales rose 6.1%, to $3.8 billion from $3.6 billion. Same store sales gained 4.3%. Metro also owns 5.7% of Alimentation Couche-Tard (Toronto symbol ATD.B), which operates convenience stores in North America, Scandinavia and Eastern Europe and is a recommendation of Stock Pickers Digest, our newsletter for aggressive investing. Due to a special charge, Metro’s share of Couche-Tard’s earnings fell to $8.7 million in the latest quarter from $9.1 million a year earlier.

The company is in a strong position to keep making acquisitions and buying back shares. Its long-term debt of $1.1 billion is a low 13% of its market cap, and it holds cash of $5.1 million. The stock trades at 17.2 times the $2.03 a share Metro will likely earn in fiscal 2015. The $0.47 dividend yields 1.3%.

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LOBLAW COMPANIES LTD. $69 (Toronto symbol L; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 412.7 million; Market cap: $28.5 billion; Price-to-sales ratio: 0.6; Dividend yield: 1.4%; TSINetwork Rating: Above Average; www.loblaw.ca) plans to close 52 less profitable stores in the next year, including supermarkets, gas bars and stand-alone Joe Fresh clothing outlets. Following these closures, it will operate 2,400 stores, including the 1,250 Shoppers Drug Mart pharmacies it bought for $12.3 billion in cash and shares in March 2014.

The move will cut $300 million from Loblaw’s yearly sales, but it should add $35 million to $40 million to its annual gross profits. Loblaw also expects to save $200 million this year by merging its warehouses and other operations with Shoppers.

Excluding store-closure costs, Loblaw earned $350 million in the three months ended June 20, 2015, up 17.8% from $297 million a year earlier. Earnings per share gained 14.9%, to $0.85 from $0.74, on more shares outstanding.

Sales rose 2.2%, to $10.5 billion from $10.3 billion. Excluding gasoline, same-store sales rose 4.2% at Loblaw’s supermarkets, while Shoppers’ same-store sales gained 3.8%. Savings from the Shoppers acquisition are helping Loblaw repay the money it borrowed to complete the purchase. The company ended the latest quarter with total debt of $11.1 billion (or 39% of its market cap), down from $11.4 billion at the end of 2014. It also held cash of $1.3 billion.

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EMERA INC. $42 (Toronto symbol EMA; Income Portfolio, Utilities sector; Shares outstanding: 145.3 million; Market cap: $6.1 billion; Price-to-sales ratio: 2.2; Dividend yield: 4.5%; TSINetwork Rating: Average; www. emera.com) is buying Teco Energy (New York symbol TE), which supplies electricity and natural gas to 1.05 million customers in Tampa Bay, Florida and surrounding areas. A separate subsidiary distributes gas to 510,000 customers in New Mexico. This a big purchase for Emera, which will pay $6.5 billion U.S. in cash. If you include Teco’s debt, the deal is worth $10.4 billion U.S., or 2.3 times Emera’s current market cap.

After Emera completes the purchase in mid-2016, it will have $20 billion U.S. of assets (56% in Florida, 23% in Canada, 10% in New England, 6% in New Mexico and 5% in the Caribbean).

Regulated utilities will provide 80% of the combined company’s earnings.

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A large number of stocks fall into a grey area. We wouldn’t advise buying them, but they are “okay to hold,” in our view.
The stock market and presidential elections have a relationship that can be summed up by what is known as the “four year rule.”
Brokers like theme investing because it gives them an opportunity to recommend new stocks or ETFs to their clients, which may not be beneficial to investors.
Many new ETFs have wide appeal and include a broad range of investment opportunities. They can also come with extra costs that investors should be aware of