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.

POTASH CORP. OF SASKATCHEWAN $34 (Toronto symbol POT; Aggressive Growth Portfolio, Resources sector; Shares outstanding: 834.7 million; Market cap: $28.4 billion; Price-to-sales ratio: 4.5; Dividend yield: 5.8%; TSINetwork Rating: Average; www.potashcorp.com) has offered to buy leading German fertilizer producer K+S AG for around $8.6 billion U.S.

K+S has rejected the offer, as it feels the price discounts the potential value of its new Legacy potash mine in Saskatchewan, which will open in 2016. As a result, K+S has indicated that Potash Corp. would have to raise its bid by roughly 22%.

In response, Potash Corp. may launch a hostile takeover offer. However, German regulators would probably block an acquisition, particularly if Potash Corp. plans to close some of K+S’s mines. Potash Corp. is still a hold.

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$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$ IGM FINANCIAL INC. $38 (Toronto symbol IGM; Conservative Growth Portfolio, Finance sector; Shares outstanding: 247.5 million; Market cap: $9.4 billion; Price-to-sales ratio: 3.1; Dividend yield: 5.9%; TSINetwork Rating: Above Average; www.igmfinancial.com) had $137.9 billion worth of assets under management as of July 31, 2015, down 3.0% from $142.1 billion a year earlier. The company’s fee income rises and falls with the value of the mutual funds and other securities it manages, so its revenue and earnings decline when the price of these assets falls.

However, IGM sells most of its funds through its own salesforce. This leaves it less dependent on selling through the brokerage industry than its competitors. This salesforce also lets IGM form close relationships with clients, and keep redemption rates down.

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TORONTO-DOMINION BANK $53 (Toronto symbol TD; Conservative Growth and Income Portfolios, Finance sector; Shares outstanding: 1.8 billion; Market cap: $95.4 billion; Price-to-sales ratio: 3.4; Dividend yield: 3.8%; TSINetwork Rating: Above Average; www.td.com) recently agreed to pay an undisclosed sum to department store operator Nordstrom (New York symbol JWN) for its U.S. credit card portfolio. These loans total $2.2 billion U.S.; TD expects to complete the purchase by the end of 2015.

Separately, TD has agreed to become the exclusive issuer of Nordstrom-branded Visa and privatelabel credit cards.

Under the deal, which is similar to the bank’s March 2013 purchase of Target’s credit card portfolio, Nordstrom will keep receiving most of the earnings from its card operations. However, TD will also get a share, and it stands to benefit as more Nordstrom shoppers adopt the cards.

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ROYAL BANK OF CANADA $76 (Toronto symbol RY; Conservative Growth and Income Portfolios, Finance sector; Shares outstanding: 1.4 billion; Market cap: $106.4 billion; Price-to-sales ratio: 3.2; Dividend yield: 4.1%; TSINetwork Rating: Above Average; www.rbc.com) continues to sell its less promising overseas operations as it shifts its international focus to the U.S., U.K. and Asia.

For example, it recently sold its retail banking business in the country of Suriname, South America.

It’s also selling its Swiss private banking operations to SYZ Group for an undisclosed sum. This subsidiary offers wealth management services to wealthy investors from emerging markets like Latin America, Africa and the Middle East.

Meanwhile, Royal aims to complete its purchase of Los Angeles-based City National (New York symbol CYN) by the end of 2015. City National focuses on wealthy individuals and lending to businesses in the entertainment, technology and health care industries. Royal plans to merge it with its U.S. wealth management operations.

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Overall earnings fell 1.2%, to $410 million from $415 million, while per-share profits gained 2.0%, to $0.52 from $0.51, on fewer shares outstanding. Excluding currency rates, the company’s earnings per share jumped 14%.

Thomson’s sound balance sheet will let it keep developing new products, particularly ones it can deliver over the Internet or through mobile devices. As of June 30, 2015, the company held cash of $1.1 billion, or $1.44 a share. Its long-term debt of $7.0 billion is a manageable 21% of its market cap.

The stock has gained 30% in the past year and now trades at 20.5 times Thomson’s likely 2015 earnings of $2.03 a share. That’s still an acceptable multiple in light of its high market share, unique products and improving profit margins. The $1.34 dividend yields 3.2%.

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PENGROWTH ENERGY CORP. $1.71 (Toronto symbol PGF; Aggressive Growth and Income Portfolios, Resources sector; Shares outstanding: 540.7 million; Market cap: $924.6 million; Price-to-sales ratio: 0.9; Dividend yield: 14.0%; TSINetwork Rating: Average; www.pengrowth.com) plans to spend $190 million to $210 million on its oil and gas properties in 2015, down from its earlier forecast of $220 million to $240 million.

The company also wants to sell $600 million worth of less important assets. It will use the cash to pay down its debt of $1.9 billion, which is a high 2.1 times its market cap.

Meanwhile, Pengrowth continues to benefit from its hedging program, which locks in selling prices above today’s low oil and gas prices. That should help it keep paying monthly dividends of $0.02 a share. The annual rate of $0.24 yields a high 14.0% due to the stock’s depressed price.

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ENCANA CORP. $9.45 (Toronto symbol ECA; Conservative Growth Portfolio, Resources sector; Shares outstanding: 842.5 million; Market cap: $8.0 billion; Price-to-sales ratio: 1.2; Dividend yield: 3.8%; TSINetwork Rating: Average; www.encana.com) continues to sell less important properties as it narrows its focus on four higher-margin projects: Montney (B.C.), Duvernay (Alberta) and Eagle Ford and Permian (Texas).

These sales cut its daily output by 21.0% in the three months ended June 30, 2015, to 388,700 barrels a day (67% gas, 33% oil and natural gas liquids) from 491,800 a year earlier. As well, the company’s realized gas prices, which include the benefit of hedging contracts, fell 13.7%, while oil prices dropped 37.0%.

As a result, Encana lost $167 million, or $0.20 a share (all amounts except share price and market cap in U.S. dollars). A year earlier, it earned $171 million, or $0.23. Cash flow per share dropped 75.3%, to $0.22 from $0.89, while revenue declined 47.7%, to $830 million from $1.6 billion.

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Successful expansion in Ireland is just one reason Great-West Lifeco gets our nod as one of Canada’s top financial blue chip stocks.
CENOVUS ENERGY INC. $19 (Toronto symbol CVE; Conservative Growth Portfolio, Resources sector; Shares outstanding: 833.2 million; Market cap: $15.8 billion; Price-to-sales ratio: 1.0; Dividend yield: 3.4%; TSINetwork Rating: Average) 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% of these operations. Cenovus’s refineries help cut its exposure to falling oil prices, as cheaper crude lowers their operating costs.

Cenovus still plans to spend $1.8 billion to $2.0 billion on expansions and upgrades in 2015, unchanged from its previous estimate. These projects should add 50,000 barrels a day to its production by the end of 2016.

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