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
PEPSICO INC. $92 (New York symbol PEP; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 1.5 billion; Market cap: $138.0 billion; Price-to-sales ratio: 2.0; Dividend yield: 3.0%; TSINetwork Rating: Above Average; www.pepsico.com) has suffered lately as a more health-conscious population consumes fewer soft drinks. Sales of its low-calorie sodas have also fallen on concerns over the long-term health effects of the artificial sweetener aspartame. In 2014, total U.S. diet soda sales declined 5.9%.

In response, PepsiCo has replaced the aspartame in Diet Pepsi with Splenda, a low-calorie sweetener made from regular sugar. The switch will likely boost sales, as the company has launched a new marketing campaign and promotions that will likely encourage consumers to try the new drink. Even so, PepsiCo’s overall sales will likely stay weak for the rest of 2015.

PepsiCo is a hold.
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MONDELEZ INTERNATIONAL INC. $42 (Nasdaq symbol MDLZ; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 1.6 billion; Market cap: $67.2 billion; Price-to-sales ratio: 2.0; Dividend yield: 1.6%; TSINetwork Rating: Above Average; www.mondelezinternational.com) makes cookies and biscuits (Oreo, Chips Ahoy, Ritz), chocolate bars (Cadbury, Toblerone), gum and candy (Trident, Chiclets) and Halls cough drops.

The stock gained 10% recently on news that activist investment firm Pershing Square Capital now owns 7.5% of the company. Pershing will likely pressure Mondelez to improve its profitability, instead of trying to break it up or merge it with another food maker. However, the stock is expensive at 23.6 times the company’s projected 2015 earnings of $1.78 a share.

Mondelez is a hold.

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SONY CORP. ADRs $25 (New York symbol SNE; Conservative Growth Portfolio, Manufacturing & Industry sector; ADRs outstanding: 1.3 billion; Market cap: $32.5 billion; Price-to-sales ratio: 0.4; Dividend suspended in September 2014; TSINetwork Rating: Average; www.sony.com) recently announced plans to sell $2.6 billion worth of new common shares, as well as $1.0 billion of convertible bonds. It will use the proceeds to make more of its industry-leading image sensors for digital cameras, smartphones and tablets.

The company has had trouble selling its own smartphones and other devices, so it makes sense to focus on electronic components. As part of a recent restructuring, Sony quit making cheaper mobile phones for emerging markets, though it still makes higher-priced models for developed nations.

Meanwhile, in its fiscal 2016 first quarter, which ended June 30, 2015, Sony’s revenue fell 17.3%, to $14.8 billion from $17.9 billion a year earlier. In Japanese yen, revenue fell just 0.1%.

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CANON INC. ADRs $30 (New York symbol CAJ; Conservative Growth Portfolio, Manufacturing & Industry sector; ADRs outstanding: 1.1 billion; Market cap: $33.0 billion; Price-to-sales ratio: 1.1; Dividend yield: 4.2%; TSINetwork Rating: Above Average; www.canon.com) gets over half of its revenue by making office equipment, mainly printers and copiers. Other products include digital cameras and parts for TVs and medical gear.

Businesses continue to buy more of Canon’s copiers and laser printers, but consumers are taking more pictures with smartphones. That’s hurting the company’s camera sales.

In the three months ended June 30, 2015, Canon’s revenue fell 13.0%, to $8.0 billion from $9.2 billion a year earlier. Without the negative impact of the high U.S. dollar, sales in Japanese yen gained 5.1%. Overall earnings fell 30.2%, to $559.0 million from $800.5 million. Earnings per ADR dropped 29.2%, to $0.51 from $0.72, on fewer ADRs outstanding (each American depositary receipt represents one common share).

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NEWMONT MINING CORP. $16 (New York symbol NEM; Aggressive Growth Portfolio, Resources sector; Shares outstanding: 529.1 million; Market cap: $8.5 billion; Price-to-sales ratio: 1.1; Dividend yield: 0.6%; TSINetwork Rating: Average; www.newmont.com) has purchased the Cripple Creek & Victor gold mine in Colorado for $820 million.

Cripple Creek will produce 350,000 to 400,000 ounces of gold a year once it completes its current expansion in 2016. To put that in context, Newmont expects to produce 4.6 million to 4.9 million ounces in 2015. The mine should last until at least 2026. The company feels it can cut Cripple Creek’s operating costs by 10%. However, like most gold firms, Newmont’s shares will need a gold-price recovery to move significantly higher.

Newmont is still a hold.

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APACHE CORP. $40 (New York symbol APA; Aggressive Growth Portfolio, Resources sector; Shares outstanding: 378.0 million; Market cap: $15.1 billion; Price-to-sales ratio: 1.4; Dividend yield: 2.5%; TSINetwork Rating: Average; www.apachecorp.com) continues to sell overseas properties as part of a plan to focus on its less-risky onshore operations in North America.

The company recently sold stakes in liquefied natural gas projects and other properties in Australia for $5.7 billion and used the cash to repay $2.7 billion of loans. As of June 30, 2015, Apache’s long-term debt was $9.7 billion, or 64% of its market cap. It also held cash of $2.95 billion.

Excluding writedowns and other unusual items, earnings dropped 85.8% in the three months ended June 30, 2015, to $82 million, or $0.22 a share, from $576 million, or $1.49 a share, a year earlier. Revenue fell 39.9%, to $2.0 billion from $3.3 billion. The company now plans to cut its capital spending to between $3.6 billion and $3.9 billion in 2015, down from $10.9 billion in 2014.

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CHEVRON CORP. $73 (New York symbol CVX; Conservative Growth Portfolio, Resources sector; Shares outstanding: 1.9 billion; Market cap: $138.7 billion; Price-to-sales ratio: 0.9; Dividend yield: 5.9%; TSINetwork Rating: Above Average; www.chevron.com) has sold $11 billion worth of less important businesses since 2014. It should reach its goal of selling $15 billion of assets by 2017.

Even with the sales, the company’s oil output will likely average 3.1 million barrels a day in 2017, up 19.2% from 2.6 million in the second quarter of 2015.

That’s mainly because Chevron plans to start up two big offshore gas projects: its 47.3%-owned Gorgon field, off Australia’s northwest coast, and the nearby Wheatstone field (64.14% owned). Each will also have a plant to convert the gas into a liquid for shipment to buyers in Asia.

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PHILIPS ELECTRONICS N.V. ADRs $25 (New York symbol PHG; Conservative Growth Portfolio, Manufacturing & Industry sector; ADRs outstanding: 925.3 million; Market cap: $23.1 billion; Priceto- sales ratio: 0.9; Dividend yield: 3.5%; TSINetwork Rating: Average; www.philips.com) will soon close the $2.9-billion sale of 80.1% of its light emitting diode (LED) components and automotive-lighting division. The buyer is private equity firm GO Scale Capital.

The deal excludes Philips’s lighting-solutions operations, which design and build LED systems for large-scale uses. The company plans to spin this business off as a separate firm. After the spinoff, Philips will focus on medical equipment and consumer goods.

Philips is a buy.

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NORDSTROM INC. $74 (New York symbol JWN; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 188.2 million; Market cap: $13.9 billion; Price-to-sales ratio: 1.0; Dividend yield: 2.0%; TSINetwork Rating: Average; www.nordstrom.com) owns and operates 304 stores in the U.S. and Canada that mainly sell upscale clothing, accessories and footwear.

In its fiscal 2016 second quarter, which ended August 1, 2015, sales rose 9.1%, to $3.7 billion from $3.4 billion a year earlier. Same-store sales (which exclude contributions from new outlets) rose 4.9%. Earnings gained 14.7%, to $1.09 a share from $0.95.

Toronto-Dominion Bank (Toronto symbol TD) recently agreed to buy the company’s credit card loans for $1.8 billion. Nordstrom will probably use these funds to pay down its total debt of $3.1 billion.

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