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.

GANNETT CO., INC. $13 (New York symbol GCI; Conservative Growth Portfolio, Consumer sector: Shares outstanding: 114.9 million; Market cap: $1.5 billion; Price-to-sales ratio: n.a.; Dividend yield: 4.9%; TSINetwork Rating: Average; www.gannett.com) publishes daily newspapers in 92 U.S. markets, including its flagship newspaper, USAToday, as well as 19 papers in the U.K. It also has over 200 magazines and other publications.

As a separate firm, Gannett should earn $1.98 a share in 2015, and the stock trades at just 6.6 times that figure. The $0.64 dividend yields 4.9%.

Gannett is still a buy.

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TEGNA INC. $29 (New York symbol TGNA; Conservative Growth Portfolio, Consumer sector: Shares outstanding: 226.9 million; Market cap: $6.6 billion; Price-to-sales ratio: 1.1; Dividend yield: 1.9%; TSINetwork Rating: Average; www.tegna.com) owns 46 TV stations, as well as websites that attract over 39 million unique visitors a month.

Gannett spun off its newspaper-publishing operations on June 29, 2015.

Investors received two shares of the new Gannett for each share they held. The rest of the company became Tegna. Investors only become liable for capital gains taxes when they sell.

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PAYPAL HOLDINGS INC. $38
(Nasdaq symbol PYPL; Aggressive Growth Portfolio, Finance sector; Shares outstanding: 1.2 billion; Market cap: $45.6 billion; Price-to-sales ratio: n.a.; No dividends paid; TSINetwork Rating: Above Average; www.paypal.com) processes online transactions, including purchases made through eBay’s auction websites. In the past few years, it has expanded into stores and mobile payments. eBay investors received one PayPal share for each eBay share they held. They only become liable for capital gains taxes when they sell their new shares. Operating as a separate firm will let PayPal pursue alliances with more retailers, cutting its reliance on eBay. At the same time, it continues to invest in its mobile operations, which will help it profit as more people buy goods and pay bills through smartphones.

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EBAY INC. $29 (Nasdaq symbol EBAY; Aggressive Growth Portfolio, Finance sector; Shares outstanding: 1.2 billion; Market cap: $34.8 billion; Priceto- sales ratio: 1.9; No dividends paid; TSINetwork Rating: Above Average; www.ebay.com) launched its online auction site in September 1995 and now has 157 million users worldwide. Sellers pay fees to list and sell their goods through eBay’s websites.

In addition to used goods, the company continues to sell more merchandise from retailers, which is helping it compete with Amazon.com. Right now, over 60% of eBay’s total transactions are sales of new items at fixed prices.

The company also operates several other popular websites, including StubHub (ticket sales for live events), Shopping. com (comparison shopping) and Rent.com (apartment and house rentals). These services are in addition to its local websites, which sell classified ads in over 1,000 cities.

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AMERICAN EXPRESS CO. $76 (New York symbol AXP, Conservative Growth Portfolio, Finance sector; Shares outstanding: 1.0 billion; Market cap: $76.0 billion; Price-to-sales ratio: 2.4; Yield: 1.5%; TSINetwork Rating: Average; www.americanexpress.com) issues the only credit card Costco accepts at its U.S. outlets. However, this deal expires in March 2016, so fewer Costco shoppers are signing up for new cards. As a result, Amex will likely sell these loans.

The proceeds would help the company fund new services. For example, it recently launched Amex Express Checkout. Similar to PayPal (see page 73), this service makes it easier for U.S. cardholders to buy goods online.

Meanwhile, Amex earned $1.47 billion in the second quarter of 2015, down 3.7% from $1.53 billion a year earlier. The 2014 quarter included 100% of Amex’s business-travel division, which it later merged into a 50/50 joint venture. Per-share profits fell 0.7%, to $1.42 from $1.43, on fewer shares outstanding.

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J.P. MORGAN CHASE & CO. $69 (New York symbol JPM; Income Portfolio, Finance sector; Shares outstanding: 3.7 billion; Market cap: $255.3 billion; Price-to-sales ratio: 2.8; Dividend yield: 2.6%; TSINetwork Rating: Average; www.jpmorganchase.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 Bank, 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’s revenue fell 8.3%, from $102.7 billion in 2010 to $94.2 billion in 2014. That’s mainly because it sold some operations to cut its exposure to riskier businesses, such as owning and trading commodities. Low interest rates have also hurt the revenue it receives from new loans.

Even so, earnings jumped 22.5%, from $17.4 billion in 2010 to $21.3 billion in 2012. Per-share profits gained 31.3%, from $3.96 to $5.20, on fewer shares outstanding. Morgan continues to settle lawsuits related to its role in the 2008 financial crisis. As a result, its 2013 earnings fell to $4.35 a share (or a total of $17.9 billion). Earnings recovered to $5.29 a share (or $21.8 billion) in 2014.

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WELLS FARGO & CO. $58 (New York symbol WFC; Conservative Growth and Income Portfolios, Finance sector; Shares outstanding: 5.2 billion; Market cap: $301.6 billion; Price-to-sales ratio: 3.5; Dividend yield: 2.6%; TSINetwork Rating: Average; www.wellsfargo.com) operates through three divisions: Community Banking provides consumer 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 U.S. supplies 95% of Wells Fargo’s revenue.

Weak loan demand and lower interest rates cut the bank’s revenue by 5.0%, from $85.2 billion in 2010 to $80.9 billion in 2011. Loan volumes improved in 2012, causing revenue to rise to $86.1 billion. Lower fee income cut the bank’s revenue to $83.8 billion in 2013. Revenue rebounded to $84.3 billion in 2014, thanks to gains at the bank’s wealth management business.

Earnings jumped 85.5%, from $2.21 a share (or a total of $12.4 billion) in 2010 to $4.10 a share (or $23.1 billion) in 2014.

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