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.

BOMBARDIER INC. (Toronto symbols BBD.A $2.55 and BBD.B $2.53; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 1.7 billion; Market cap: $4.4 billion; Price-to-sales ratio: 0.3; Dividend suspended in February 2015; TSINetwork Rating: Extra Risk; www.bombardier.com) plans to sell shares in its transportation division to the public. This business makes passenger railcars and accounts for 45% of Bombardier’s total revenue.

The company expects to complete the sale in the fourth quarter of 2015. The new shares will mainly trade on Germany’s stock exchange because that’s where this business is based. Bombardier will retain a majority stake in this new company.

Bombardier also recently suspended its dividend and sold new shares to shore up its balance sheet. The cash should help the company finish developing its new CSeries jet. Bombardier has firm orders for 243 CSeries planes. If buyers exercise their options and other agreements, that figure would rise to 603 aircraft with a total value of about $39 billion U.S.

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METRO INC. $34 (Toronto symbol MRU; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 246.9 million; Market cap: $8.4 billion; Price-to-sales ratio: 0.7; Dividend yield: 1.4%; TSINetwork Rating: Average; www.metro.ca) plans to spend $300 million to build new supermarkets and upgrade existing stores in its 2015 fiscal year, which ends September 30, 2015. That’s up 47.8% from $203 million in fiscal 2014.

These investments should help Metro reach its long-term goal of increasing its annual sales by 2% to 4% and earnings per share by 8% to 10%.

Metro is a buy.

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CENOVUS ENERGY INC. $21 (Toronto symbol CVE; Conservative Growth Portfolio, Resources sector; Shares outstanding: 828.4 million; Market cap: $17.4 billion; Price-to-sales ratio: 0.9; Dividend yield: 5.0%; TSINetwork Rating: Average; www.cenovus.com) has temporarily shut down its Foster Creek oil sands project in northern Alberta, as forest fires in the area are hindering traffic on the main access road to the site.

Cenovus own 50% of Foster Creek, while U.S.-based ConocoPhillips (New York symbol COP) owns the other 50%. In the first quarter of 2015, Cenovus’s share of this project’s output was 68,000 barrels a day, or 31% of its total daily oil production of 218,000 barrels.

The fires have also forced other oil projects in Alberta to close. In all, these operations account for 9% of the province’s total production. However, the shutdowns have increased the spot price of Western Canadian crude, which should help Cenovus offset the lost revenue.

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CAE INC. $15 (Toronto symbol CAE; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 267.2 million; Market cap: $4.0 billion; Price-to-sales ratio: 1.8; Dividend yield: 1.9%; TSINetwork Rating: Average; www.cae.com) has won a new contract to train pilots for the U.S. Army and Air Force. As a result, the company will build a new training facility at Dothan Regional Airport in Alabama.

This eight-year deal is worth $200 million U.S. To put that in context, CAE’s revenue was $2.2 billion (Canadian) in the fiscal year ended March 31, 2015. Military clients supply about 40% of the company’s revenue, which cuts its reliance on selling flight simulators to cyclical commercial airlines.

CAE is our #1 buy for 2015.

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IGM FINANCIAL INC. $42 (Toronto symbol IGM; Conservative Growth Portfolio, Finance sector; Shares outstanding: 248.5 million; Market cap: $10.4 billion; Price-to-sales ratio: 3.5; Dividend yield: 5.4%; TSINetwork Rating: Above Average; www.igmfinancial.com) is Canada’s largest independent mutual fund company, with $148.5 billion of assets under management. Power Financial owns 59.1% of IGM.

In the first quarter of 2015, IGM’s earnings rose 3.0%, to $200.3 million from $194.4 million a year earlier. Per-share earnings gained 3.9%, to $0.80 from $0.77, on fewer shares outstanding. Revenue increased 6.4%, to $760.9 million from $714.8 million. Sales of mutual funds (net of redemptions) fell 12.0%, but rising stock markets pushed up assets under management by 8.1%.

The Canadian Medical Association recently dropped Mackenzie and other firms as sub-advisors on some of the bond funds it sells to its members. That will cut IGM’s assets under management by $10 billion. However, based on the fees it earns from this client, the impact on its earnings is small. The stock trades at just 12.5 times the $3.36 a share that IGM will likely earn in 2015. The $2.25 dividend yields 5.4%.

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GREAT-WEST LIFECO INC. $37 (Toronto symbol GWO; Conservative Growth and Income Portfolios, Finance sector; Shares outstanding: 997.5 million; Market cap: $36.9 billion; Priceto- sales ratio: 0.9; Dividend Yield: 3.5%; TSINetwork Rating: Above Average; www.greatwestlifeco.com) is one of Canada’s largest insurance companies, with $1.2 trillion of assets under administration. It also offers mutual funds, retirement planning and wealth management. Power Financial (Toronto symbol PWF) owns 67.1% of Great-West.

The company continues to expand in Ireland. In 2013, it paid $1.75 billion for Irish Life Group, a major pension manager and life insurance provider. It will also soon complete its purchase of the Irish operations of Legal & General Group for an undisclosed sum. This business provides investment and tax-planning services to wealthy individuals.

Meanwhile, in the three months ended March 31, 2015, Great-West’s earnings rose 19.3%, to $700 million from $587 million a year earlier. Irish Life contributed $80 million, up from $52 million. Due to more shares outstanding, earnings per share rose 18.6%, to $0.70 from $0.59. Revenue rose 27.6%, to $12.7 billion from $9.9 billion.

The company will probably earn $2.82 a share in 2015, and the stock trades at a low 13.1 times that estimate. The $1.30 dividend yields 3.5%.

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BANK OF NOVA SCOTIA $66 (Toronto symbol BNS; Conservative Growth and Income Portfolios, Finance sector; Shares outstanding: 1.2 billion; Market cap: $79.2 billion; Price-to-sales ratio: 3.6; Dividend yield: 4.1%; TSINetwork Rating: Above Average; www.scotiabank.com) has now purchased 51% of the credit card operations of Cencosud S.A., Chile’s largest retailer, for $280 million U.S. The deal made the bank Chile’s third-largest credit card issuer.

Meanwhile, Bank of Nova Scotia earned $1.73 billion, or $1.42 a share, in its fiscal 2015 second quarter, which ended April 30, 2015. That’s up 1.6% from $1.70 billion, or $1.39, a year earlier. Revenue rose 3.7%, to $5.9 billion from $5.7 billion.

Earnings at the Canadian banking division (48% of the bank’s total) rose 0.7%, mainly because it sold most of its shares in mutual fund provider CI Financial (Toronto symbol CIX) in 2014. If you exclude CI and adjust for a change in tax rates, this division’s earnings rose 9% on improving loan and deposit growth.

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POTASH CORP. OF SASKATCHEWAN $38 (Toronto symbol POT; Aggressive Growth Portfolio, Resources sector; Shares outstanding: 834.2 million; Market cap: $31.7 billion; Price-to-sales ratio: 4.8; Dividend yield: 4.9%; TSINetwork Rating: Average; www.potashcorp.com) is thinking about selling its minority stakes in foreign fertilizer producers Israel Chemicals and SQM (Chile). However, it plans to keep its interests in Sinofert (China) and Arab Chemicals (Jordan).

As of March 31, 2015, these four holdings had a book value of $2.8 billion U.S. A sale would free up cash for dividends or share buybacks. However, last year’s record crop harvests continue to depress potash prices.

Potash Corp. is a hold.

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PRECISION DRILLING CORP. $8.76 (Toronto symbol PD; Aggressive Growth Portfolio, Resource sector; Shares outstanding: 292.8 million; Market cap: $2.6 billion; Priceto- sales ratio: 1.2; Dividend yield: 3.2%; TSINetwork Rating: Extra Risk; www.precisiondrilling.com) provides contract drilling services to land-based oil and gas producers, mainly in North America. The company operates 323 rigs.

Falling oil prices have cut drilling activity in Canada and the U.S. by about 50% in the past six months. As a result, Precision’s revenue fell 23.8% in the first quarter of 2015, to $512.1 million from $672.2 million a year earlier. Earnings declined 76.3%, to $24.0 million, or $0.08 a share, from $101.6 million, or $0.35.

The Supreme Court of Canada recently upheld a lower court ruling in an Ontario income tax dispute involving one of Precision’s subsidiaries. As a result, the Ontario government repaid $55 million of the taxes Precision remitted in 2008, along with interest, for a total of $69 million. The cash will help Precision pay for its plan to spend $506 million on capital upgrades in 2015, down 33.0% from $754.9 million in 2014.

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