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.

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If you want to find out how to hire a stock broker who meets your needs, you need to watch out above all for conflicts of interest
PENGROWTH ENERGY CORP. $4.15 (Toronto symbol PGF; Aggressive Growth and Income Portfolios, Resources sector; Shares outstanding: 530.2 million; Market cap: $2.2 billion; Price-to-sales ratio: 1.8; Dividend yield: 5.8%; TSINetwork Rating: Average; www.pengrowth.com) recently started up its Lindbergh oil sands project in eastern Alberta, which should produce 16,000 barrels a day by the end of 2015.

Due to falling oil prices and Lindbergh’s completion, Pengrowth plans to spend $200 million to upgrade and maintain its properties in 2015, down 74.0% from $770 million last year.

But even with the lower spending, Pengrowth expects to produce between 73,000 and 75,000 barrels a day (57% oil and liquids, 43% natural gas) in 2015, or about 1.5% more than in 2014, thanks to Lindbergh.

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CAE INC. $15 (Toronto symbol CAE; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 265.2 million; Market cap: $4.0 billion; Price-to-sales ratio: 1.8; Dividend yield: 1.9%; TSINetwork Rating: Average; www.cae.com) is buying the military flight-training business of BOMBARDIER INC. (Toronto symbols BBD.A $3.12 and BBD.B $3.04; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 1.7 billion; Market cap: $5.2 billion; Price-to-sales ratio: 0.4; Dividend suspended in February 2015; TSINetwork Rating: Average; www.bombardier.com).

This business trains pilots for the Royal Canadian Air Force and other NATO countries at facilities in Moose Jaw, Saskatchewan, and Cold Lake, Alberta.

CAE will pay $19.8 million when it closes the deal later this year. This a small sum for both companies, but the new operations are a nice fit with CAE’s other pilot-training businesses. After the sale, Bombardier can focus on its struggling aircraft-manufacturing business, including the upcoming launch of its new CSeries passenger jet.

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SAPUTO INC. $36 (Toronto symbol SAP; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 391.1 million; Market cap: $14.1 billion; Price-to-sales ratio: 1.3; Dividend yield: 1.4%; TSINetwork Rating: Average; www.saputo.com) bought 87.92% of Warrnambool Cheese and Butter Factory, one of Australia’s largest dairy producers, for $449.6 million in February 2014. In April 2014, it added the fluid-milk operations of Nova Scotia dairy Scotsburn for $65.0 million.

These acquisitions increased Saputo’s revenue by 20.4% in its fiscal 2015 third quarter, which ended December 31, 2014, to $2.8 billion from $2.3 billion a year ago. Higher cheese and butter prices in the U.S. also contributed to the gain. Earnings rose 7.3%, to $154.6 million from $144.1 million. But earnings per share gained just 2.7%, to $0.38 from $0.37, on more shares outstanding.

The stock trades at 22.9 times the $1.57 a share Saputo will likely earn in fiscal 2015. That’s a high p/e ratio for a slow-growing dairy company that relies on acquisitions to expand.

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MANITOBA TELECOM SERVICES INC. $24 (Toronto symbol MBT; Conservative Growth and Income Portfolios, Utilities sector; Shares outstanding: 78.1 million; Market cap: $1.9 billion; Price-to-sales ratio: 1.2; Dividend yield: 7.1%; TSINetwork Rating: Average; www.mtsallstream.com) gets 60% of its revenue from its MTS division, which has 1.3 million telephone and wireless clients in Manitoba. The other 40% comes from Allstream, which sells telephone, Internet and other communication services to businesses across Canada.

In the three months ended December 31, 2014, the company earned $24.2 million, or $0.31 a share. That’s a big improvement over the year-earlier quarter, when writedowns and other unusual charges led to a loss of $87.8 million, or $1.25.

Overall revenue fell 0.9%, to $404.8 million from $408.5 million.

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TELUS CORP. $44 (Toronto symbol T; Conservative Growth and Income Portfolios, Utilities sector; Shares outstanding: 611.7 million; Market cap: $26.9 billion; Price-to-sales ratio: 2.2; Dividend yield: 3.6%; TSINetwork Rating: Above Average; www.telus.com) is Canada’s third-largest wireless carrier, after BCE and Rogers Communications, with 8.0 million subscribers. Wireless now supplies 54% of Telus’s revenue and 66% of its earnings.

The remaining 46% of revenue and 34% of earnings come from its wireline division, which mainly consists of 3.2 million traditional phone customers in B.C., Alberta and eastern Quebec. This business also includes 1.45 million Internet users and 888,000 TV customers.

Unlike BCE, which has expanded its media businesses in the past few years, Telus has concentrated on improving its wireless and high-speed Internet networks.

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BCE INC. $56 (Toronto symbol BCE; Conservative Growth and Income Portfolios, Utilities sector; Shares outstanding: 840.3 million; Market cap: $47.1 billion; Price-to-sales ratio: 2.2; Dividend yield: 4.6%; TSINetwork Rating: Above Average; www.bce.ca) is Canada’s largest telephone provider, with 5.0 million customers in Ontario and Quebec. It also has 2.3 million high-speed Internet users and 2.4 million TV subscribers. This business supplies 46% of BCE’s revenue.

The company also sells wireless services (29% of revenue) to 8.1 million customers across Canada, and its Bell Media segment (13%) owns CTV Television, specialty channels and radio stations.

In November 2014, the company paid $3.95 billion in cash and stock for the 56% of Bell Aliant that it didn’t already own. Bell Aliant, which accounts for the remaining 12% of BCE’s revenue, sells telephone and Internet services to 2.2 million clients in Atlantic Canada and rural Ontario and Quebec.

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MOLSON COORS CANADA INC. (Toronto symbols TPX.A $84 and TPX.B $92; Conservative Growth and Income Portfolios, Consumer sector; Shares outstanding: 193.0 million; Market cap: $17.8 billion; Priceto- sales ratio: 3.2; Dividend yield: 2.3%; TSINetwork Rating: Average; www.molsoncoors.com) sold less beer in 2014, but its ongoing cost-control plan continues to give it more cash for debt repayments and dividends.

In 2014, the company’s worldwide beer volumes fell 1.3%. That lowered its revenue by 1.4%, to $4.1 billion from $4.2 billion in 2013 (all amounts except share price and market cap in U.S. dollars). If you disregard currency exchange rates, revenue gained 0.3%.

Molson Coors continues to improve its efficiency. As a result, its earnings rose 5.7%, to $768.5 million from $727.1 million. Per-share earnings gained 4.6%, to $4.13 from $3.95, on more shares outstanding.

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CANADIAN TIRE CORP. $118 (Toronto symbol CTC.A; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 78.1 million; Market cap: $9.2 billion; Price-to-sales ratio: 0.7; Dividend yield: 1.8%; TSINetwork Rating: Above Average; www.canadiantire.ca) began operating in 1922 and is now one of Canada’s leading retailers.

The company owns 493 Canadian Tire stores, which sell automotive, household and sporting goods. Franchisees run most of these outlets. Other operations include 300 gas stations and 91 PartSource auto parts stores.

Canadian Tire has acquired more-specialized retailers to help it compete with big U.S.-based chains like Wal-Mart and Home Depot. In 2002, it bought Mark’s Work Wearhouse, which sells casual and work clothing through 383 stores. It later shortened the name to Mark’s as it added more women’s clothing and other merchandise.

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LOBLAW COMPANIES LTD. $48 (Toronto symbol L; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 412.7 million; Market cap: $19.8 billion; Price-to-sales ratio: 0.4; Dividend yield: 2.0%; TSINetwork Rating: Above Average; www.loblaw.ca) is Canada’s largest food retailer, with roughly 1,200 stores. Its banners include Loblaws, Provigo, Fortinos, Real Canadian Superstore and No Frills.

The company recently acquired the 1,250-store Shoppers Drug Mart chain. Loblaw paid $12.3 billion, consisting of $6.6 billion in cash and $5.7 billion in Loblaw common shares. Shoppers shareholders now own 29% of the combined company.

Loblaw’s parent company, George Weston Ltd. (Toronto symbol WN), agreed to help it pay for this acquisition by purchasing $500 million worth of new shares. Due to the extra shares outstanding, Weston now owns 46% of Loblaw, down from 63% prior to the purchase.

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