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
ENCANA CORP. $15 (Toronto symbol ECA; Conservative Growth Portfolio, Resources sector; Shares outstanding: 741.0 million; Market cap: $11.1 billion; Price-to-sales ratio: 1.6; Dividend yield: 2.2%; TSINetwork Rating: Average; www.encana.com) has agreed to sell its natural gas pipelines and compression facilities in B.C.’s Montney region to a partnership between Veresen Inc. (Toronto symbol VSN) and investment firm KKR & Co. (New York symbol KKR). Encana will continue to own and operate gas wells in this region.

Encana will get $412 million (Canadian) when the sale closes in the next few weeks. To put that in context, it earned $281 million U.S., or $0.38 U.S. a share, in the quarter ended September 30, 2014.

Encana is a buy.

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SHAWCOR LTD. $38 (Toronto symbol SCL; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 64.5 million; Market cap: $2.5 billion; Price-to-sales ratio: 1.4; Dividend yield: 1.6%; TSINetwork Rating: Average; www.shawcor.com) makes sealants and coatings that keep oil and gas pipelines from rusting. It also manufactures industrial products, such as electrical wire and protective sheaths.

Low oil prices are prompting oil and gas producers to delay new drilling projects in the Gulf of Mexico. As a result, ShawCor will write down the value of its pipe-coating facility in Texas. Meanwhile, the devaluation of Venezuela’s currency has prompted the company to write down its 50% joint venture in that country.

These charges will cut ShawCor’s earnings by $80 million in the fourth quarter of 2014. To put that in context, it earned $115.5 million, or $1.90 a share, in the first nine months of the year.

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ATCO LTD. (Toronto symbols ACO.X [class I non-voting] $48 and ACO.Y [class II voting] $48; Income Portfolio, Utilities sector; Shares outstanding: 115.1 million; Market cap: $5.5 billion; Price-to-sales ratio: 1.3; Dividend yield: 2.1%; TSINetwork Rating: Above Average; www.atco.com) holds 53.2% of Canadian Utilities (see left). It also owns 75.5% of ATCO Structures & Logistics, which builds temporary buildings for construction and energy exploration firms; Canadian Utilities owns the remaining 24.5%.

The drop in oil prices is hurting growth at the structures business. As a result, ATCO likely earned $3.02 a share in 2014, down 10.9% from 2013. But higher earnings from Canadian Utilities should raise its 2015 earnings to $3.39 a share, and the stock trades at 14.2 times that estimate. The $0.99 dividend yields 1.8%.

Based on current prices, you can buy an ATCO share for $48 and get roughly $51 worth of Canadian Utilities. That means you get ATCO’s structures business, which provides around 25% of its earnings, for free.

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CANADIAN UTILITIES LTD. (Toronto symbols CU [class A non-voting] $42 and CU.X [class B voting] $42; Income Portfolio, Utilities sector; Shares outstanding: 263.3 million; Market cap: $11.1 billion; Price-to-sales ratio: 3.1; Dividend yield: 2.8%; TSINetwork Rating: Above Average; www.canadianutilities.com) distributes electricity and natural gas in Alberta and Australia. It also operates 18 power plants in Canada, Australia and the U.K. ATCO Ltd. owns 53.2% of the company.

Alberta power regulators recently selected Canadian Utilities to build and operate a new 500- kilometre transmission line between Edmonton and Fort Mc- Murray, an area where power demand could double in the next 10 years.

The company will own 80% of a joint venture that will build this project. Quanta Services (New York symbol PWR) will own the remaining 20%. Canadian Utilities’ share of the $1.43-billion cost is $1.14 billion. Construction will begin in 2017, and the new line should start up in 2019.

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ANDREW PELLER LTD. $15 (Toronto symbol ADW.A; Income Portfolio, Consumer sector; Shares outstanding: 14.3 million; Market cap: $214.5 million; Price-to-sales ratio: 0.7; Dividend yield: 2.8%; TSINetwork Rating: Above Average; www.andrewpeller.com) is Canada’s second-largest producer of wines, after Vincor International. Its wineries in Nova Scotia, Ontario and British Columbia account for 13.4% of the Canadian wine market.

In the second quarter of its 2015 fiscal year, which ended September 30, 2014, Peller’s sales rose 7.2%, to $82.8 million from $77.2 million a year earlier. That’s mainly because the company started selling its Wayne Gretzky wines in Western Canada. It also launched several new products, including its skinnygrape spritzers and Panama Jack cocktails.

Earnings jumped 45.5%, to $5.1 million, or $0.37 a share, from $3.5 million, or $0.25.

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BLACKBERRY LTD. $15 (Toronto symbol BB; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 528.5 million; Market cap: $7.9 billion; Price-to-sales ratio: 1.7; No dividends paid; TSINetwork Rating: Speculative; www.blackberry.com) lost $148 million, or $0.28 a share, in its fiscal 2015 third quarter, which ended November 29, 2014 (all amounts except share price and market cap in U.S. dollars). A year earlier, it lost $4.4 billion, or $8.37 a share.

Excluding writedowns and other unusual items, BlackBerry earned $0.01 a share in the latest quarter, unchanged from a year earlier.

Revenue fell 33.5%, to $793 million from $1.2 billion. In the latest quarter, 46% of total revenue came from hardware sales, 46% from communication services and 8% from software. BlackBerry ended the quarter with cash of $3.1 billion, or $5.88 a share. Its long-term debt of $1.7 billion is equal to 26% of its market cap.

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METRO INC. $92 (Toronto symbol MRU; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 84.5 million; Market cap: $7.8 billion; Price-to-sales ratio: 0.6; Dividend yield: 1.3%; TSINetwork Rating: Average; www.metro.ca) operates 600 grocery stores and 250 drugstores in Quebec and Ontario.

In its 2014 fiscal year, which ended September 27, 2014, Metro’s earnings rose slightly, to $460.9 million from $460.7 million in fiscal 2013. The company spent $459.7 million on share buybacks in the past year, which is why its earnings per share gained 8.5%, to $5.13 from $4.73.

Overall sales rose 1.7%, to $11.6 billion from $11.4 billion, while same-store sales gained 1.1%. Higher food prices were the main reason for these gains. As well, the company recently paid $101.6 million for 75% of privately held bakery Première Moisson, which has 23 stores and three production facilities in Quebec.

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LOBLAW COMPANIES LTD. $59 (Toronto symbol L; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 412.8 million; Market cap: $24.4 billion; Price-to-sales ratio: 0.6; Dividend yield: 1.7%; TSINetwork Rating: Above Average; www.loblaw.ca) is Canada’s largest food retailer, with about 1,050 stores.

The company is benefiting from sales of other products beyond food. For example, in 2006 it launched its popular Joe Fresh line of clothing, shoes and accessories.

Loblaw sells these goods in over 330 of its supermarkets and through 17 stand-alone stores in the U.S. and Canada. It plans to open 140 more Joe Fresh stores outside of North America in the next four years.

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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: 3.4; Dividend yield: 4.0%; TSINetwork Rating: Above Average; www.rbc.com) is selling its private banking and wealth management businesses in Switzerland. Together, these operations have around $2 billion of assets. The sale is part of Royal’s plan to sell less important overseas operations. It will use the proceeds to expand its wealth management businesses in more profitable regions, including North America, the U.K. and Asia. Royal Bank is a buy.