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
IMPERIAL OIL $53.20 (Toronto symbol IMO; Shares outstanding: 847.6 million; Market cap: $43.9 billion; TSINetwork Rating: Average; Div. yield: 1.0%; www.imperialoil.ca) has suspended production at its Kearl oil sands project in northern Alberta due to problems with a machine that separates bitumen (heavy oil) from sand.

Kearl produced 92,000 barrels a day in the third quarter of 2014, or 30% of Imperial’s total daily output of 307,000 barrels. Kearl’s second phase will add another 78,100 barrels per day to Imperial’s output in 2015.

The company expects to complete the repairs at Kearl in the next few weeks. Due to the recent drop in oil prices, the outage will have only a small impact on Imperial’s fourth-quarter earnings.

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ENERPLUS CORP. $14.89 (Toronto symbol ERF; Shares outstanding: 205.2 million; Market cap: $3.1 billion; TSINetwork Rating: Extra Risk; Dividend yield: 7.6%) produces an average of 104,035 barrels of oil equivalent a day (58% gas and 42% oil). The company’s properties are mainly in Alberta, Saskatchewan, B.C., North Dakota and Montana, as well as the Marcellus shale, which passes through Pennsylvania, New York, Ohio and West Virginia.

In the quarter ended September 30, 2014, Enerplus’s production rose 18.6% from a year earlier. Cash flow per share gained just 6.1%, to $1.04 from $0.98, as it realized lower prices for its oil.

Enerplus plans to spend $830 million on exploration and development for all of 2014 and about the same amount next year. By the end of 2015, it aims to produce over 111,000 barrels a day.

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POTASH CORP. OF SASKATCHEWAN $40 (Toronto symbol POT; Aggressive Growth Portfolio, Resources sector; Shares outstanding: 829.7 million; Market cap: $33.2 billion; Price-to-sales ratio: 5.4; Dividend yield: 4.0%; TSINetwork Rating: Average; www.potashcorp.com) gets 40% of its revenue and 50% of its earnings from potash, followed by nitrogen (35%, 40%) and phosphate (25%, 10%) fertilizers.

The company sold its potash for an average of $281 U.S. a tonne in the third quarter of 2014, down 8.5% from $307 U.S. a year earlier.

It now expects to sell 9.0 million to 9.2 million tonnes of potash for all of 2014, up from 8.1 million in 2013. However, lower selling prices will cut its earnings to a projected $1.80 U.S. a share from $2.09 U.S. The stock trades at a somewhat high 19.3 times the 2014 estimate. The $1.40 U.S. dividend yields 4.0%.

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AGRIUM INC. $109 (Toronto symbol AGU; Aggressive Growth Portfolio, Resources sector; Shares outstanding: 143.7 million; Market cap: $15.7 billion; Price-to-sales ratio: 1.0; Dividend yield 3.3%; TSINetwork Rating: Average; www.agrium.com) gets just 3% of its revenue from potash, so the Russian mine shutdown will have little impact on its short-term earnings.

Agrium’s 1,400 retail stores supply 78% of its revenue. Nitrogen fertilizers it manufactures from natural gas provide the remaining 19%.

Equipment failures have forced the company to shut down its Vanscoy potash mine in Saskatchewan. Agrium is taking advantage of this outage to increase this project’s capacity by 40%.

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CRESCENT POINT ENERGY CORP. $29.65 (Toronto symbol CPG; Shares outstanding: 443.3 million; Market cap: $13.2 billion; TSINetwork Rating: Extra Risk; Dividend yield: 9.3%; www.crescentpointenergy.com) produces oil and natural gas in Western Canada, with a focus on its Bakken light oil development in southeastern Saskatchewan. Its output is 91% oil and 9% gas.

In the three months ended September 30, 2014, Crescent Point’s cash flow rose 11.6%, to $618.4 million from $554.1 million a year earlier.

The company raised its daily output by 19.7%, to 141,183 barrels of oil equivalent from 117,963. That, plus higher oil and gas prices, was the main reason for the rising cash flow. Cash flow per share rose at a slower rate of 2.1%, to $1.45 from $1.42, because Crescent Point issued shares to pay for acquisitions.

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Stock Investing
Every Monday we feature “A Stock to Sell” as our daily post. With every stock or investment we recommend as a sell, we give you a full explanation of why we advise against investing in it at this time.

Otter Tail Corporation (symbol OTTR on Nasdaq; www.ottertail.com) is the parent of Otter Tail Power Company, which supplies electricity to over 130,000 customers. Otter Tail Corporation also has manufacturing, plastics and construction operations.

Otter Tail Power Company’s customers are in a 50,000-square-mile area that covers parts of Minnesota (48% of electrical revenue), North Dakota (43%) and South Dakota (9%). Commercial and farm clients supply 37% of electrical revenue, followed by residential (33%), industrial (23%) and other (7%).

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LOBLAW COMPANIES $60.00 (Toronto symbol L; Shares outstanding: 412.7 million; Market cap: $25.2 billion; TSINetwork Rating: Above Average; Dividend yield: 1.6%; www.loblaw.ca) is Canada’s largest food retailer, with about 1,200 stores. Its banners include Loblaws, Provigo, Fortinos, Real Canadian Superstore and No Frills. George Weston Ltd. owns 46% of the company.

Loblaw completed its acquisition of the Shoppers Drug Mart chain in March 2014. It paid $12.3 billion: $6.6 billion in cash and $5.7 billion in Loblaw common shares.

In the quarter ended October 4, 2014, Loblaw’s sales rose 35.9%, to $13.6 billion from $10.0 billion a year earlier. Without Shoppers’ contribution, sales rose 2.0%. Before one-time items, Loblaw’s earnings gained 23.3%, to $0.90 a share from $0.73.

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THOMSON REUTERS CORP. $45 (Toronto symbol TRI; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 799.7 million; Market cap: $36.0 billion; Price-to-sales ratio: 2.8; Dividend yield: 3.4%; TSINetwork Rating: Above Average; www.thomsonreuters.com) is seeing higher demand for its financial information products for the first time since the 2008 economic crisis. Sales at its legal and tax and accounting businesses are also improving.

In the three months ended September 30, 2014, Thomson’s overall revenue rose 1.1%, to $3.11 billion from $3.07 billion a year earlier (all amounts except share price and market cap in U.S. dollars).

The financial division’s revenue (54% of the total) fell 0.7%. But banks and other clients are buying more products than they’re cancelling, which should raise this division’s future revenue.

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CANADIAN PACIFIC RAILWAY LTD. $202 (Toronto symbol CP; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 171.5 million; Market cap: $34.6 billion; Price-to-sales ratio: 5.6; Dividend yield: 0.7%; TSINetwork Rating: Above Average; www.cpr.ca) is down 18.5% from its recent peak of $248, partly due to the drop in oil prices. Even through cheaper crude will cut CP’s fuel costs, investors fear that producers will defer new projects, which could hurt the company’s crude-by-rail volumes.

Oil accounts for just 7% of the company’s revenue, so any production drop would have little impact on its earnings.

Moreover, CP continues to do a good job of cutting its costs. In the third quarter of 2014, its operating ratio improved to 62.8% from 65.9% a year earlier. (Operating ratio is calculated by dividing regular operating costs by revenue. The lower the ratio, the better.)

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