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
A conservative, step-by-step Canadian guide: account choice, W-8BEN, FX cost cuts, first trade, and DRIP, built for steady dividend income.
REITMANS (CANADA) LTD. $6.43 (Toronto symbol RET.A; TSINetwork Rating: Extra Risk) (514-384- 1140; www.reitmans.com; Shares outstanding: 64.6 million; Market cap: $410.2 million; Dividend yield: 3.1%) owns 843 women’s clothing stores across Canada.

The chain consists of 343 Reitmans, 141 Penningtons, 107 Smart Set, 105 Addition Elle, 79 RW & Co. and 68 Thyme Maternity stores. It also has 21 Thyme Maternity boutiques in some Canadian Babies “R” Us locations.

In the three months ended November 1, 2014, Reitmans’ sales fell 4.5%, to $238.3 million from $249.4 million a year earlier. Same-store sales increased 0.2%. Sales fell because the company closed 52 underperforming stores.

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WESTJET AIRLINES $32.32 (Toronto symbol WJA; TSINetwork Rating: Extra Risk)(1-877-493-7853; www.westjet.com; Shares outstanding: 127.8 million; Market cap: $4.2 billion; Div. yield: 1.5%) has jumped to new all-time highs over the past month as fuel prices continue to drop along with oil prices. Fuel makes up around a third of an airline’s operating costs.

Meanwhile, the company’s load factor rose to 80.5% from 79.7% in November 2013. Load factor is the percentage of available seats occupied by paying passengers.

The increase was even more positive considering that the company increased its capacity by 6.9% to meet higher demand. Demand for WestJet’s flights remains high, and the launch of its new Canadian regional airline, WestJet Encore, has also gone well.

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RUSSEL METALS $27.18 (Toronto symbol RUS; TSINetwork Rating: Speculative)(905-819-7777; www.russelmetals.com; Shares outstanding: 61.6 million; Market cap: $1.7 billion; Dividend yield: 5.6%) is one of North America’s largest metal distributors. It serves 39,000 clients at 53 locations in Canada and 12 in the U.S.

In the quarter ended September 30, 2014, Russel’s revenue rose 30.4%, to $1.04 billion from $796.8 million a year earlier. The company’s metal-services business raised its prices in response to higher demand, increasing its revenue by 14%. The energy products division, which supplies pipes for oil and gas drillers, saw its revenue jump 41%.

Earnings gained 74.6%, to $33.0 million, or $0.54 a share. A year earlier, the company earned $18.9 million, or $0.31. Russel has invested in new plants and processing equipment in the past three years, which has cut its costs and improved its efficiency. That’s paying off with higher profit margins.

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GOODYEAR TIRE & RUBBER CO. $27.23 (Nasdaq symbol GT; TSINetwork Rating: Extra Risk) (330-796-2122; www.goodyear.com; Shares outstanding: 274.6 million; Market cap: $7.5 billion; Dividend yield: 0.9%) dipped as low as $18.87 in October but has since rebounded. It’s now up 11.5% since we made it our #1 pick for 2014 in our February issue at $24.42. In U.S. dollar terms, the shares have gained 16.9%.

In the quarter ended September 30, 2014, Goodyear’s sales fell 6.9%, to $4.7 billion from $5.0 billion a year earlier. The company sold 2% fewer tires worldwide, including a 4% drop in North America as car dealers stocked up on cheaper Chinese-made tires ahead of an expected U.S. tariff.

But even with the lower revenue, earnings jumped 39.9%, to $242.0 million, or $0.87 a share. A year earlier, it earned $190.0 million, or $0.68 a share.

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INTACT FINANCIAL CORP. $81.73 (Toronto symbol IFC; TSINetwork Rating: Speculative) (416-341-1464; www.intactfc.com; Shares outstanding: 131.5 million; Market cap: $10.8 billion; Dividend yield: 2.4%) is Canada’s largest provider of property and casualty insurance, based on premiums. Its brands include Intact Insurance, Canada BrokerLink, belairdirect and Grey Power.

In the three months ended September 30, 2014, Intact’s revenue was virtually unchanged from a year earlier, at $1.91 billion. The company earned $204 million, or $1.55 a share, up sharply from $51 million, or $0.39. However, the year-earlier results include a pre-tax loss of $270 million, mostly related to weather. Similar losses in the 2014 quarter were $125 million.

Thanks to the lower catastrophe losses, Intact reported an improved combined ratio, or claims paid out divided by premiums taken in (the lower, the better) of 93.2% in the latest quarter, down from 102.8%.

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Investment counsellor
Every Tuesday we bring you “Best Canadian Stocks.” You get our specific recommendation on the stocks we profile, with a full explanation of how we arrived at our opinion. You’ll read about stocks making moves you should know about, from coverage in one of our three newsletters featuring Canadian stocks—The Successful Investor, Stock Pickers Digest and Canadian Wealth Advisor.

CANADIAN TIRE CORP. (Toronto symbol CTC.A; www.canadiantire.ca)operates 492 Canadian Tire stores, which specialize in automotive, household and sporting goods. It also owns other retail chains, such as Mark’s (casual clothing) and SportChek.

The company continues to add new locations and renovate older stores. It’s also benefiting from its 2011 purchase of the Forzani Group of sporting goods stores, including the popular SportChek banner. These moves are helping it compete with U.S.-based retailers like Wal-Mart.

Earlier this year Canadian Tire agreed to sell 20% of its credit card operations to Bank of Nova Scotia for $500 million. The company has an option to sell an additional 29% to the bank over the next 10 years.

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BELL ALIANT INC. $27 (Toronto symbol BA, Conservative Growth Portfolio, Utilities sector; Shares outstanding: 227.8 million; Market cap: $6.2 billion; Price-to-sales ratio: 2.2; Dividend yield: 7.0%; TSINetwork Rating: Average; www.bellaliant.ca) ells telephone and Internet services to 2.5 million customers in Atlantic Canada, as well as rural parts of Ontario and Quebec. It also sells wireless services through an alliance with BCE, which owns 45% of Bell Aliant.

The company continues to replace its copper-wire cables with fibre optic lines. This lets it sell more high-speed Internet and digital TV subscriptions, and offset declining sales of its regular phone services, which still supply 60% of its revenue.

Bell Aliant expects to spend $550 million to $600 million on network upgrades in 2012, compared to $573 million in 2011. Its fibre optic systems now reach 621,000 homes. The company plans to increase that to 650,000 by the end of 2012.

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Investment Counsellor
Every Monday we feature “A Stock to Sell” as our daily post. With every stock we recommend as a sell, we give you a full explanation of why we advise against investing in the stock at this time. Adidas AG (ADR) (symbol ADDYY on the U.S. over-the-counter market; www.adidas.com) together with its subsidiaries, develops, makes and markets athletic equipment and clothing worldwide. The company operates through six segments: Wholesale, Retail, TaylorMade-Adidas Golf Company, Rockport, Reebok-CCM Hockey and Other Centrally Managed Brands....
ARC RESOURCES $26.76 (Toronto symbol ARX; Shares outstanding: 317.4 million; Market cap: $8.1 billion; TSINetwork Rating: Speculative; Dividend yield: 4.5%; www.arcresources.com) produces oil and natural gas in Western Canada. Its average daily output of 110,165 barrels of oil equivalent is 60% gas and 40% oil.

In the three months ended June 30, 2014, ARC’s cash flow per share jumped 43.1%, to $0.93 from $0.65 a year earlier.

Production gained 17.9%, even though maintenance on existing wells cost the company an estimated 2,400 barrels a day in the latest quarter. ARC’s realized gas price rose 28.3%. Oil prices increased 14.5%.

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