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
LOBLAW COMPANIES LTD. $60 (Toronto symbol L; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 412.4 million; Market cap: $24.7 billion; Price-to-sales ratio: 0.6; Dividend yield: 1.6%; TSINetwork Rating: Above Average; www.loblaw.ca) has sold 15 stores and one warehouse to Choice Properties Real Estate Investment Trust (Toronto symbol CHP.UN).

Loblaw received $211.9 million, which is equal to 57% of the $371.0 million, or $0.90 a share, that it earned in the three months ended October 4, 2014. That total included $112.2 million of Choice Properties’ units. As a result, Loblaw now owns 83.0% of this REIT.

Loblaw is a buy....
SAPUTO INC. $32 (Toronto symbol SAP; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 390.7 million; Market cap: $12.5 billion; Price-to-sales ratio: 1.3; Dividend yield: 1.6%; TSINetwork Rating: Average; www.saputo.com) earned $155.7 million in its fiscal 2015 second quarter, which ended September 30, 2014. That’s up 16.8% from $133.3 million a year earlier.

Earnings per share gained 14.7%, to $0.39 from $0.34, on more shares outstanding (all per-share amounts adjusted for a 2-for-1 stock split in September 2014).

Sales rose 21.1%, to $2.7 billion from $2.3 billion. That’s mainly because of Warrnambool Cheese and Butter Factory, an Australian maker of milk, cheese, butter and other dairy products; Saputo bought 87.92% of Warrnambool for $449.6 million in January 2014. Higher selling prices for cheese and butter in the U.S. also contributed to the gain.

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MAPLE LEAF FOODS INC. $19 (Toronto symbol MFI; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 142.1 million; Market cap: $2.7 billion; Price-to-sales ratio: 0.7; Dividend yield: 0.8%; TSINetwork Rating: Average; www.mapleleaf.ca) is Canada’s largest food processing company. It mainly sells its products, including fresh and prepared meats and poultry, under the Maple Leaf and Schneider brands.

In May 2014, the company sold its 90.0% stake in Canada Bread, Canada’s second-largest producer of baked goods after Weston Bakery. It received $1.66 billion for this holding.

Meanwhile, Maple Leaf continues to make progress with a major restructuring of its meatprocessing operations, which mainly involves closing older plants and shifting their operations to newer facilities. The company expects to complete the plan by the end of 2015.

Maple Leaf is starting to see some of the plan’s benefits. In the quarter ended September 30, 2014, it lost $26.7 million, or $0.19 a share, compared to a loss of $24.5 million, or $0.18 a share, a year ago. But if you exclude restructuring costs, losses improved to $0.13 a share from $0.19.

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TORSTAR CORP. $6.20 (Toronto symbol TS.B; Conservative Growth and Income Portfolios, Consumer sector; Shares outstanding: 80.2 million; Market cap: $497.2 million; Price-to-sales ratio: 0.4; Dividend yield: 8.5%; TSINetwork Rating: Average; www.torstar.com) has teamed up with the publisher of Montreal’s La Presse newspaper to launch a free version of the Toronto Star specifically for tablet computers.

La Presse launched its own tablet version in 2013. So far, it has attracted over 450,000 users.

Under this agreement, Torstar will use La Presse’s technology. The two companies will also jointly sell online ads, which should appeal to national advertisers that aim to reach both English and French readers.

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TELUS CORP. $42 (Toronto symbol T; Conservative Growth and Income Portfolios, Utilities sector; Shares outstanding: 612.0 million; Market cap: $25.7 billion; Price-to-sales ratio: 2.2; Dividend yield: 3.8%; TSINetwork Rating: Above Average; www.telus.com) added 113,000 new wireless subscribers, net of cancellations, in the three months ended September 30, 2014, up 8.7% from a year earlier. It now has 8.0 million wireless subscribers. In addition, it continues to attract high-speed Internet and digital TV users.

As a result, its revenue rose 5.4%, to $3.0 billion from $2.9 billion. Earnings gained 6.0%, to $387 million from $365 million. Telus spent $164 million on share buybacks in the latest quarter, so its per-share earnings rose 10.3%, to $0.64 from $0.58.

The company also raised its quarterly dividend by 11.1%, to $0.40 a share from $0.36. The new annual rate of $1.60 yields 3.8%. This was the eighth hike since May 2011.

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HOME CAPITAL GROUP INC. $50 (Toronto symbol HCG; Aggressive Growth Portfolio, Finance sector; Shares outstanding: 70.1 million; Market cap; $3.5 billion; Price-to-sales ratio: 3.5; Dividend yield: 1.6%; TSINetwork Rating: Average; www.homecapital.com) caters to borrowers who don’t meet the stricter standards of traditional banks. Its clients include recent immigrants with limited credit histories, and the self-employed.

However, Home Capital continues to do a good job of identifying problem loans early and adjusting the payment terms. That keeps its loan losses down.

In the three months ended September 30, 2014, earnings rose 10.5%, to $1.05 a share from $0.95 a year earlier. Revenue gained 6.5%, to $255.0 million from $239.4 million. Bad loans were just 0.27% of the Home Capital’s total loans, down from 0.35%.

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CANADIAN IMPERIAL BANK OF COMMERCE $104 (Toronto symbol CM; Conservative Growth and Income Portfolios, Finance sector; Shares outstanding: 397.0 million; Market cap: $41.3 billion; Price-to-sales ratio: 2.4; Dividend yield: 3.8%; TSINetwork Rating: Above Average; www.cibc.com) is Canada’s fifth-largest bank, with $405.4 billion of assets.

CIBC prefers to focus on domestic banking instead of international expansion; Canada supplies about 85% of its revenue. The bank sold half of its Aeroplan accounts to TD Bank (see page 113) when TD took over the plan.

As a result, its earnings fell 2.5% in the three months ended July 31, 2014, to $908 million from $931 million a year earlier. Per-share earnings declined 1.3%, to $2.23 from $2.26, on fewer shares outstanding. These figures exclude unusual items, such as gains on investment sales.

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BANK OF MONTREAL $82 (Toronto symbol BMO; Conservative Growth and Income Portfolios, Finance sector; Shares outstanding: 649.0 million; Market cap: $53.2 billion; Price-to-sales ratio: 2.5; Dividend yield: 3.8%; TSINetwork Rating: Above Average; www.bmo.com) is Canada’s fourth-largest bank, with $586.8 billion of assets.

In July 2011, the bank paid $4.1 billion for Milwaukee-based Marshall & Ilsley. The move doubled the size of its U.S. retail banking business, which now supplies 15% of its total earnings. Thanks to cost cuts and an improving U.S.

economy, this division will likely earn $686 million in fiscal 2014, up 8.7% from 2013. The bank aims to raise that to at least $750 million in 2015.

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BANK OF NOVA SCOTIA $69 (Toronto symbol BNS; Conservative Growth and Income Portfolios, Finance sector; Shares outstanding: 1.2 billion; Market cap: $82.8 billion; Price-to-sales ratio: 2.7; Dividend yield: 3.8%; TSINetwork Rating: Above Average; www.scotiabank.com) is the third-largest bank in Canada, with $791.5 billion of assets.

In the quarter ended July 31, 2014, the bank’s earnings rose 38.5%, to $2.3 billion from $1.6 billion a year earlier. Per-share profits gained 36.0%, to $1.85 from $1.36, on more shares outstanding.

The latest earnings included a $555-million gain on the sale of most of Bank of Nova Scotia’s stake in mutual fund operator CI Financial Corp. (Toronto symbol CIX). Without that, the bank earned $1.40 a share. Revenue rose 17.6%, to $6.5 billion from $5.5 billion.

Bank of Nova Scotia set aside $398 million to cover potential bad loans in the latest quarter, up 26.8% from $314 million a year earlier. That’s mainly due to rising credit card balances, more car loans and higher provisions for commercial loans in the Caribbean and Latin America.

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