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
Learn which Canadian sectors have historically delivered more dependable dividends—and why. This safety-first guide explains the cash-flow mechanics, key risks (rates, regulation, credit cycles), and how to build a balanced income mix without chasing yield.
GENERAL MILLS INC. $50 (New York symbol GIS, Conservative Growth Portfolio, Consumer sector; Shares outstanding: 610.1 million; Market cap: $30.5 billion; Price-to-sales ratio: 1.8; Dividend yield: 3.3%; TSINetwork Rating: Above Average; www.generalmills.com) earned $345.2 million in its fiscal 2015 first quarter, which ended August 24, 2014. That’s down 24.8% from $459.3 million a year earlier. Per-share earnings fell 21.4%, to $0.55 from $0.70, on fewer shares outstanding.

Without unusual items, such as gains and losses on hedging contracts, earnings per share declined 12.9%, to $0.61 from $0.70. The company launched over 250 new products in the quarter, which increased its operating and advertising costs. Sales fell 2.4%, to $4.3 billion from $4.4 billion, mainly due to weak demand for breakfast cereal in the U.S.

The company expects its new products to boost its sales by 5% in fiscal 2015. General Mills also estimates that a new cost-cutting plan, which includes closing plants, will save it $400 million in the current fiscal year. In the longer term, streamlining its other operations should cut its yearly costs by $152 million by 2017.

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SHERWIN-WILLIAMS CO. $221 (New York symbol SHW; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 97.8 million; Market cap: $21.6 billion; Price-to-sales ratio: 2.0; Yield: 1.0%; TSINetwork Rating: Above Average; www.sherwin-williams.com) reported that its sales rose 12.1% in the quarter ended June 30, 2014, to $3.0 billion from $2.7 billion a year ago. About 40% of that gain came from Mexican paint maker Comex’s U.S. and Canadian assets, which Sherwin bought for $165 million in September 2013.

Earnings rose 13.3%, to $291.4 million from $257.3 million. Per-share earnings gained 19.5%, to $2.94 from $2.46, on fewer shares outstanding.

The company will likely earn $8.64 a share in 2014, up 15.4% from 2013, but the stock trades at a high 25.6 times that forecast.

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YUM! BRANDS INC. $72 (New York symbol YUM; Aggressive Growth Portfolio; Consumer sector; Shares outstanding: 439.7 million; Market cap: $31.7 billion; Price-to-sales ratio: 2.4; Dividend yield: 2.3%; TSINetwork Rating: Above Average; www.yum.com) plans to open two restaurants in Dallas called Bahn Shop, which specialize in Vietnamese banh mi sandwiches. The company is also testing a new fast food outlet called Super Chix, which features chicken sandwiches.

If successful, new banners like these would help Yum offset slowing sales at its U.S. KFC and Pizza Hut restaurants. Yum also raised its quarterly dividend by 10.8%, to $0.41 a share from $0.37. The new annual rate of $1.64 yields 2.3%.

Yum Brands is a buy.

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CISCO SYSTEMS INC. $25 (Nasdaq symbol CSCO; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 5.1 billion; Market cap: $127.5 billion; Price-to-sales ratio: 2.8; Dividend yield 3.0%; TSINetwork Rating: Average; www.cisco.com) is buying Metacloud, a privately held California firm whose software helps companies manage data they store on remote servers.

The company didn’t reveal the purchase price. However, earlier this year Cisco earmarked $1 billion for its Intercloud initiative, which aims to deliver cloud computing services through a network of outside companies instead of building its own system. Using partners makes it easier for Cisco to expand to other countries and comply with local laws about data privacy and other online issues.

Cisco is a buy.

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MTS SYSTEMS CORP. $69 (Nasdaq symbol MTSC; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 15.1 million; Market cap: $1.0 billion; Price-to-sales ratio: 1.8; Dividend yield: 1.7%; TSINetwork Rating: Average; www.mts.com) recently paid $16.7 million for Roehrig Engineering, which has developed an electromagnetic technology that tests shock absorbers and other industrial equipment more accurately than traditional methods. These products look like a nice fit with MTS’s existing automotive testing equipment.

In its fiscal 2014 third quarter, which ended June 28, 2014, MTS’s revenue rose 7.7%, to $145.5 million from $135.1 million a year earlier. Overall earnings improved 9.7%, to $12.7 million from $11.5 million a year earlier. Earnings per share gained 13.9%, to $0.82 from $0.72, on fewer shares outstanding. MTS spends 4% of its revenue on research.

The stock is up 129% in the past five years and now trades at 21.0 times MTS’s projected fiscal 2014 earnings of $3.28 a share. That’s high p/e ratio for a firm that serves the highly cyclical automotive and aerospace industries.

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TENNANT CO. $68 (New York symbol TNC; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 18.4 million; Market cap: $1.3 billion; Price-to-sales ratio: 1.6; Dividend yield: 1.2%; TSINetwork Rating: Average; www.tennantco.com) makes industrial floor-cleaning equipment, including scrubbers, sweepers and polishers. It also manufactures cleaning gear for garages, stadiums, parking lots and city streets.

In 2008, the company started selling equipment featuring its ec-H20 technology, which uses electricity to turn tap water into a chemical-free cleaning solution. This helps cut the machine’s operating costs.

Strong demand for this equipment increased the company’s sales by 9.4% in the three months ended June 30, 2014, to a record $219.1 million from $200.2 million a year earlier. Sales of ec- H2O gear rose 7.6% and account for about 20% of Tennant’s overall revenue.

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BOEING CO. $129 (New York symbol BA; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 720.6 million; Market cap: $93.0 billion; Price-to-sales ratio: 1.1; Dividend yield: 2.3%; TSINetwork Rating: Above Average; www.boeing.com) has won a contract from the U.S. National Aeronautics and Space Administration (NASA) to develop a new vehicle that will carry astronauts to and from the International Space Station.

Boeing will build three of its Crew Space Transportation (CST-100) crew capsules at the Kennedy Space Center in Florida. The contract is worth $4.2 billion, which is equal to 5% of the company’s annual revenue of $88.4 billion.

NASA, which retired its space shuttle fleet in 2011, plans to resume manned space flights in 2017.

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FEDEX CORP. $159 (New York symbol FDX; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 283.2 million; Market cap: $45.0 billion; Price-to-sales ratio: 1.0; Dividend yield: 0.5%; TSINetwork Rating: Average; www.fedex.com) continues to benefit from a recent cost-control plan and the rise of online shopping, which has boosted demand for its package-delivery services.

In the first quarter of its 2015 fiscal year, which ended August 31, 2014, FedEx’s revenue rose 6.0%, to $11.7 billion from $11.0 billion a year earlier. Earnings gained 23.9%, to $606 million from $489 million. FedEx is an aggressive buyer of its own stock. As a result, its earnings per share jumped 37.3%, to $2.10 from $1.53.

The company expects to earn $8.50 to $9.00 a share for all of fiscal 2015, and the stock trades at 18.2 times the midpoint of that range. That’s an attractive multiple, particularly as FedEx is raising its shipping rates in January 2015.

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NORDSTROM INC. $69 (New York symbol JWN; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 192.6 million; Market cap: $13.3 billion; Price-to-sales ratio: 1.0; Dividend yield: 1.9%; TSINetwork Rating: Average; www.nordstrom.com) mainly sells upscale clothing, accessories and footwear. The company owns and operates 276 stores in 36 states. In September 2014, it opened its first Canadian location, in Calgary.

Nordstrom recently paid $350 million in stock for Trunk Club, which sells men’s clothing over the Internet. Trunk Club sends its members a selection of clothes based on their sizes and preferences. Members keep only the items they want and ship the rest back.

The company will operate Trunk Club as a separate business. However, this firm’s expertise should help Nordstrom improve its existing online operations.

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