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.

ENERFLEX LTD. $19.28
(Toronto symbol EFX; TSINetwork Rating: Extra Risk) (403-387-6377; www.enerflex.com; Shares outstanding: 78.5 million; Market cap: $1.5 billion; Dividend yield: 1.6%) rents and sells equipment and services for natural gas production, including compression and processing plants, refrigeration gear and power generators. On June 30, 2014, the company completed the $430 million U.S. acquisition of two businesses owned by privately held Axip Energy Services LP, an international contract compression and processing subsidiary, and a division that provides aftermarket services.

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Earnings gained 5.8%, to $28.9 million from $27.3 million. Per-share earnings increased 2.8%, to $0.37 from $0.36, on more shares outstanding.

Dividend on the rise
The company’s financial position is strong: its $130.5 million of long-term debt—down from $169.4 million a year ago—represents just 6.2% of its market cap.

Toromont raised its quarterly dividend by 15.4% with the April 2014

TOROMONT INDUSTRIES LTD. $26.75 (Toronto symbol TIH; TSINetwork Rating: Extra Risk) (416-667- 5511; www.toromont.com; Shares outstanding: 77.1 million; Market cap: $2.1 billion; Dividend yield: 2.2%) distributes a broad range of industrial equipment, including machinery made by Caterpillar Inc. It also makes refrigeration systems through its CIMCO division.

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BELLATRIX EXPLORATION $7.43 (Toronto symbol BXE; TSINetwork Rating: Speculative) (403-266-8670; www.bellatrixexploration.com; Shares outstanding: 191.1 million; Market cap: $1.4 billion; No dividends paid) is now 7.4% owned by activist investor Orange Capital LLC. That’s up from the initial 5.3% interest that Orange Capital announced on September 4, 2014.

Orange wants Bellatrix to discuss changing the size and composition of its 10-person board of directors. It also wants the company to hire a financial advisor to explore strategic alternatives, including selling its midstream assets (natural gas processing plants and pipeline gathering systems) or an outright sale of the entire firm.

Bellatrix has been rapidly expanding over the past year. However, Alberta’s rising gas production has overwhelmed the pipelines that pump it to various processing facilities. This has hurt Bellatrix’s production and cash flow, as well as its share price. But when the bottlenecks are resolved, the company’s cash flow should jump.

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SYMANTEC CORP. $24.50 (Nasdaq symbol SYMC; TSINetwork Rating: Average) (408-517-8000; www.symantec.com; Shares outstanding: 690.5 million; Market cap: $16.9 billion; Dividend yield: 2.5%) is one of two companies that Home Depot (New York symbol HD) has hired to help investigate its recently discovered data breach.

Stolen Home Depot credit card numbers have turned up for sale on a website called Rescator.cc, which has been linked to a Ukrainian dealer in stolen credit cards.

It’s not yet clear how many customers were affected, but the total could exceed 60 million in Canada and the U.S. Customers at Home Depot’s Mexico stores were not affected, nor were online shoppers at HomeDepot.com. Personal identification numbers (PINs) for debit cards were not taken.

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DOMINO’S PIZZA $76.57 (New York symbol DPZ; TSINetwork Rating: Average) (734-930-3030; www.dominos.com; Shares outstanding: 55.1 million; Market cap: $4.2 billion; Dividend yield: 1.3%) has opened its first store in Norway, in the city of Oslo. It plans to open three more outlets in the city by the end of this year.

The master franchisee for the Norwegian stores is Domino’s Pizza Norway. Its chairman is Birgir Bieltvedt, who is also chairman of Domino’s Pizza Iceland. He previously helped launch Domino’s in Denmark and Germany.

The company now operates in over 70 markets worldwide, and its international stores supply almost half of its sales and a third of its earnings. However, Domino’s still has considerable room to grow overseas.

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STANTEC INC. $72.86 (Toronto symbol STN; TSINetwork Rating: Extra Risk) (780-917-7288; www.stantec.com; Shares outstanding: 46.8 million; Market cap: $3.4 billion; Dividend yield: 1.0%) plans to split its shares on a 2-for-1 basis, effective November 14, 2014.

When a company’s share price goes up, it has an incentive to split the stock to make it seem cheaper to investors, who may then buy more. This can make the stock more liquid than if the firm refrained from splits and let its share price go to uncommonly high levels.

Shares of Stantec are up 1,982% since we first recommended the company (then called Stanley Technology Group) at $3.50 in one of our first issues of Stock Pickers Digest in 1998.

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CARFINCO FINANCIAL GROUP $11.35 (Toronto symbol CFN; TSINetwork Rating: Speculative) (1-888-486-4356; www.carfinco.com; Shares outstanding: 26.5 million; Market cap: $299.7 million; Dividend yield: 4.2%) is the subject of a friendly takeover bid from Banco Santander of Spain (ADR symbol SAN on New York). The offer is for $11.25 a share in cash. Carfinco will also pay a special dividend of up to $0.10 a share when the deal closes.

Carfinco is now trading at $11.35, which is equal to the value of the cash and special dividend. Carfinco’s directors and executive officers, who collectively own 12.9% of the company, have agreed to support the deal.

However, Carfinco could attract a rival bid, or significant shareholders, such as mutual funds, could hold out for a higher offer. We’ll say more as the takeover progresses, but for now Carfinco is a hold.

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WESTJET AIRLINES $33.05 (Toronto symbol WJA; TSINetwork Rating: Extra Risk) (1-877-493-7853; www.westjet.com; Shares outstanding: 127.8 million; Market cap: $4.2 billion; Dividend yield: 1.5%) serves 90 destinations in North America, Central America, the Caribbean and Europe. Its fleet of 107 modern Boeing 737s are 30% more fuel efficient than older jets.

In June 2013, the company launched WestJet Encore, its Canadian regional airline. This business now operates 13 Bombardier Q400 NextGen turboprop planes, which seat 78 passengers.

In the three months ended June 30, 2014, WestJet’s earnings rose 15.9%, to a second-quarter record of $51.8 million from $44.7 million a year earlier. Earnings per share gained 17.6%, to $0.40 from $0.34, on fewer shares outstanding. This was WestJet’s 37th consecutive quarter of profitability.

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FIRSTSERVICE CORP. $59.35 (Toronto symbol FSV; TSINetwork Rating: Extra Risk) (416-960-9500; www.firstservice.com; Shares outstanding: 36.6 million; Market cap: $2.1 billion; Dividend yield: 0.7%) serves the following areas of the real estate market: commercial real estate, residential property management and property improvement. The company has more than 24,000 employees worldwide.

In the quarter ended June 30, 2014, FirstService’s revenue rose 14.7%, to $660.7 million from $576.1 million a year earlier (all figures except share prices in U.S. dollars). Excluding one-time items, earnings per share were $0.74, up 29.8% from $0.57.

Revenue rose at all three of FirstService’s divisions: Colliers International (commercial real estate), up 22%; FirstService Residential (residential property management), up 9%; and FirstService Brands (property services), up 12%. FirstService Brands operates Paul Davis Restoration, California Closets and CertaPro Painters.

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