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
TECK RESOURCES LTD. $25 (Toronto symbol TCK.B; Conservative Growth Portfolio, Resources sector; Shares outstanding: 576.2 million; Market cap: $14.4 billion; Price-to-sales ratio: 1.6; Dividend yield: 3.6%; TSINetwork Rating: Average; www.teck.com) is a leading producer of metallurgical coal, a key ingredient in steelmaking. Its six coal mines (five in B.C. and one in Alberta) have lifespans from six to 70 years.

The company sells most of its coal to customers in Asia. In 2013, coal accounted for 43% of Teck’s revenue and 41% of its earnings.

Teck also produces copper (30%, 41%), which manufacturers use to make electrical wire, auto parts and components for electronic devices. As well, Teck is a major supplier of zinc (27%, 18%), which prevents rusting when added to steel.

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BANK OF NOVA SCOTIA $72 (Toronto symbol BNS; Conservative Growth and Income Portfolios, Finance sector; Shares outstanding: 1.2 billion; Market cap: $86.4 billion; Price-to-sales ratio: 3.0; Dividend yield: 3.6%; TSINetwork Rating: Above Average; www.scotiabank.com) has completed the sale of most of its shares in mutual fund company CI Financial (Toronto symbol CIX). That cut its stake to 7.7% from 36.8%.

The bank now expects to report an after-tax gain of $550 million on the sale, up from its earlier estimate of $400 million. That will help with its plan to buy back 1% of its outstanding shares by the end of May 2015.

Bank of Nova Scotia is a buy.

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BLACKBERRY LTD. $10 (Toronto symbol BB; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 527.0 million; Market cap: $5.3 billion; Price-to-sales ratio: 1.1; No dividends paid; TSINetwork Rating: Speculative; www.blackberry.com) has won approval from the U.S. Defense Information Systems Agency for changes to its server software. These upgrades will let employees of businesses that work with the U.S. Department of Defense use non-BlackBerry devices, including the Apple iPhone and phones powered by Google’s Android software.

Adapting its mobile data systems to securely handle competing phones should help BlackBerry hang to its big government and corporate clients.

BlackBerry is still a hold.

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ENCANA CORP. $23 (Toronto symbol ECA; Conservative Growth Portfolio, Resources sector; Shares outstanding: 741.0 million; Market cap: $17.0 billion; Price-to-sales ratio: 2.6; Dividend yield: 1.3%; TSINetwork Rating: Average; www.encana.com) reported that its cash flow fell 1.4% in the quarter ended June 30, 2014, to $656 million, or $0.89 a share (all amounts except share price and market cap in U.S. dollars). A year earlier, its cash flow was $665 million, or $0.90 a share. Earnings per share declined 32.4%, to $0.23 from $0.34.

These declines are mainly because the company continues to sell less-important assets as part of its plan to focus on six core properties: Montney (B.C.), Duvernay (Alberta), DJ Basin (Colorado), San Juan Basin (New Mexico), Tuscaloosa Marine Shale (Louisiana) and Eagle Ford (Texas).

These areas contain large amounts of oil and natural gas liquids, such as butane and propane. These commodities supplied 14% of Encana’s output in the latest quarter, up from 9% a year ago. That cuts its exposure to weak gas prices.

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AGRIUM INC. $99 (Toronto symbol AGU; Aggressive Growth Portfolio, Resources sector; Shares outstanding: 143.7 million; Market cap: $14.2 billion; Price-to-sales ratio: 0.9; Dividend yield 3.3%; TSINetwork Rating: Average; www.agrium.com) has suspended operations at its Vanscoy, Saskatchewan, potash mine because the main hoist system failed. Agrium will use the shutdown to speed up its plan to increase the mine’s capacity.

The company expects the outage to cost $40 million (all amounts except share price and market cap in U.S. dollars).

To put that in context, Agrium earned $625 million, or $4.34 a share, in the second quarter of 2014. That’s down 16.0% from $744 million, or $5.00 a share, a year earlier. Record earnings from Agrium’s retail stores, which sell fertilizers and seeds to farmers in North America, South America and Australia, offset lower bulk fertilizer prices.

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SNC-LAVALIN GROUP INC. $56 (Toronto symbol SNC; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 152.3 million; Market cap: $8.5 billion; Price-to-sales ratio: 1.1; Dividend yield: 1.7%; TSINetwork Rating: Average; www.snclavalin.com) has agreed to sell its 21% stake in Astoria I, a private partnership that operates a gas-fired power plant in New York City.

The company did not say how much it would receive. However, it recently sold most of its interest in Astoria II, which operates a second power plant on the same site, for $87.6 million. To put that in context, SNC earned $32.1 million, or $0.21 a share, in the three months ended June 30, 2014. The sale cut SNC’s stake in Astoria II from 18.5% to 6.2%.

These sales are part of SNC’s new plan to focus on engineering projects in areas with stronger growth potential, such as mining, water treatment and oil and gas.

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MAPLE LEAF FOODS INC. $20 (Toronto symbol MFI; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 141.9 million; Market cap: $2.8 billion; Price-to-sales ratio: 0.6; Dividend yield: 0.8%; TSINetwork Rating: Average; www.mapleleaf.ca) ships only a small portion of its pork products to Russia, so that country’s recent ban on food imports from Canada will have little effect on its sales and earnings.

Pork prices have moved up recently, because a virus has cut hog supplies. As a result, consumers have shifted to beef and other meats. However, the Russian pork ban could cut prices in Canada, which would help spur demand for Maple Leaf’s products.

Meanwhile, Maple Leaf’s sales rose 9.6% in the three months ended June 30, 2014, to $831.8 million from $759.3 million a year earlier, as higher selling prices offset lower volumes. The company continues to restructure, including closing older plants. Its loss narrowed to $0.13 a share from $0.25.

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EMERA INC. $34 (Toronto symbol EMA; Income Portfolio, Utilities sector; Shares outstanding: 142.6 million; Market cap: $4.8 billion; Price-to-sales ratio: 1.8; Dividend yield: 4.3%; TSINetwork Rating: Average; www.emera.com) is Nova Scotia’s main power supplier. It also holds interests in electrical utilities in the U.S. and the Caribbean.

Emera is currently building the Maritime Link, which will transmit electricity from the island of Newfoundland to Nova Scotia through an undersea cable. The power will come from a new hydroelectric project on Labrador’s Churchill River. The company will spend $1.6 billion on Maritime Link, which should begin operating in 2017.

Separately, Emera will pay $390 million for a 34.9% stake in a new utility that will transmit power from Churchill River to Newfoundland.

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CANADIAN UTILITIES LTD. (Toronto symbols CU [class A non-voting] $39 and CU.X [class B voting] $39; Income Portfolio, Utilities sector; Shares outstanding: 262.8 million; Market cap: $10.2 billion; Price-to-sales ratio: 2.9; Dividend yield: 2.7%; TSINetwork Rating: Above Average; www. canadianutilities.com) distributes electricity and natural gas in Alberta and Australia. It also operates 18 power plants in Canada, Australia and the U.K. ATCO Ltd. (see page 84) owns 53.2% of the company.

Canadian Utilities continues to invest in projects that will make Alberta’s electricity grid more reliable. For example, it is building 355 kilometres of new transmission lines and substations in the province’s southeast. So far, the company has spent $1.3 billion on this $1.8-billion project. It should begin operating in early 2015.

In all, Canadian Utilities expects to spend $5.5 billion on upgrades to its power lines and pipelines in Alberta between 2014 and 2016. These improvements will help it take advantage of rising electricity demand from oil sands projects.

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