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
When we get questions about investing in stocks through split-share, our advice is, avoid the risk and invest in good stocks individually
CAE INC. $14 (Toronto symbol CAE; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 264.0 million; Market cap: $3.7 billion; Price-to-sales ratio: 1.7; Dividend yield: 1.7%; TSINetwork Rating: Average; www.cae.com) has received orders for seven flight simulators and related equipment. In all, these deals are worth $120 million, or 6% of CAE’s $2.1 billion of annual revenue.

The company has sold 11 flight simulators since its 2015 fiscal year began on April 1, 2014. In fiscal 2014, the company sold a record 48 simulators.

CAE is our #1 buy for 2014.

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TIM HORTONS INC. $60 (Toronto symbol THI; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 134.2 million; Market cap: $8.1 billion; Price-to-sales ratio: 2.5; Dividend yield: 2.1%; TSINetwork Rating: Average; www.timhortons.com) operates 3,610 coffee-and-donut stores in Canada, 870 in the U.S. and 44 in the Persian Gulf.

In the quarter ended March 30, 2014, the company’s revenue rose 4.8%, to $766.4 million from $731.5 million a year earlier. That’s mainly because it opened 23 outlets in Canada and 11 in the U.S. Same-store sales rose 1.6% at its Canadian locations and 1.9% in the U.S.

Earnings gained 5.5%, to $90.9 million from $86.2 million. Per-share earnings jumped 17.9%, to $0.66 from $0.56, on fewer shares outstanding.

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CANADIAN TIRE CORP. $103 (Toronto symbol CTC.A; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 79.7 million; Market cap: $8.2 billion; Price-to-sales ratio: 0.7; Dividend yield: 1.9%; TSINetwork Rating: Above Average; 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 is selling 20% of its credit card operations to Bank of Nova Scotia (see page 74) for $500 million. Canadian Tire has an option to sell an additional 29% to the bank over the next 10 years.

Meanwhile, Canadian Tire earned $70.6 million in the quarter ended March 29, 2014, down 3.3% from $73.0 million a year earlier. Earnings per share fell 2.2%, to $0.88 from $0.90, on fewer shares outstanding.

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POTASH CORP. OF SASKATCHEWAN $39 (Toronto symbol POT; Aggressive Growth Portfolio, Resources sector; Shares outstanding: 837.9 million; Market cap: $32.7 billion; Price-to-sales ratio: 4.6; Dividend yield: 3.9%; TSINetwork Rating: Average; www.potashcorp.com) is up 10% since the start of 2014. That’s mainly because potash miners cut their output in response to the July 2013 breakup of a marketing alliance between producers in Russia and Belarus. These reductions have increased prices from their recent low of $310 U.S. a tonne to $350.

Prices should remain steady, particularly because North American farmers will need more fertilizer to replenish their soil after last year’s record crops. However, the stock trades at a high 22.0 times the $1.65 U.S. a share the company will probably earn in 2014.

Potash Corp. is still a hold.

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CGI GROUP INC. $38 (Toronto symbol GIB.A; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 309.6 million; Market cap: $11.8 billion; Price-to-sales ratio: 1.1; No dividends paid; TSINetwork Rating: Extra Risk; www.cgi.com) has won a contract to help modernize the Michigan state government’s computer systems.

The revenue from this deal—$89.4 million U.S.—is small next to the company’s annual revenue of $10 billion. Still, deals like this enhance CGI’s reputation in the wake of the well-publicized problems it had launching the Obamacare website.

CGI Group is a buy.

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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: 4.2%; TSINetwork Rating: Average; www.emera.com) has agreed to pay $390 million for 34.9% of a line that will transmit power from a new hydro-electric plant in Labrador to the island of Newfoundland. In addition, Emera will spend $1.6 billion on an undersea line that will transmit 20% of this facility’s power to Nova Scotia.

These projects, which should start up in 2017, will help Emera comply with new Nova Scotia regulations that require it to get 40% of its power from renewable sources by 2030, up from 17% today.

Emera is a buy.

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CANADIAN IMPERIAL BANK OF COMMERCE $98 (Toronto symbol CM; Conservative Growth and Income Portfolios, Finance sector; Shares outstanding: 397.4 million; Market cap: $38.9 billion; Price-to-sales ratio: 2.3; Dividend yield: 4.1%; TSINetwork Rating: Above Average; www.cibc.com) is Canada’s fifth-largest bank, with $397.1 billion of assets.

CIBC prefers to focus on domestic banking instead of expanding internationally; Canada accounts for around 85% of its revenue.

The bank recently teamed up with Tim Hortons (see page 76) to launch a new loyalty credit card called the Double Double Visa. This card lets users earn points toward coffee and food at Tim Hortons.

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BANK OF MONTREAL $81 (Toronto symbol BMO; Conservative Growth and Income Portfolios, Finance sector; Shares outstanding: 645.2 million; Market cap: $52.3 billion; Price-to-sales ratio: 2.5; Dividend yield: 3.9%; TSINetwork Rating: Above Average; www.bmo.com) is Canada’s fourth-largest bank, with $582.0 billion of assets.

In the quarter ended April 30, 2014, the bank’s earnings rose 12.1%, to $1.1 billion from $966 million a year ago. Per-share earnings rose 13.2%, to $1.63 from $1.44, on fewer shares outstanding.

Earnings from Canadian retail banking (42% of the total) rose 14.2%, as low interest rates spurred demand for mortgages and business loans. The U.S. retail banking division (14%) reported a 5.0% profit decline due to fewer gains on mortgage loan sales.

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BANK OF NOVA SCOTIA $73 (Toronto symbol BNS; Conservative Growth and Income Portfolios, Finance sector; Shares outstanding: 1.2 billion; Market cap: $87.6 billion; Price-to-sales ratio: 3.0; Dividend yield: 3.5%; TSINetwork Rating: Above Average; www.scotiabank.com) is the third-largest bank in Canada, with $791.8 billion of assets.

The bank continues to expand overseas. It recently agreed to pay $300 million for 51% of the credit card operations of Cencosud S.A., Chile’s largest retailer. The deal will make the bank Chile’s third-largest credit card issuer.

In the quarter ended April 30, 2014, Bank of Nova Scotia’s earnings rose 13.9%, to $1.8 billion, or $1.39 a share. A year earlier, it earned $1.6 billion, or $1.22 a share. Revenue gained 9.8%, to $5.7 billion from $5.2 billion.

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