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
ROYAL BANK OF CANADA $79 (Toronto symbol RY; Conservative Growth and Income Portfolios, Finance sector; Shares outstanding: 1.4 billion; Market cap: $110.6 billion; Price-to-sales ratio: 3.0; Dividend yield: 3.6%; TSINetwork Rating: Above Average; www.rbc.com) is Canada’s second-largest bank, with $895.9 billion of assets.

Royal recently completed the sale of its moneylosing Jamaican operations, which included 13 branches. The bank will record a one-time loss of $97 million on the deal, up from its earlier estimate of a $60-million loss.

Meanwhile, Royal earned $2.2 billion in the quarter ended April 30, 2014, up 15.3% from $1.9 billion a year ago. Per-share earnings rose 17.6%, to $1.47 from $1.25, on fewer shares outstanding.

Overall revenue gained 7.2%, to $8.3 billion from $7.7 billion. Revenue at Royal’s retail banking division (which supplied 40% of the total) gained 5.1%, thanks to stronger loan demand in Canada. The lower Canadian dollar also improved the results of its U.S. and Caribbean operations.

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TORONTO-DOMINION BANK $56 (Toronto symbol TD; Conservative Growth and Income Portfolios, Finance sector; Shares outstanding: 1.8 billion; Market cap: $99.0 billion; Price-to-sales ratio: 3.0; Dividend yield: 3.4%; TSINetwork Rating: Above Average; www.td.com) is Canada’s largest bank, with $896.5 billion of assets.

On January 1, 2014, the bank became the primary credit card issuer for the hugely popular Aeroplan travel reward program run by Aimia Inc. (Toronto symbol AIM). As part of the deal, TD acquired half of the existing Aeroplan accounts from the previous issuer, CIBC (see page 75). It paid $162.5 million upfront and will pay $37.5 million annually over the next three years.

Thanks to this purchase, as well as steady loan demand in Canada and the U.S., TD’s earnings rose 13.5% in the quarter ended April 30, 2014, to $2.1 billion from $1.8 billion a year earlier. Per-share earnings gained 14.7%, to $1.09 from $0.95, on fewer shares outstanding. Revenue rose 12.5%, to $7.4 billion from $6.6 billion.

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DUNDEE CORP. $17 (Toronto symbol DC.A; Aggressive Growth Portfolio, Finance sector; Shares outstanding: 53.5 million; Market cap: $909.5 million; Price-to-sales ratio: 4.5; No dividends paid; TSINetwork Rating: Average; www.dundeecorp.com) owns businesses in the wealth management, real estate, natural resource and agriculture industries.

Dundee is more risky than most of the stocks we recommend. Many brokers avoid it due to its complex holding company structure, so it has little following among institutional investors. Irregular earnings from real estate and resource operations also add to its risk, and the lack of a dividend hurts its appeal.

However, like most holding companies, Dundee typically trades at a discount to the market value of the assets it held. Occasionally, it would unlock some of this value, as it did in 2011 when it sold its Dynamic mutual fund operations. In 2013, it spun off its commercial real estate subsidiary —DREAM Unlimited (Toronto symbol DRM)—as a separate company.

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IMPERIAL OIL LTD. $57 (Toronto symbol IMO; Conservative Growth and Income Portfolios, Shares outstanding: 847.6 million; Market cap: $48.3 billion; Price-to-sales ratio: 1.5; Dividend yield: 0.9%; TSINetwork Rating: Average; www.imperialoil.ca) is Canada’s third-largest publicly traded oil company, after Suncor Energy and Canadian Natural Resources. Imperial is a 69.6%- owned subsidiary of U.S.-based ExxonMobil Corp. (New York symbol XOM).

About 80% of Imperial’s oil production comes from its oil sands operations in Alberta, including its 25% stake in the Syncrude project.

It also has conventional oil and natural gas operations in Western Canada and owns interests in offshore projects in Atlantic Canada. Based on its current daily output, Imperial’s 3.6 billion barrels of proven reserves should last 35 years.

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tech stocks
DragonWave Inc. (symbol DWI on Toronto; www.dragonwaveinc.com) makes equipment that wirelessly transmits broadband voice, video and other data. That lets customers send and receive data in places that fibre optic networks haven’t yet reached. The company’s clients are mainly high-speed Internet and wireless providers. It also sells to organizations that operate their own networks, such as universities, hospitals, cities and businesses. DragonWave prefers to focus on product design and support; it outsources most of its manufacturing to other firms....
Investment Advice
The Successful Investor organization was something of a pioneer, in print and online, in the Canadian investment advisory newsletter publishing industry. I launched the company in 1994 with one goal in mind: to give Canadian investors a source of investment advice (and, ultimately, portfolio management) that would differ from the alternatives in one key measure. Our Successful Investor service is free of the conflicts of interest that warp other sources of investment advice. I expected a big market for this kind of service. After all, our best business prospects have always been informed investors who understand that conflicts of interest can taint investment advice and make it costly and dangerous to investors....
short selling stocks
Every Wednesday, we publish our “Investor Toolkit” series on TSI Network. Whether you’re a new or experienced investor, these weekly updates are designed to give you specific advice on successful investing. Each Investor Toolkit update gives you a fundamental tip and shows you how you can put it into practice right away. Tip of the week: “With short selling, you have to balance the slim chance of making money fast against the greater probability that you will lose money—possibly a lot of it.” There are plenty of references in the financial media to “shorts”—those seeking to profit from stocks that fall in price. But this strategy comes with considerable risk....
BHP BILLITON LTD. ADRs $72 (New York symbol BHP; Conservative Growth Portfolio, Resources sector; ADRs outstanding: 1.6 billion; Market cap: $115.2 billion; Price-to-sales ratio: 2.9; Dividend yield: 3.3%; TSINetwork Rating: Average; www. bhpbilliton.com) is the world’s largest mining company, with major operations in Australia, South Africa, the U.S. and the U.K.

BHP’s main products include iron ore (31% of revenue; 43% of earnings), oil and potash (20%; 32%), copper (18%; 16%), coal (17%; 6%), and aluminum, manganese and nickel (14%; 3%). BHP cuts its risk by focusing on projects with high-quality, long-lasting reserves.

Oil and gas expansion spurred results

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VERIZON COMMUNICATIONS INC. $52 (New York symbol VZ, Conservative Growth and Income Portfolios, Utilities sector; Shares outstanding: 4.1 billion; Market cap: $213.2 billion; Price-to-sales ratio: 1.3; Dividend yield: 4.1%; TSINetwork Rating: Average; www.verizon.com) recently completed its $130-billion purchase of the 45% of Verizon Wireless that it didn’t already own from U.K.-based Vodafone Group.

The company now owns 100% of Verizon Wireless, which sells wireless services to 104.6 million subscribers in the U.S. Wireless now supplies 68% of Verizon’s revenue. The remaining 32% comes from its 20.4 million regular phone customers and 16.2 million high-speed Internet and digital TV subscribers. Thanks mainly to the Verizon Wireless purchase, the company’s earnings per share jumped 24.7% in the three months ended June 30, 2014, to $0.91 from $0.73 a year earlier. Revenue gained 5.7%, to $31.5 billion from $29.8 billion.

The company should earn $3.54 a share in 2014, and the stock trades at 14.7 times that forecast. The $2.12 dividend yields 4.1%.

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