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.

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Stock investment clubs can help new investors find quality stocks and develop their own investing style. But watch out for the drawbacks.
PROCTER & GAMBLE CO. $79 (New York symbol PG; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 2.7 billion; Market cap: $213.3 billion; Price-to-sales ratio: 2.7; Dividend yield: 3.3%; TSINetwork Rating: Above Average; www.pg.com) is selling most of its pet food business to privately held Mars Inc. The sale will let Procter focus on its more-profitable household and personal care products.

The company will receive $2.9 billion when the deal closes in the next few months. To put that in context, Procter earned $2.6 billion, or $0.90 a share, in the quarter ended March 31, 2014. The company will likely use the cash to buy back more shares.

Procter & Gamble is a buy.

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INTERNATIONAL FLAVORS & FRAGRANCES INC. $104 (New York symbol IFF; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 81.3 million; Market cap: $8.5 billion; Price-to-sales ratio: 2.8; Dividend yield: 1.5%; TSINetwork Rating: Above Average; www.iff.com) makes over 36,000 compounds that improve the taste of foods and the smell of consumer products.

In January 2014, the company paid $102.5 million for Aromor Flavors and Fragrances, a private Israeli firm that is also one of IFF’s ingredient suppliers.

This purchase helped increase IFF’s sales by 5.8% in the three months ended March 31, 2014, to $770.2 million from $727.8 million a year earlier. The company gets 75% of its sales from outside the U.S. and nearly 50% from emerging markets. If you exclude currency exchange rates, sales rose 7%.

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MCCORMICK & CO. INC. $71 (New York symbol MKC; Income Portfolio, Consumer sector; Shares outstanding: 119.0 million; Market cap: $8.4 billion; Price-to-sales ratio: 2.3; Dividend yield: 2.1%; TSINetwork Rating: Average; www.mccormick.com) makes spices, herbs, seasonings and flavours. It sells these products to consumers and industrial clients. In its fiscal 2014 second quarter, which ended May 31, 2014, McCormick’s sales rose 3.1%, to $1.03 billion from $1.00 billion a year earlier. That’s mainly because McCormick bought a Chinese bouillon maker for $144.8 million in May 2013. This purchase offset lower sales in the Americas.

Earnings gained 7.5%, to $84.5 million, or $0.64 a share, from $78.6 million, or $0.59, a year earlier.

McCormick continues to benefit from its ongoing cost cuts, which should save it $45 million in fiscal 2014. That will help fund the additional $25 million it plans to spend on advertising this year.

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ALCOA INC. $15 (New York symbol AA; Conservative Growth Portfolio, Resources sector; Shares outstanding: 1.2 billion; Market cap: $18.0 billion; Price-to-sales ratio: 0.7; Dividend yield: 0.8%; TSINetwork Rating: Average; www.alcoa.com) plans to upgrade its Hampton, Virginia, plant to make lightweight aluminum blades that help cut new jet engines’fuel consumption by 20% over older models.

Alcoa will spend $25 million on this project. To put that in context, it earned $98 million, or $0.09 a share, in the three months ended
March 31, 2014.

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INTEL CORP. $31 (Nasdaq symbol INTC; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 5.0 billion; Market cap: $155.0 billion; Price-to-sales ratio: 2.9; Dividend yield: 2.9%; TSINetwork Rating: Above Average; www.intel.com) now expects $13.7 billion of revenue in the second quarter of 2014, up from its earlier forecast of $13.0 billion. That’s because businesses are replacing their older computers at a faster-than-expected pace.

The stock has gained 19% since the start of the year and trades at 15.2 times the $2.04 a share that Intel will probably earn in 2014. That’s a particularly attractive p/e ratio for a tech leader that spends a high 22% of its revenue on research.

Intel is a buy.

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FEDEX CORP. $151 (New York symbol FDX; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 318.0 million; Market cap: $48.0 billion; Price-to-sales ratio: 1.1; Dividend yield: 0.5%; TSINetwork Rating: Average; www.fedex.com) delivers packages and documents in the U.S. and over 220 other countries through its fleet of 650 planes and over 108,000 trucks and other surface vehicles.

The company recently changed the way it charges for shipping bulky packages by truck. In the past, it based its fee on weight, but it will now charge according to size. This makes it more expensive to ship lighter items that take up significant space, such as diapers. FedEx has also raised its fuel surcharge, which will help offset its rising fuel costs.

Meanwhile, the company earned $2.10 billion in its 2014 fiscal year, which ended May 31, 2014. That’s up 6.1% from $1.98 billion in fiscal 2013. FedEx spent $4.9 billion on share buybacks in its latest fiscal year. As a result, its earnings per share rose 8.3%, to $6.75 from $6.23. Revenue gained 2.9%, to $45.6 billion from $44.3 billion.

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EBAY INC. $49 (Nasdaq symbol EBAY; Aggressive Growth Portfolio, Finance sector; Shares outstanding: 1.3 billion; Market cap: $63.7 billion; Priceto- sales ratio: 3.8; No dividends paid; TSINetwork Rating: Above Average; www.ebay.com) gets 51% of its revenue by charging users fees to sell goods on its shopping websites, including its main auction site, which it launched in September 1995. This site now has 145.1 million users.

eBay gets a further 43% of its revenue from processing online transactions, mostly through its wholly owned PayPal subsidiary. This business now has 148.4 million users. The remaining 6% of eBay’s revenue comes from its Enterprise division, which helps businesses process online orders.

The company lost $2.4 billion, or $1.82 a share, in the three months ended March 31, 2014. That’s mainly because it transferred $9.0 billion in cash from its overseas businesses to its U.S. headquarters, triggering a $3.0-billion tax bill.

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VISA INC. $209 (New York symbol V; Conservative Growth Portfolio, Finance sector; Shares outstanding: 628.4 million; Market cap: $131.3 billion; Price-to-sales ratio: 10.9; Dividend yield: 0.8%; TSINetwork Rating: Above Average; www.visa.com) operates the world’s largest electronic payments network, through which it processes credit, debit, prepaid and commercial transactions.

Visa gets most of its revenue from fees it charges card issuers and merchants for using its network. It bases its fees on payment volume, transactions processed and other factors. The banks that issue the cards are responsible for evaluating customer creditworthiness and collecting payments, not Visa.

In its fiscal 2014 second quarter, which ended March 31, 2014, Visa’s earnings jumped 25.8%, to $1.6 billion from $1.3 billion a year earlier. Per-share earnings rose 31.3%, to $2.52 from $1.92, on fewer shares outstanding. However, if you exclude a one-time tax benefit in the latest quarter, earnings per share rose 14.6%, to $2.20.

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AT&T INC. $35 (New York symbol T; Conservative Growth and Income Portfolios, Utilities sector; Shares outstanding: 5.2 billion; Market cap: $182.0 billion; Price-to-sales ratio: 1.4; Dividend yield: 5.3%; TSINetwork Rating: Average; www.att.com) is buying satellite TV provider DirecTV (Nasdaq symbol DTV) for $48.5 billion (70% stock and 30% cash).

Satellite TV demand has slowed in the past few years as consumers switch to online services like Netflix. However, DirecTV’s rural customers are a good fit with AT&T’s urban U-verse fibre optic TV service. It’s a bold move, but it could pay off.

The takeover will make AT&T the second-largest provider of pay-TV services in the U.S., with 27 million subscribers. That will help it compete with Comcast, which will have 30 million customers after it buys rival Time Warner Cable. It will also give AT&T more clout when buying entertainment and sports programming.

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