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
SUNCOR ENERGY INC. $36 (Toronto symbol SU; Conservative Growth Portfolio, Resources sector; Shares outstanding: 1.5 billion; Market cap: $54.0 billion; Price-to-sales ratio: 1.4; Dividend yield: 2.2%; TSINetwork Rating: Average; www. suncor.com) produced an average of 365,000 barrels of oil a day at its oil sands projects in September 2013....
MAPLE LEAF FOODS INC. $13 (Toronto symbol MFI; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 140.0 million; Market cap: $1.8 billion; Price-to-sales ratio: 0.4; Dividend yield: 1.2%; TSINetwork Rating: Average; www.mapleleaf.ca) has received regulatory approval for its plan to sell its Rothsay rendering operations.

Rothsay recycles by-products from Maple Leaf’s main meatprocessing operations into a variety of ingredients for other products, including animal feed, soaps, lotions, cosmetics, fertilizers and plastics. Rothsay also makes biodiesel fuels.

The company will receive $645 million when the deal closes on October 28, 2013. It will use the cash to pay down its $1.3 billion of long-term debt.
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CANADIAN IMPERIAL BANK OF COMMERCE $82 (Toronto symbol CM; Conservative Growth Portfolio, Finance sector; Shares outstanding: 400.0 million; Market cap: $32.8 billion; Price-to-sales ratio: 1.9; Dividend yield: 4.7%; TSINetwork Rating: Above Average; www.cibc.com) has launched Aventura, a new credit card loyalty plan for travellers. Aventura cards let users earn points on their purchases and redeem them for free flights and other benefits.

Toronto-Dominion Bank (see page 104) recently replaced CIBC as the primary issuer of cards under the popular Aeroplan loyalty program. As part of the deal, CIBC will hang on to Aeroplan accounts held by customers who also bank at CIBC. That’s about half the Aeroplan portfolio.

The bank estimates that losing half of the Aeroplan business will cut its annual earnings by $0.45 a share; in the year ended October 31, 2012, it earned $8.07 a share. However, the additional benefits of the Aventura plan, including letting users fly on any airline and not just Air Canada, should help it attract more customers.
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TRANSCANADA CORP. $44 (Toronto symbol TRP; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 707.1 million; Market cap: $31.1 billion; Price-to-sales ratio: 3.5; Dividend yield: 4.2%; TSINetwork Rating: Above Average; www.transcanada.com) expects to complete the southern portion of its Keystone XL pipeline by the end of 2013. This $2.3-billion U.S. project will pump crude oil from terminals in Cushing, Oklahoma, to refineries on the U.S. Gulf Coast. Demand for this pipeline from oil shippers is strong, because rising shale oil production in North Dakota has increased inventories at Cushing and hurt crude prices.

The company still hopes to win approval for Keystone XL’s northern portion, which would pump oil from Alberta to the Gulf Coast. The U.S. government will probably announce its decision in 2014.

TransCanada is a buy....
EMERA INC. $29 (Toronto symbol EMA; Income Portfolio, Utilities sector; Shares outstanding: 132.4 million; Market cap: $3.8 billion; Price-to-sales ratio: 1.7; Dividend yield: 4.8%; 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.

The company continues to invest in promising new projects. For example, it recently agreed to pay $541 million U.S. for three natural-gas-fired power plants in New England. Emera also plans to pay $390 million for a 34.5% stake in a power plant in Labrador. In addition, it will spend $1.5 billion to build an undersea cable that will transmit 20% of this facility’s power to Nova Scotia.

Closing a non-regulated power plant for maintenance helped cut Emera’s second-quarter earnings by 8.0%, to $42.6 million from $46.3 million a year earlier. Earnings per share fell 13.5%, to $0.32 from $0.37, on more shares outstanding. However, overall revenue still rose 1.0%, to $506.5 million from $501.3 million, thanks to colder-than-normal weather in Nova Scotia and higher power rates.
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FORTIS INC. $31 (Toronto symbol FTS; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 211.7 million; Market cap: $6.6 billion; Price-to-sales ratio: 1.8; Dividend yield 4.0%; TSINetwork Rating: Above Average; www.fortis.ca) is the main electricity supplier in Newfoundland and Prince Edward Island. It also distributes natural gas in B.C. and operates power plants in other parts of Canada, the U.S. and the Caribbean.

On June 27, 2013, Fortis paid $1.5 billion U.S. for CH Energy, which distributes gas and electricity in New York State.

Without costs related to this acquisition and other unusual items, Fortis earned $61 million, or $0.32 a share, in the second quarter of 2013. That’s down 10.3% from $68 million, or $0.36, a year earlier. The decline is mainly due to lower rates and volumes at its B.C. gas utility. Revenue fell 0.3%, to $790 million from $792 million.
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PRECISION DRILLING CORP. $10 (Toronto symbol PD; Aggressive Growth Portfolio, Resource sector; Shares outstanding: 276.9 million; Market cap: $2.8 billion; Price-to-sales ratio: 1.4; Dividend yield: 2.0%; TSINetwork Rating: Extra Risk; www.precisiondrilling.com) provides contract-drilling services to land-based oil and gas producers, mainly in North America. As of June 30, 2013, it had 324 rigs in service.

Wet weather in Western Canada and low gas prices have hurt demand for Precision’s rigs. In the second quarter of 2013, its revenue fell 0.8%, to $378.9 million from $382.0 million a year earlier.

However, demand for the company’s Super Series rigs, which can reach deeper pockets of oil and gas, remains strong.
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TORONTO-DOMINION BANK $91 (Toronto symbol TD; Conservative Growth Portfolio, Finance sector; Shares outstanding: 917.6 million; Market cap: $83.5 billion; Price-to-sales ratio: 2.8; Dividend yield: 3.7%; TSINetwork Rating: Above Average; www.td.com) has agreed to pay $52.5 million U.S. to settle charges that it failed to report suspicious transactions related to a fraudulent investment scheme in Florida. Separately, the bank is appealing a court ruling that it pay $67 million U.S. related to this case.

These amounts are small next to the $1.6 billion (Canadian), or $1.65 a share, that TD earned in the quarter ended July 31, 2013. Still, settling these charges cuts TD’s risk, especially in light of tighter enforcement from U.S. securities regulators.

TD Bank is a buy....
BLACKBERRY LTD. $8.44 (Toronto symbol BB; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 524.6 million; Market cap: $4.4 billion; Price-to-sales ratio: 0.4; No dividends paid; TSINetwork Rating: Speculative; www.blackberry.com) lost $965 million, or $1.84 a share, in the three months ended August 31, 2013 (all amounts except share price and market cap in U.S. dollars). That’s mainly because it wrote down the value of its unsold Z10 touchscreen smartphones by $934 million. A year earlier, it lost $229 million, or $0.44 a share. Revenue fell 45.0%, to $1.6 billion from $2.9 billion.

The company has accepted a $9.00 U.S.-a-share takeover offer from Fairfax Financial Holdings (Toronto symbol FFH). However, it’s unclear if Fairfax can complete the deal. That’s why the stock is trading at 9.8% below the offer price.

Due to its worsening financial condition, we’ve cut BlackBerry’s TSINetwork Rating from “Average” to “Speculative.”
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