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
MOLSON COORS CANADA INC. (Toronto symbols TPX.A $51 and TPX.B $51; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 183.6 million; Market cap: $9.5 billion; Price-to-sales ratio: 2.1; Dividend yield: 2.6%; TSINetwork Rating: Average; www.molsoncoors.com) is one of the world’s leading brewers. Its main brands include Coors Light, Molson Canadian and Carling.

In the three months ended June 29, 2013, the company earned $278.6 million (all amounts except share prices and market cap in U.S. dollars). That’s up 11.4% from $250.1 million a year earlier. Earnings per share rose 9.4%, to $1.51 from $1.38. These figures exclude unusual items, mainly costs to integrate StarBev LP, which the company bought for $3.4 billion in June 2012. StarBev owns nine breweries in central and eastern Europe.

Thanks mainly to StarBev’s contribution, sales rose 17.9%, to $1.2 billion from $999.4 million. StarBev is also helping the company offset slower beer sales in North America.
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MANITOBA TELECOM SERVICES INC. $33 (Toronto symbol MBT; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 67.7 million; Market cap: $2.2 billion; Price-to-sales ratio: 1.5; Dividend yield: 5.2%; TSINetwork Rating: Average; www.mts.ca) recently agreed to sell its Allstream subsidiary to Accelero Capital Holdings, a private firm controlled by Egyptian billionaire Naguib Sawiris.

In 2004, the company paid $1.6 billion for Allstream, which provides integrated telephone, Internet and other communication services to over 50,000 businesses across Canada.

The sale price is $520 million. If you disregard various closing costs, Manitoba Telecom will receive $405 million. The company expects to close the deal by the end of 2013.
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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) earned a record $943 million in its fiscal 2013 third quarter, which ended July 31, 2013. That’s up 8.9% from $866 million a year earlier. Earnings per share rose 11.2%, to $2.29 from $2.06, on fewer shares outstanding. Revenue gained 3.6%, to $3.3 billion from $3.15 billion.

Low interest rates continue to spur loan demand at CIBC’s retail banking division. As well, acquisitions pushed up earnings at its wealth management business. Earnings at its security-trading operations also improved thanks to higher trading volumes. However, loan-loss provisions rose 0.9%, to $320 million from $317 million, partly to cover potential losses caused by flooding in Alberta.

The bank also announced that it plans to buy back 2% of its outstanding shares over the next year.
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TELUS CORP. $33 (Toronto symbol T; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 645.7 million; Market cap: $21.3 billion; Price-to-sales ratio: 2.0; Dividend yield: 4.1%; TSINetwork Rating: Above Average; www.telus.com) moved up on news that U.S.-based Verizon Communications (New York symbol VZ) is buying the 45% of the Verizon Wireless joint venture that it does not already own from U.K.-based Vodafone Group (Nasdaq symbol VOD). Verizon Wireless has 100.1 million subscribers in the U.S. In the wake of the this deal, Verizon announced that it would not enter Canada’s wireless market at this time.

Ottawa still plans to set aside wireless spectrum for new entrants at an auction in January 2014. That could encourage other foreign carriers besides Verizon to expand into Canada. Telus gets a high 53% of its revenue and 67% of its earnings from wireless, so it’s particularly vulnerable to new competition. As well, new regulations that limit roaming charges and let customers cancel their contracts early could dampen the company’s earnings growth.

Telus is still a hold.

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LINAMAR CORP. $33 (Toronto symbol LNR; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 64.7 million; Market cap: $2.1 billion; Price-to-sales ratio: 0.6; Dividend yield: 1.0%; TSINetwork Rating: Extra Risk; www.linamar.com) gets 80% of its revenue by making engines, transmissions and other precisionmachined parts for automakers. The company has plants in North America, Europe and Asia.

The remaining 20% of Linamar’s revenue comes from its self-propelled, scissor-type elevating work platforms, which it sells under the Skyjack name, plus consumer products, such as lawn mowers and cargo trailers.

The company continues to benefit from strong car sales. Rising construction activity has also prompted contractors to replace their older Skyjack platforms.
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SHAWCOR LTD. $43 (Toronto symbol SCL; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 59.6 million; Market cap: $2.6 billion; Price-to-sales ratio: 1.4; Dividend yield: 1.2%; TSINetwork Rating: Average; www.shawcor.com) gets 90% of its revenue by making sealants and coatings that keep oil and gas pipelines from rusting. The remaining 10% comes from manufacturing industrial products, such as electrical wire and protective sheaths.

The company continues to benefit from recent acquisitions that have increased its North American manufacturing capacity. As well, demand for its pipeline-coating services continues to rise in Asia, Latin America and Europe. Asia now supplies 39% of ShawCor’s revenue, followed by North America (38%), Europe (15%) and Latin America (8%).

In the three months ended June 30, 2013, ShawCor’s revenue jumped 39.9%, to a record $457.3 million from $326.9 million a year earlier. That’s mainly because the company paid $30 million for the 49% of Socotherm LaBarge LLC that it did not already own. Texas-based Socotherm coats and insulates pipelines for deepwater oil and gas projects. Its clients operate in the Gulf of Mexico and off Africa’s west coast.
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BOMBARDIER INC. (Toronto symbols BBD.A $5.08 and BBD.B $5.06; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 1.7 billion; Market cap: $8.6 billion; Price-to-sales ratio: 0.5; Dividend yield: 2.0%; TSINetwork Rating: Average; www.bombardier.com) is the world’s third-largest commercial aircraft maker, behind Boeing and Airbus. It is also the world’s leading passenger railcar manufacturer.

The company has postponed the first test flight of its new CSeries passenger jet. It had planned to begin flight tests in June, but it needs extra time to upgrade the plane’s software.

Bombardier has firm orders for 177 CSeries jets, plus options for 211 more. If the buyers exercise all these options, the resulting 388 orders would be worth $26 billion (all amounts except share prices and market cap in U.S. dollars).
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ENCANA CORP. $18 (Toronto symbol ECA; Conservative Growth Portfolio, Resources sector; Shares outstanding: 737.7 million; Market cap: $13.3 billion; Price-to-sales ratio: 2.3; Dividend yield: 4.6%; TSINetwork Rating: Average; www.encana.com) aims to cut its exposure to low natural gas prices by producing more oil and natural gas liquids (NGLs), like butane and propane.

In the three months ended June 30, 2013, Encana’s oil and NGL output rose 68.8%, to 47,600 barrels a day from 28,200 a year earlier. But that’s still just 9% of its overall production. Encana aims to raise its NGL and oil output to 70,000 to 75,000 barrels a day by the end of 2013.

In response to weak gas prices, the company continues to expand its hedging program. For the second half of 2013, it has hedged roughly 75% of its expected production at $4.37 U.S. per thousand cubic feet. That’s 22.8% higher than today’s price of $3.56 U.S. For 2014, Encana has hedged 55% of its forecast output at $4.19 U.S. per thousand cubic feet.
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CENOVUS ENERGY INC. $31 (Toronto symbol CVE; Conservative Growth Portfolio, Resources sector; Shares outstanding: 755.8 million; Market cap: $23.4 billion; Priceto- sales ratio: 1.3; Dividend yield: 3.1%; TSINetwork Rating: Average; www.cenovus.com) operates three heavy oil projects in Alberta and one in Saskatchewan. It gets about half of its output from the oil sands. Conventional oil and natural gas wells supply the other half. The company’s reserves should last 23 years.

U.S.-based ConocoPhillips (New York symbol COP) owns 50% of Cenovus’s main Foster Creek and Christina Lake oil sands projects in Alberta. These properties produce heavy bitumen, which Cenovus ships to its 50%-owned refineries in Illinois and Texas. Phillips 66 (New York symbol PSX) owns the other 50% of these refineries.

Owning refineries helps cut Cenovus’s risk, because they earn higher profits when crude oil prices fall, which offsets lower profits from its main oil production businesses. In 2012, refining accounted for 67% of Cenovus’s revenue and 46% of its earnings.
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