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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Learn the metrics that define “safe” stocks, including cash flow, payout ratios, debt, and moats, plus TFSA/RRSP tips for Canadian dividend investors.
CARFINCO FINANCIAL GROUP $10.10 (Toronto symbol CFN; TSINetwork Rating: Speculative) (1-888- 486-4356; www.carfinco.com; Shares outstanding: 26.4 million; Market cap: $266.6 million; Dividend yield: 4.8%) has now expanded into the U.S. through its $9.5-million purchase of Persian Acceptance Corp., an automotive lender that also caters to less affluent borrowers.

Persian operates in Massachusetts, New Hampshire, Maine, Connecticut and Vermont. It works with about 362 car dealers who use the company to get loans for their customers. Persian currently has $42.7 million U.S. in outstanding loans. To put that in perspective, Carfinco has $195.0 million of loans.

Growth by acquisition, especially into the U.S., adds risk. However, Carfinco is cutting that risk by keeping key members of Persian’s management in place, including Peter Miller, its founder and president. Miller sold the company to Carfinco and can receive an additional $2 million on the purchase price if Persian reaches certain performance targets over the next two years.
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AMERIGO RESOURCES $0.43 (Toronto symbol ARG; TSINetwork Rating: Speculative) (604-681-2802; www.amerigoresources.com; Shares outstanding: 172.3 million; Market cap: $72.4 million; No dividends paid) processes copper and molybdenum from waste rock at Chile’s El Teniente, the world’s largest copper mine. The contract runs at least through 2037. Amerigo also has an agreement to process material from the nearby Cauquenes tailings pond.

Amerigo gets 94% of its revenue by processing copper. The remaining 6% comes from molybdenum.

In the three months ended June 30, 2013, Amerigo’s revenue fell 22.0%, to $31.4 million from $40.0 million a year earlier (all figures except share price and market cap in U.S. dollars). That’s because Amerigo’s copper production fell 17.5%, and molybdenum output declined 23.1%.
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MART RESOURCES $1.19 (Toronto symbol MMT; TSINetwork Rating: Speculative) (403-270-1841; www.martresources.com; Shares outstanding: 356.6 million; Market cap: $449.3 million; Dividend yield: 16.8%) produces oil at its 50%-held Umusadege field in the Niger Delta region of southern Nigeria.

The company recently completed construction of a new central processing facility at the Umusadege field. This plant can process 35,000 barrels of oil a day, enough to handle the field’s current output of 10,140 barrels a day, in addition to all future production increases.

Meanwhile, the company is reporting steady cash flow and continues to pay quarterly dividends of $0.05 a share. The stock yields 16.8%.
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CHESAPEAKE ENERGY $27.30 (New York symbol CHK; TSINetwork Rating: Extra Risk) (405-848-8000; www.chkenergy.com; Shares outstanding: 665.5 million; Market cap: $18.1 billion; Dividend yield: 1.3%) is up 9% since August 19, when activist investor Carl Icahn revealed that he had increased his stake in the company to 9.98% from 8.98%.

Icahn has a long history of pushing companies to make changes that have increased shareholder value.

He first acquired a stake in Chesapeake in May 2012. Since then, he has successfully pressured the company to replace four of its eight board members with his nominees. Most recently, four of Chesapeake’s top executives left as part of an ongoing reorganization. That’s in addition to co-founder and former CEO Aubrey McClendon, who departed in April, and two senior vicepresidents who left in May.
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CIMAREX ENERGY $91.50 (New York symbol XEC; TSINetwork Rating: Extra Risk) (303-295-3995; www.cimarex.com; Shares outstanding: 86.5 million; Market cap: $7.9 billion; Dividend yield: 0.6%) produces and explores for natural gas and oil. Gas makes up 49% of its output. Cimarex’s properties are in the Mid-Continent region of the U.S., which includes Oklahoma, Kansas and Texas (50% of production); the Permian Basin of western Texas and southeastern New Mexico (47%); and the Texas Gulf Coast (3%).

In the three months ended June 30, 2013, Cimarex’s production averaged 686.8 million cubic feet of natural gas equivalent per day (including oil).

That’s up 16.4% from 590.1 million cubic feet a year earlier. Thanks to the higher production and increased oil and gas prices, Cimarex’s cash flow per share jumped 42.9%, to $4.00 from $2.80.
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DEVON ENERGY CORP. $59.82 (New York symbol DVN; TSINetwork Rating: Speculative) (405-235- 3611; www.dvn.com; Shares outstanding: 406.0 million; Market cap: $23.9 billion; Dividend yield: 1.5%) is one of the largest U.S.-based oil and natural gas explorers and producers. Its production mix is 58% gas and 42% oil.

In 2011, Devon sold all of its international and Gulf of Mexico properties, which it saw as risky and expensive to develop. The company is now focused on its North American projects, which include conventional production, shale oil in Texas and oil sands in Alberta.

Devon is now further tightening its focus by selling its natural gas gathering and processing assets for $300 million to $500 million.
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strong>AEROPOSTALE $10.08 (New York symbol ARO; TSINetwork Rating: Extra Risk) (646- 485-5410; www.aeropostale.com; Shares outstanding: 78.5 million; Market cap: $798.2 million; No dividends paid) reported sales of $454.0 million in the three months ended August 3, 2013. That was down 6.4% from $485.3 million a year earlier. Same-store sales declined 15%.

The slow U.S. economy has increased the unemployment rate among teens, which has hurt sales at most teen-focused retailers. Aeropostale lost $0.34 a share in the latest quarter, compared to nil per share a year earlier.

The company now has a new product development team in place, which should let it better react to changes in teenage fashion trends. Aeropostale will likely be able to repeat its past success at attracting customers, but its sales may remain weak in the near term.
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COMPUTER MODELLING GROUP $24.00 (Toronto symbol CMG; TSINetwork Rating: Speculative) (403-531-1300; www.cmgroup.com; Shares outstanding: 38.5 million; Market cap: $943.5 million; Dividend yield: 3.0%) sells consulting services and software that help oil and gas producers use advanced recovery techniques to get more out of their existing wells. It has customers in over 50 countries and offices in Calgary, Houston, London, Caracas, Bogota, Kuala Lumpur and Dubai.

In the three months ended June 30, 2013, Computer Modelling’s revenue rose 10.0%, to $18.1 million from $16.5 million a year earlier. Software licence sales increased, as did consulting and professional services revenue. Earnings rose 16.3%, to $7.1 million from $6.1 million. Per-share earnings gained 18.8%, to $0.19 from $0.16, on fewer shares outstanding.

Computer Modelling holds cash of $63.1 million, or $1.66 a share, and has no debt. It spent $3.5 million, or a high 19.2% of its revenue, on research in the latest quarter.
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PASON SYSTEMS $21.70 (Toronto symbol PSI; TSINetwork Rating: Speculative) (403-301-3400; www.pason.com; Shares outstanding: 82.1 million; Market cap: $1.8 billion; Dividend yield: 2.4%) rents equipment for monitoring and managing oil and gas rigs. It also sells communication technology, such as its satellite system, which companies use to remotely collect data from their drilling operations. Pason serves oil and gas producers and drilling contractors throughout Canada, the U.S., Mexico, Argentina and Australia.

In the three months ended June 30, 2013, Pason’s revenue fell 2.1%, to $82.4 million from $84.1 million a year earlier. Less drilling in the U.S. and Canada offset strong international sales. Still, cash flow per share rose 5.1%, to $0.62 from $0.59. That’s because the company cut costs at its U.S. operations, which account for 71% of its revenue.

Pason holds cash of $195.4 million, or $2.38 a share, and has no debt.
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