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
CHIPOTLE MEXICAN GRILL $403.00 (New York symbol CMG; TSINetwork Rating: Speculative) (303-595-4000; www.chipotle.com; Shares outstanding: 30.9 million; Market cap: $12.6 billion; No dividends paid) is a Denver- based Mexican restaurant chain. It charges slightly higher prices than fast food companies, but it offers better quality food, including naturally raised meat, and superior decor and service.

In the three months ended June 30, 2013, Chipotle’s sales rose 18.2%, to $816.8 million from $690.9 million a year earlier. The company’s restaurants attracted more customers during the quarter, which pushed up same-restaurant sales by 5.5%. Moreover, Chipotle opened 44 new outlets and now has 1,502 locations. For all of 2013, it plans to open 165 to 180 restaurants. Earnings rose 7.6%, to $87.9 million, or $2.84 a share, from $81.7 million, or $2.68.

The company’s earnings would have been even higher, but it spent 33.1% of its sales on food and ingredients in the latest quarter, up from 32.1% a year ago. Prices rose particularly sharply for chicken, dairy products and salsa ingredients.
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DOMINO’S PIZZA $61.50 (New York symbol DPZ; TSINetwork Rating: Average) (734-930-3030; www.dominos.com; Shares outstanding: 55.7 million; Market cap: $3.5 billion; Dividend yield: 1.3%) is the world’s largest chain of pizza stores that offer takeout and delivery. It operates 10,440 outlets in the U.S. and over 70 other countries. Franchisees run most of these stores.

The company’s earnings per share rose 21.3% in the quarter ended June 16, 2013, to $0.57 from $0.47 a year earlier. The latest figure beat the consensus estimate of $0.56. Sales gained 10.0%, to $414.0 million from $376.1 million. That also exceeded the consensus estimate of $405.1 million. Same-store sales rose 5.8% internationally and 6.7% in the U.S.

Domino’s continues to boost its sales by aggressively promoting its new pizza recipes. It’s also profiting by moving into ordering online and through software applications, or apps, on smartphones. In addition, it still has lots of growth potential overseas.
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CARFINCO FINANCIAL GROUP $9.45 (Toronto symbol CFN; TSINetwork Rating: Speculative) (1-888-486-4356; www.carfinco.com; Shares outstanding: 26.4 million; Market cap: $250.2 million; Dividend yield: 5.1%) provides car loans to consumers who don’t meet the criteria of traditional lenders, like banks.

In the three months ended June 30, 2013, Carfinco’s revenue rose 10.6%, to $19.5 million from $17.7 million a year earlier. Earnings rose 7.0%, to $5.8 million from $5.4 million. Earnings per share were unchanged at $0.22 on more shares outstanding.

The stock is up 19% since we first recommended it in our July 2012 issue at $7.93. The company’s outlook remains positive, and the shares trade at just 11.1 times Carfinco’s latest 12 months of earnings.
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INTACT FINANCIAL CORP. $61.99 (Toronto symbol IFC; TSINetwork Rating: Speculative) (416-341- 1464; www.intactfc.com; Shares outstanding: 132.0 million; Market cap: $8.2 billion; Dividend yield: 2.8%) is Canada’s largest provider of property and casualty insurance, based on premiums. Its brands include Intact Insurance, Canada BrokerLink, belairdirect and Grey Power.

In the three months ended June 30, 2013, Intact’s revenue rose 10.4%, to $2.18 billion from $1.98 billion a year earlier. The company earned $0.89 a share, down sharply from $1.35. However, the latest results include a one-time loss of $0.79 a share related to storms and flooding in Alberta.

Earlier this year, Ontario’s minority Liberal government agreed to meet an NDP demand for a 15% cut to auto insurance premiums. This was in exchange for NDP support on the June 2013 provincial budget, which avoided triggering an election.
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BROADRIDGE FINANCIAL SOLUTIONS $30.69 (New York symbol BR; TSINetwork Rating: Extra Risk) (201-714-3000; www.broadridge.com; Shares outstanding: 121.2 million; Market cap: $3.7 billion; Dividend yield: 2.7%) serves the investment industry in three main areas: investor communications, securities processing and transaction clearing. The company processes 85% of all proxy votes in the U.S.

In its fiscal 2013 fourth quarter, which ended June 30, 2013, Broadridge’s earnings jumped 61.4%, to $134.6 million from $83.4 million a year earlier. Pershare earnings rose 67.2%, to $1.12 from $0.67, on fewer shares outstanding.

If you disregard unusual items, such as writedowns and costs to integrate recent acquisitions, Broadridge’s per-share earnings would have risen 12.7%, to $1.15 from $1.02. On that basis, the company’s latest earnings beat the consensus estimate of $1.09 a share.
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THE CHURCHILL CORP. $9.11 (Toronto symbol CUQ; TSINetwork Rating: Speculative) (780-454-3667; www.churchillcorporation.com; Shares outstanding: 24.6 million; Market cap: $224.1 million; Dividend yield: 5.3%) has reported earnings of just $485,000, or $0.02 a share, in the three months ended June 30, 2013. However, that’s a big improvement from a loss of $4.3 million, or $0.18 a share, a year earlier.

Churchill’s long-term prospects are sound, and the stock has rebounded from its low of $7 earlier this year. The company’s order backlog stood at $1.81 billion at the end of June 2013, up 15.2% from $1.57 billion a year previous. Meanwhile, its dividend, which yields a high 5.3%, appears safe.

However, the stock trades at a high 31.4 times the company’s forecast 2013 earnings of $0.29 a share, and its long-term debt of $150.2 million, which is a high 67% of its market cap, adds risk.
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WAJAX CORP. $36.32 (Toronto symbol WJX; TSINetwork Rating: Extra Risk) (905-212-3300; www.wajax.ca; Shares outstanding:16.7 million; Market cap: $601.0 million; Dividend yield: 6.6%) sells and services cranes, forklifts and other heavy equipment. It also sells related parts (such as bearings, motors, hoses and fittings) and power systems (including diesel engines and transmissions).

In the three months ended June 30, 2013, Wajax’s revenue declined 6.4%, to $362.1 million from $386.6 million a year earlier. Earnings fell 26.8%, to $13.5 million, or $0.81 a share, from $18.5 million, or $1.11.

The declines mostly came from reduced activity in the Western Canadian oil and gas industry, which hurt results at Wajax’s power systems business. Lower mining equipment and construction sales more than offset strength in the materials-handling market.
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MCCOY CORP. $6.25 (Toronto symbol MCB; TSINetwork Rating: Speculative) (780-453-8451; www.mccoyglobal.com; Shares outstanding: 26.8 million; Market cap: $167.6 million; Dividend yield: 3.2%) operates through two divisions: Mobile Solutions and Energy Products and Services.

Energy Products and Services sells hydraulic equipment, including power tongs, for drilling rigs. Power tongs are large wrench-like tools that tighten and loosen the pipe in the drill hole.

Mobile Solutions builds heavy-duty trailers for U.S. and Canadian clients in the oil and gas, wind energy, infrastructure and construction industries.
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LEON’S FURNITURE LTD. $13.30 (Toronto symbol LNF; TSINetwork Rating: Average) (416-243- 7880; www.leons.ca; Shares outstanding: 70.6 million; Market cap: $930.0 million; Dividend yield: 3.0%) reports that its sales jumped to $480.6 million in the three months ended June 30, 2013, from $162.1 million a year earlier. Earnings rose 60.4%, to $14.4 million, or $0.20 a share, from $9.0 million, or $0.13.

The latest three months was the first full quarter in which the furniture chain owned former rival The Brick. Its $700-million purchase of The Brick closed on March 28, 2013.

The Brick operates 234 stores across Canada, while Leon’s has 76 outlets in every province except B.C. Leon’s and The Brick will continue to operate as separate chains.
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