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
Thinking about dividend capture? Learn why ex dividend date trading often disappoints Canadians after spreads, taxes, FX and volatility, plus safer options.
MICROSOFT CORP. $32 (Nasdaq symbol MSFT; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 8.3 billion; Market cap: $265.6 billion; Priceto- sales ratio: 3.6; Dividend yield: 2.9%; TSINetwork Rating: Above Average; www.microsoft.com) continues to benefit from strong demand for its business software, particularly programs that run server computers and data centres.

However, falling demand for desktops and laptops is hurting sales of the company’s new Windows 8 operating system. Sales of mobile devices powered by Windows 8 have also suffered in the face of strong competition from other smartphones and tablets.

In its 2013 fiscal year, which ended June 30, 2013, Microsoft’s revenue rose 5.6%, to $77.8 billion from $73.7 billion in 2012. However, earnings fell 5.4%, to $27.0 billion, or $2.62 a share, from $28.5 billion, or $2.78 a share. These figures exclude several unusual items, such as a $900-million writedown of unsold Surface RT tablet computers. To spur sales, Microsoft has cut the price of these tablets by 30%.

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APPLE INC. $441 (Nasdaq symbol AAPL; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 940.1 million; Market cap: $414.6 billion; Price-to-sales ratio: 2.4; Dividend yield: 2.8%; TSINetwork Rating: Average; www.apple.com) gets 69% of its sales from its hugely popular mobile devices: the iPhone smartphone and the iPad tablet computer. The remaining 31% comes from its Mac computers and iPod music players.

In its 2013 third quarter, which ended June 29, 2013, Apple’s sales rose 0.9%, to $35.3 billion from $35.0 billion a year earlier. Thanks to strong demand for older, cheaper models, the company sold 31.2 million iPhones, up 20.0% from a year earlier. However, iPad sales fell 14.2%, to 14.6 million units. Apple also sold 6.6% fewer Mac computers, and 32.3% fewer iPods as many iPod users upgrade to iPhones.

Even with the higher sales, earnings in the quarter fell 21.8%, to $6.9 billion from $8.8 billion. Earnings per share fell 19.8%, to $7.47 from $9.32, on fewer shares outstanding.

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CISCO SYSTEMS INC. $26 (Nasdaq symbol CSCO; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 5.3 billion; Market cap: $137.8 billion; Priceto- sales ratio: 2.9; Dividend yield 2.6%; TSINetwork Rating: Average; www.cisco.com) is a leading maker of hardware and software that links and manages computer networks. The company’s hardware includes routers, local area network (LAN) and asynchronous transfer mode (ATM) switches, and dial-up access servers.

Like IBM and Texas Instruments (see box on page 73), Cisco is a good example of a tech company that has matured into a cyclical growth stalwart. Even though its sales growth has slowed in the past few years, Cisco still dominates its field. That’s partly because it has formed long-term relationships with government agencies and other large customers.

The company also continues to benefit from its 2011 restructuring plan, which included selling its money-losing consumer-products businesses and cutting jobs.

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PROCTER & GAMBLE CO. $80 (New York symbol PG; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 2.7 billion; Market cap: $216.0 billion; Price-to-sales ratio: 2.8; Dividend yield: 3.0%; TSINetwork Rating: Above Average; www.pg.com) began operating in 1837 and is now one of the world’s largest makers of household and personal-care products. It has 25 different brands that each generate over $1 billion in annual sales.

The company has five main divisions: Fabric Care and Home Care products, such as Tide laundry detergent and Duracell batteries (32% of 2012 sales, 26% of earnings); Beauty goods like Olay cosmetics (24%, 22%); Baby Care and Family Care products, including Pampers diapers (19%, 19%); Health Care items such as Crest toothpaste (15%, 17%); and Grooming products, including Gillette razors (10%, 16%). Wal-Mart accounts for 14% of the company’s sales.

The recession cut Procter’s sales by 5.5%, from $83.5 billion in 2008 to $78.9 billion in 2009 (fiscal years end June 30). Sales recovered to $82.6 billion in 2011, and rose to $83.7 billion in 2012.
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Two ETFs that will profit from an Asian rebound
Emerging markets have been down lately but the long-term outlook remains sound. A good way to profit from that outlook with less risk is through low-fee exchange traded funds (ETFs). Here are two we follow regularly.

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Coach aims for big growth in international sales and more men’s products
Anthia Cumming
Pat McKeough responds to many requests for specific advice on stocks to buy and other questions on investment strategy and the economy from the members of his Inner Circle. Every week, his comments and recommendations on the most intriguing questions of the past week go out to all Inner Circle members. And each week, we offer you one of the highlights from these Q&A sessions. While we reserve our buy-hold-sell advice for Inner Circle members, these excerpts provide a great deal of information and analysis on stocks we’ve covered for members of Pat’s Inner Circle. This week, we received a question from an Inner Circle member about one of the world’s leading makers of luxury accessories. In order to generate further growth Coach is relying on increasing overseas sales and on an expansion into more men’s products. Pat examines the company’s prospects in the face of stiffer competition and rising costs. ...
Visa looks to overseas growth to keep profits and share price rising
VISA INC. (New York symbol V; www.visa.com) operates the world’s largest electronic payments network. The company processes credit, debit, prepaid and commercial payments under the Visa, Visa Electron, Interlink and PLUS brands. Visa gets most of its revenue from fees it charges card issuers and merchants for using its network. These fees are based on payment volume, transactions processed and other factors. The responsibility for evaluating customer creditworthiness and collecting payments lies with the banks that issue the cards, not with Visa....
Investor Toolkit: Why so many investors underperform the market so often
Every Wednesday, we publish our “Investor Toolkit” series on TSI Network. Whether you’re a beginning or experienced investor, these weekly updates are designed to give you specific investment advice. Each Investor Toolkit update gives you a fundamental piece of investment advice, and shows you how you can put it into practice right away. Today’s tip: “The best way to outperform the market is to invest consistently—and to avoid going in and out of the market erratically trying to buy low and sell high.”...
Telus braces for challenge from Verizon
TELUS (Toronto symbol T; www.telus.com) has 7.7 million wireless subscribers across Canada. It gets much more of its revenue from wireless than major competitor BCE—54% compared to BCE’s 32%. Telus gets the remaining 46% of its revenue from its traditional phone business, which has 3.4 million customers in B.C., Alberta and eastern Quebec. Telus also has 1.3 million Internet subscribers and 712,000 Telus TV subscribers....