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Pat McKeough responds to many requests from members of his Inner Circle for specific advice about stock picks as well as questions on investment strategy and the economy. 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 an Inner Circle asked us about one of the few major pharmaceutical stocks based in Canada. Valeant Pharmaceuticals was purchased in 2010 by Biovail, then Canada’s largest pharmaceutical firm, and the new company adopted the Valeant name. Valeant is making headlines with its hostile takeover bid for U.S. drug maker Allergan, the maker of the cosmetic drug Botox. ...

DEVON ENERGY CORP. (New York symbol DVN; www.dvn.com) is one of the largest U.S.-based oil and natural gas explorers and producers. Its production mix is 57% gas and 43% 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 aimed to focus on its North American projects, which include conventional production, Texas shale oil and Alberta oil sands....

Every Wednesday, we publish our “Investor Toolkit” series on TSI Network. Whether you’re a new or experienced investor, these weekly updates are designed to give you advice on the stock market and other investment topics that will help you develop a successful approach to investing. Each Investor Toolkit update gives you a fundamental tip and shows you how you can put it into practice right away. Today’s tip: “In theory, there is nothing wrong with hedge funds, but in practice it’s much more difficult to make money shorting bad stocks than it is buying good ones.”...

Natural gas prices are now at $4.72 U.S. per thousand cubic feet, up 159% from their low of $1.82 in April 2012. The best low-risk way to profit in natural gas is to invest in companies that are steadily increasing their production and cash flows. Here are two producers we cover in our newsletter on safety-conscious investing, Canadian Wealth Advisor. Note: ARC Resources has just released its first-quarter results and these will be reviewed in an upcoming issue of Canadian Wealth Advisor....

We’ve had great success with companies spun off from larger parent firms in the past few years. That’s mainly because spinoffs let both companies focus on their already well-established businesses. As well, a parent will only hand out a subsidiary’s shares to its own investors if it’s confident the spinoff will benefit both companies. Last week, we covered a spinoff that has been successful so far, Mondelez (see the article here). This week we examine the company that spun it off, Kraft Foods. We cover both of these stocks in our advisory on U.S. investing, Wall Street Stock Forecaster....

Pat McKeough responds to many requests from members of his Inner Circle for specific advice about buying stocks as well as questions on investment strategy and the economy. 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 had a question from an Inner Circle member about one of Canada’s three big grocery chains. Already the owner of Sobeys, Empire made a major acquisition late last year when it added the Canadian stores of U.S. chain Safeway. The deal gave the company a much larger presence in Western Canada to offset its concentration of Sobeys stores in eastern Canada. Pat examines the company’s business with Safeway on board and assesses the rewards and potential hidden risks of this big acquisition. ...

ENERFLEX LTD. $17.15 (Toronto symbol EFX; TSINetwork Rating: Extra Risk) (403-387-6377; www.enerflex.com; Shares outstanding: 78.3 million; Market cap:
$1.3 billion; Dividend yield: 1.8%) rents and sells equipment and services for natural gas production, including compression and processing plants, refrigeration equipment and power generators.

The company has a strong position in three expanding markets: U.S. and Canadian shale gas; Australian natural gas from coal beds; and conventional Middle Eastern natural gas, most of which gets converted to liquefied natural gas (LNG) for shipping worldwide.

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TOROMONT INDUSTRIES LTD. $26.96 (Toronto symbol TIH; TSINetwork Rating: Extra Risk) (416-667-5511; www.toromont.com; Shares outstanding: 76.9 million; Market cap: $2.1 billion; Dividend yield: 2.2%) distributes a broad range of industrial equipment, including machinery made by Caterpillar Inc. It also makes refrigeration systems through its CIMCO division.

The company completed the spinoff of Enerflex Ltd. (see right) in July 2011. Shareholders received shares of both the new Toromont Industries and Enerflex.

In the three months ended March 31, 2014, Toromont’s revenue fell slightly, to $311.7 million from $313.1 million a year earlier.

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AEROPOSTALE $4.68 (New York symbol ARO; TSINetwork Rating: Extra Risk) (646-485-5410; www.aeropostale.com; Shares outstanding: 78.5 million; Market cap: $378.4 million; No dividends paid) is undertaking a number of major initiatives to increase its sales and profits.

These moves are in response to the slow U.S. economy, which has increased the unemployment rate among teenagers, hurting sales at teen retailers like Aeropostale.

In the three months ended February 1, 2014, Aeropostale’s sales fell 16.0%, to $670.0 million from $797.7 million a year earlier. Same-store sales declined 15%. It lost $70.3 million, or $0.90 a share, compared to loss of $671,000, or $0.01.

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ALIMENTATION COUCHE-TARD $29.82 (Toronto symbol ATD.B: TSINetwork Rating: Extra Risk) (1-800-361-2612; www.couche-tard.com; Shares outstanding: 538.2 million; Market cap: $17.1 billion; Dividend yield: 0.4%) has split its shares on a 3-for-1 basis.

When a company’s stock price goes up, it has an incentive to split the stock to make it seem cheaper to investors, who may then buy more. This can make the stock more liquid than if it refrained from splits and let its share price go to uncommonly high levels.

Alimentation Couche-Tard is a buy.

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SYMANTEC CORP. $21.41 (Nasdaq symbol SYMC; TSINetwork Rating: Average) (1-408-517-8000; www.symantec.com; Shares outstanding: 691.6 million; Market cap: $14.7 billion; Dividend yield: 2.8%) reports that its revenue fell 5.6% in its fiscal 2014 fourth quarter, which ended March 28, 2014, to $1.65 billion from $1.75 billion a year earlier.

However, earnings per share rose 6.8%, to $0.47 from $0.44, mainly due to savings from a new restructuring plan that includes job cuts and simplifying the company’s product lines.

Symantec now expects to earn $1.84 to $1.92 a share in fiscal 2015, which is higher than the consensus estimate of $1.83. The stock trades at just 11.4 times the midpoint of that range, mainly due to investor uncertainty after Symantec fired its CEO over the slow progress of its restructuring.

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SHERRITT INTERNATIONAL $4.63 (Toronto symbol S; TSINetwork Rating: Speculative) (1-800-704-6698; www.sherritt.com; Shares outstanding: 297.3 million; Market cap: $1.4 billion; Dividend yield: 0.9%) has fended off activist investor George Armoyan’s attempt to put three of his nominees on its nine-person board of directors.

Meanwhile, Armoyan has put forward a number of proposals for Sherritt to cut costs, reduce its debt and better align what he sees as the interests of shareholders, management and the board directors.

Even though he lost the board vote, Armoyan’s ongoing involvement, and his 5% interest in the company, should keep drawing investor attention to Sherritt’s strong long-term prospects. Sherritt is already putting a number of his proposals in place.

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MAJOR DRILLING $8.48 (Toronto symbol MDI; TSINetwork Rating: Speculative) (1-866-264-3986; www.majordrilling.com; Shares outstanding: 79.2 million; Market cap: $672.9 million; Dividend yield: 2.4%) is a large contract-drilling firm that mainly serves the mining industry.

In the three months ended January 31, 2014, Major’s revenue fell 41.7%, to $71.8 million from $123.3 million a year earlier. The company’s loss also widened to $12.8 million, or $0.16 a share, from $4.3 million, or $0.05. The latest earnings included a $3.3-million foreign exchange loss.

Many of Major’s large- and medium-sized mining customers, particularly gold companies, slowed their drilling activity in the latest quarter, and orders from junior miners dropped sharply.

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PASON SYSTEMS $30.37 (Toronto symbol PSI; TSINetwork Rating: Speculative) (403-301-3400; www.pason.com; Shares outstanding: 82.4 million; Market cap: $2.5 billion; Dividend yield: 2.0%) is trading near all-time highs as it continues to gain from the boom in U.S. shale oil and gas drilling.

Pason 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 March 31, 2014, the company’s revenue rose 12.7%, to $123.2 million from $109.3 million a year earlier. Higher sales in the U.S., Australia and Canada offset slower drilling activity in Mexico and a significant devaluation of the Argentine currency.

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AIMIA INC. $19.13 (Toronto symbol AIM; TSINetwork Rating: Extra Risk) (514-205-7315; www.aimia.com; Shares outstanding: 173.4 million; Market cap: $3.2 billion; Dividend yield: 3.8%) is buying 25% of Travel Club, Spain’s largest loyalty program.

Travel Club, which generated 40 million euros of revenue in 2013, has 6 million members and 30 business partners. Aimia plans to use its international experience to expand Travel Club’s member base and attract partners from new areas, including finance, fashion, insurance and the telecom industry.

The company has lots of experience with European loyalty programs. For example, it built Nectar, the U.K.’s leading coalition loyalty program, from a start-up into a multinational business in just 10 years. Today, Nectar has 19 million members, which amounts to more than 50% of U.K. households. Aimia has also built a significant presence in the Italian customer-loyalty market through Nectar Italia.

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DELPHI ENERGY $3.34 (Toronto symbol DEE; TSINetwork Rating: Speculative) (403-265-6171; www.delphienergy.ca; Shares outstanding: 154.4 million; Market cap: $529.7 million; No dividends paid) develops, produces and explores for oil and natural gas. About 72% of its output is gas. The remaining 28% is oil.

In the three months ended December 31, 2013, the company’s production rose 24.3%, to 8,988 barrels of oil equivalent a day (including gas) from 7,229 barrels a year earlier.

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TRILOGY ENERGY CORP. $28.59 (Toronto symbol TET; TSINetwork Rating: Speculative) (403-290-2900; www.trilogyenergy.com; Shares outstanding: 99.5 million; Market cap: $3.6 billion; Dividend yield: 1.5%) owns oil and gas properties in central Alberta’s Kaybob and Grande Prairie areas. About 61% of Trilogy’s production is natural gas. The remaining 39% is oil.

In the three months ended March 31, 2014, Trilogy produced 33,135 barrels of oil equivalent a day (including gas), down 8.2% from 36,119 barrels a year earlier.

Cash flow per share fell 4.5%, to $0.64 from $0.67, as higher oil and gas prices partly offset the production drop.

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WYNDHAM WORLDWIDE $72.29 (New York symbol WYN; TSINetwork Rating: Extra Risk) (973-753-6000; www.wyndhamworldwide.com; Shares outstanding: 127.3 million; Market cap: $9.3 billion; Dividend yield: 1.9%) reported revenue of $1.19 billion in the three months ended March 31, 2014. That was up 5.3% from $1.13 billion a year earlier.

Before one-time items, earnings rose 9.9%, to $0.78 a share from $0.71.

To further boost its revenue, Wyndham has invested heavily in its online booking systems. It is also expanding in fast-growing markets like Asia and Latin America. The company’s outlook is positive, but the stock now trades at a high 19.1 times Wyndham’s latest 12 months of earnings.

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RUBY TUESDAY, INC. $7.72 (New York symbol RT; TSINetwork Rating: Speculative) (865-379-5700; www.rubytuesday.com; Shares outstanding: 61.4 million; Market cap: $502.6 million; No dividends paid) owns 679 casual dining restaurants in the U.S., with franchisees operating 31 in the U.S. and 45 overseas. The company also runs 20 Lime Fresh restaurants and franchises eight (six domestic and two international).

In the three months ended March 4, 2014, Ruby Tuesday’s sales fell 3.8%, to $295.6 million from $307.4 million a year earlier. Same-restaurant sales declined 1.9%. Continued weak consumer spending was the main reason for the decline. As well, the company closed less-profitable restaurants in the quarter, and competition remains intense in the casual-dining business.

Excluding one-time items, Ruby Tuesday lost $4.5 million, or $0.07 a share, compared to a year-earlier profit of $6.3 million, or $0.10. That beat the consensus estimate of an $0.08-a-share loss.

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CHIPOTLE MEXICAN GRILL $504.32 (New York symbol CMG; TSINetwork Rating: Speculative) (303-595-4000; www.chipotle.com; Shares outstanding: 31.1 million; Market cap: $15.7 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 March 31, 2014, Chipotle’s sales rose 24.4%, to $904.2 million from $726.8 million a year earlier. The company’s restaurants attracted more customers during the quarter, which pushed up same-restaurant sales by 13.4%. Chipotle also opened 44 new outlets and now has a total of more than 1,600. In all of 2014, it aims to open 180 to 195 locations.

Earnings gained 8.5%, to $83.1 million, or $2.67 a share, from $76.6 million, or $2.47.

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>YAMANA GOLD $8.22 (Toronto symbol YRI; TSINetwork Rating: Speculative) (416-815-0220; www.yamana.com; Shares outstanding: 753.3 million; Market cap: $5.9 billion; Dividend yield: 2.0%) has succeeded in its joint $3.9-billion bid with Agnico Eagle Mines for Osisko Mining. Rival bidder Goldcorp has withdrawn its offer. Agnico Eagle and Yamana will now each own half of Osisko’s assets, including the Canadian Malartic gold mine in Quebec.

The acquisition also lets Yamana diversify beyond South America and Mexico, where it has seven mines. It should also boost the company’s per-share cash flow.

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IMPERIAL METALS $14.41 (Toronto symbol III; TSINetwork Rating: Speculative) (604-669-8959; www.imperialmetals.com; Shares outstanding: 74.9 million; Market cap: $1.1 billion; No dividends paid) is a Vancouver-based firm that produces and explores for base and precious metals.

Imperial’s producing assets include two B.C. mines: 100%-owned Mount Polley (copper and gold) and 50% of Huckleberry (copper and molybdenum). Japan’s Mitsubishi Materials holds 31.1% of Huckleberry, and Furukawa Co., Dowa Holdings and Marubeni Corp. own 6.3% each.

Imperial restarted Mount Polley in 2005 and continues to explore around the deposit to increase the mine’s reserves and lengthen its life. The company expects Mount Polley to produce until mid-2023.

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IAMGOLD $3.71 (Toronto symbol IMG; TSINetwork Rating: Speculative) (1-888-464-9999; www.iamgold.com; Shares outstanding: 376.6 million; Market cap: $1.4 billion; No dividends paid) owns 41% of the Sadiola mine and 40% of the Yatela mine, both located in Mali; 90% of its Essakane gold mine in Burkina Faso; 100% of the Doyon mine in Quebec; and 95% of the Rosebel mine in Suriname, South America.

In addition, IAMGold has a 1% royalty interest in the Diavik diamond mine in the Northwest Territories. It also owns the Niobec niobium mine in Quebec. When used as an additive, niobium makes steel stronger, more heat-resistant and easier to weld.

In the three months ended March 31, 2014, IAMGold’s revenue fell 8.5%, to $279.3 million from $305.3 million a year earlier. Cash flow per share dropped to $0.17 from $0.31. The declines were mostly due to 21.2% lower gold prices and an 8.5% production decrease.

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MITEL NETWORKS $12.03 (Toronto symbol MNW; TSINetwork Rating: Extra Risk) (613-592-2122; www.mitel.ca; Shares outstanding: 99.9 million; Market cap: $1.2 billion; No dividends paid) is now #1 in business communications products in Europe, and #3 in North American behind Avaya and Cisco, after its January 31, 2014 friendly takeover of Aastra Technologies.

Aastra, a Stock Pickers Digest recommendation, mostly makes business telephone equipment. Mitel operates in the same market as Aastra, but is focused more on software, including call centre and video-conferencing products. It is increasingly moving from selling programs that are installed at its customers’ offices to a cloud model, where it keeps its software on its own servers and sells it by subscription.

In the three months ended March 31, 2014, Mitel’s revenue rose 68.8%, to $241.5 million from $143.1 million a year ago (all figures except share price in U.S. dollars). Most of the increase came from Aastra.

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CHESAPEAKE ENERGY $29.23 (New York symbol CHK; TSINetwork Rating: Extra Risk) (405-848-8000; www.chkenergy.com; Shares outstanding: 666.2 million; Market cap: $20.0 billion; Dividend yield: 1.2%) is one of the largest U.S.-based oil and natural gas explorers and producers. Its production mix is 84% gas and 16% oil.

Chesapeake’s shares have nearly doubled since mid-2012, when activist investor Carl Icahn acquired a stake in the firm. Icahn, who has a history of pushing companies to make changes that raise shareholder value, subsequently replaced four of Chesapeake’s eight board members with his nominees. The company also pushed out controversial co-founder, CEO and chairman Aubrey K. McClendon.

As part of its restructuring, Chesapeake sold $4 billion worth of properties in 2013, which let it pay down debt and focus on areas with strong growth potential. It has also cut its costs and is now aiming for a better balance between oil and gas production.

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