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AMERICAN EXPRESS CO. (New York symbol AXP, www.americanexpress.com) gets most of its revenue from the fees it charges merchants who accept its charge cards (which have no pre-set spending limit and must be paid in full each month) and credit cards (which can carry a balance)....

In the 18th century, pioneering economist Adam Smith said that the public tends to overvalue when he called “speculative ventures”. That still makes excellent investing advice today....

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 specific investment advice. Each Investor Toolkit update gives you a fundamental piece of investing strategy, and shows you how you can put it into practice right away....

CAMECO CORP. (Toronto symbol CCO; www.cameco.com) is the world’s largest uranium producer. It supplies 14% of global mine production and has large, high-grade reserves, low-cost operations, significant market share and many mines....

Free Report: Canadian Penny Stocks: What You Need to Know about Handling the Risks and Reaping the Rewards

Pat McKeough responds to many requests from members of his Inner Circle for specific stock advice 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....

CAE INC. (Toronto symbol CAE; www.cae.com) is the world’s leading maker of flight simulators for commercial airlines, with 70% of the market. It also makes simulators for military clients. The company began training pilots for its customers in 2001 and now has over 100 flight schools in 30 countries....

CANADIAN NATIONAL RAILWAY CO. (Toronto symbol CNR; www.cn.ca) operates Canada’s largest railway. Its 32,350-kilometre network stretches across the country and through the U.S. Midwest to the Gulf of Mexico....

Growth by acquisition can be risky, as newly purchased companies may develop unforeseen problems, especially in an unsettled economy. Today we look at how growth by acquisition is working for two pipeline companies we cover regularly in our advisory on conservative investing, Canadian Wealth Advisor. ...

GENUINE PARTS CO. $82 (www.genpt.com) is buying Edmontonbased Commercial Solutions Inc. This firm distributes industrial products, such as bearings and transmission parts, across Canada. Genuine Parts didn’t say how much it would pay when it completes this purchase in the first quarter of 2014, but the deal will add $100 million to its annual revenue of $13.7 billion....

GENERAL ELECTRIC CO. $27 (www.ge.com) has raised its quarterly dividend by 15.8%, to $0.22 a share from $0.19. The new annual rate of $0.88 yields 3.3%. Buy.

BOEING CO. $135 (www.boeing.com) is seeing stronger demand for its passenger planes as airlines upgrade their aging fleets with more efficient models. As a result, it has increased its dividend by 50.5%. The new annual rate of $2.92 a share yields 2.2%. Boeing also plans to buy back $10 billion worth of its shares, or about 10% of the total outstanding, over the next three years....

AMERICAN EXPRESS CO. $86 (New York symbol AXP, Conservative Growth Portfolio, Finance sector; Shares outstanding: 1.1 billion; Market cap: $94.6 billion; Price-to-sales ratio: 2.8; Dividend yield: 1.1%; TSINetwork Rating: Average; www. americanexpress.com) gets most of its revenue from the fees it charges merchants who accept its charge cards (which have no pre-set spending limit and must be paid in full each month) and credit cards (which can carry a balance).

Unlike other credit card companies, such as Visa and MasterCard, Amex is also a lender. That lets it collect interest payments on its cardholders’outstanding balances.


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ADOBE SYSTEMS INC. $59 (Nasdaq symbol ADBE; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 501.8 million; Market cap: $29.6 billion; Price-to-sales ratio: 7.0; No dividends paid since June 2005; TSINetwork Rating: Average; www.adobe.com) earned $164.6 million, or $0.32 a share, in its fiscal 2013 fourth quarter, which ended November 29, 2013. That’s down 46.5% from $307.9 million, or $0.61 a share, a year earlier. Revenue fell 9.7%, to $1.04 billion from $1.15 billion.

Last year, the company starting selling its Creative Cloud package of photo-editing and desktop-publishing programs as a subscription instead of a one-time purchase. Adobe added 402,000 Creative Cloud subscribers during the quarter, to bring its total to 1.44 million. That beat its goal of 1.25 million users.

The stock is up 57% in the past year and now trades at 53.6 times the $1.10 a share that Adobe will likely earn in fiscal 2014. That’s a high p/e ratio for a company that mainly serves customers in cyclical businesses like publishing. However, its switch to sale-by-subscription could generate a lot of long-term growth.
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STATE STREET CORP. $71 (New York symbol STT; Aggressive Growth Portfolio, Finance sector; Shares outstanding: 439.0 million; Market cap: $31.2 billion; Price-to-sales ratio: 3.3; Dividend yield: 1.5%; TSINetwork Rating: Extra Risk; www. statestreet.com) sells accounting and administrative services to large institutional investors, such as mutual funds and pension plans.

The company’s fee income rises and falls with the value of the mutual funds and other securities it manages. Thanks to improving stock markets and new contracts, State Street’s earnings rose 13.5% in the three months ended September 30, 2013, to $537 million from $473 million a year earlier.

The company spent $560 million buying back its shares in the quarter. As a result, earnings per share gained 20.2%, to $1.19 from $0.99. Revenue increased 3.4%, to $2.5 billion from $2.4 billion.
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PEPSICO INC. $81 (New York symbol PEP; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 1.5 billion; Market cap: $121.5 billion; Price-to-sales ratio: 1.9; Dividend yield: 2.8%; TSINetwork Rating: Above Average; www.pepsico.com) has won a contract to supply soft drinks to 975 Buffalo Wild Wings restaurants in the U.S. and Canada.

The two companies will also take advantage of PepsiCo’s alliances with the National Football League and Major League Baseball to develop sports-related marketing campaigns.

In addition, Buffalo Wild Wings will develop new menu items that use PepsiCo’s snack foods, including Frito-Lay and Doritos chips. PepsiCo didn’t say how much the deal is worth or how long it will last.
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GANNETT CO. INC. $27 (New York symbol GCI; Conservative Growth Portfolio, Consumer sector: Shares outstanding: 227.9 million; Market cap: $6.2 billion; Price-to-sales ratio: 1.2; Dividend yield: 3.0%; TSINetwork Rating: Average; www.gannett.com) plans to include USAToday, its flagship newspaper, in 35 of its local daily papers’ print and electronic editions. This is a low-cost way to expose more readers to USAToday- and attract more advertisers.

As well, the company expects its TV stations’ advertising revenue to fall 20% in the fourth quarter of 2013, as the year-earlier quarter benefited from heavy political advertising ahead of the presidential election. However, if you disregard political ads, Gannett’s broadcast revenue should rise 17%.

Gannett is a buy.
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WINDSTREAM HOLDINGS INC. $8.19 (Nasdaq symbol WIN; Income Portfolio, Utilities sector; Shares outstanding: 596.1 million; Market cap: $4.9 billion; Price-to-sales ratio: 0.8; Dividend yield: 12.2%; TSINetwork Rating: Average; www.windstream.com) gets 70% of its revenue from two fast-growing fields: high-speed Internet and business telecommunications.

The company also has 3.3 million regular phone users, mainly in rural parts of the U.S., and demand for this service is falling. In the three months ended September 30, 2013, Windstream’s revenue declined 2.7%, to $1.50 billion from $1.55 billion a year earlier. Earnings per share fell 37.5%, to $0.05 from $0.08. If you exclude costs to integrate an acquisition and a loss on the early retirement of debt, earnings were flat.

Windstream is a hold....

VERIZON COMMUNICATIONS INC. $48 (New York symbol VZ, Conservative Growth and Income Portfolios, Utilities sector; Shares outstanding: 2.9 billion; Market cap: $139.2 billion; Price-to-sales ratio: 1.1; Dividend yield: 4.4%; TSINetwork Rating: Average; www. verizon.com) is buying the 45% of Verizon Wireless that it doesn’t already own from U.K.-based Vodafone Group (Nasdaq symbol VOD). Verizon Wireless is a joint venture that sells wireless services to 101.2 million U.S. subscribers.

Verizon will pay $130 billion for Vodafone’s stake, including $58.9 billion in cash. It will also issue $60.2 billion of new common shares to Vodafone shareholders, which will give them 30% of the combined firm. Notes and other compensation will cover the remaining $11.0 billion. Verizon expects to close the deal in the first quarter of 2014.

Meanwhile, strong demand for wireless and highspeed Internet increased the company’s earnings by 20.3% in the third quarter of 2013, to $0.77 a share from $0.64 a year earlier. Revenue rose 4.4%, to $30.3 billion from $29.0 billion.
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AT&T INC. $34 (New York symbol T; Conservative Growth and Income Portfolios, Utilities sector; Shares outstanding: 5.3 billion; Market cap: $180.2 billion; Price-to-sales ratio: 1.5; Dividend yield: 5.3%; TSINetwork Rating: Average; www.att.com) is the largest wireless service provider in the U.S., with 109.5 million subscribers.

AT&T continues to profit as its customers upgrade to smartphones, which generate higher revenue than cellphones. About 75% of AT&T’s users on long-term contracts now use smartphones, and it feels this could rise to 90% in the next few years.

The company is also profiting from rising demand for its U-verse package, which uses high-speed fibre optic technology to deliver phone, Internet and TV services. It now has over 10 million U-verse subscribers, up 3.1% from 9.7 million on September 30, 2013.
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ARCHER DANIELS MIDLAND CO. $43 (New York symbol ADM; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 659.0 million; Market cap: $28.3 billion; Priceto- sales ratio: 0.3; Dividend yield: 2.2%; TSINetwork Rating: Above Average; www.adm.com) has been forced to drop its offer to buy the 80.2% of GrainCorp, a leading Australian grain-storage and shipping company, that it does not already own.

That’s because Australian foreign investment regulators have blocked a full takeover. However, they could let Archer Daniels increase its GrainCorp stake to 24.9%. That would still let it profit as Australia ships more crops to Asia.

Meanwhile, the company is using the $3.0 billion it would have spent on this purchase to raise its quarterly dividend by 26.3%, to $0.24 a share from $0.19. The new annual rate of $0.96 yields 2.2%. It also plans to buy back 3% of its shares in 2014.
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CENOVUS ENERGY INC. $28 (New York symbol CVE; Conservative Growth Portfolio, Resources sector; Shares outstanding: 755.8 million; Market cap: $21.2 billion; Priceto- sales ratio: 1.2; Dividend yield: 3.2%; TSINetwork Rating: Average; www.cenovus.com) gets 60% of its production from its three heavy oil projects in Alberta and one in Saskatchewan. Conventional oil and natural gas wells supply the remaining 40%.

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

The company expects lower cash flow in 2014, partly due to rising operating costs at its oil sands projects. It’s now working on making these operations more efficient.
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APACHE CORP. $86 (New York symbol APA; Aggressive Growth Portfolio, Resources sector; Shares outstanding: 399.2 million; Market cap: $34.3 billion; Price-to-sales ratio: 2.0; Dividend yield: 0.9%; TSINetwork Rating: Average; www. apachecorp.com) continues to sell some its less important oil and gas properties, including its offshore fields in the Gulf of Mexico and a third of its Egyptian operations. In all, the company expects to raise $4 billion from these sales in 2013.

Apache will use half of the proceeds to pay down its $10.9 billion of long-term debt (as of September 30, 2013), which is equal to 32% of its market cap.

The company is also using the cash to increase production from its North American onshore properties. This approach is much cheaper than offshore drilling and has less political risk. Apache now gets 56% of its production from its onshore fields, up from 32% in 2009.
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CHEVRON CORP. $122 (New York symbol CVX; Conservative Growth Portfolio, Resources sector; Shares outstanding: 1.9 billion; Market cap: $231.8 billion; Price-to-sales ratio: 1.0; Dividend yield: 3.3%; TSINetwork Rating: Above Average; www. chevron.com) is the second-largest integrated oil company in the U.S., after ExxonMobil.

The company plans to spend $39.8 billion on exploration and upgrading its operations in 2014. That’s down 5.2% from the $42 billion it will likely spend in 2013. Chevron will devote 90% of the 2014 capital budget to extracting oil and gas. The remaining 10% will go toward improving its refineries and gas stations.

Among Chevron’s bigger projects is its 47.3%-owned Gorgon natural gas development off Australia’s west coast. Gorgon, which includes a plant that liquefies gas for export, is 75% complete and should start up in 2015. Its reserves will last 40 years.
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3M COMPANY $136 (New York symbol MMM; Conservative Growth and Income Portfolios, Manufacturing & Industry sector; Shares outstanding: 665.2 million; Market cap: $90.5 billion; Price-to-sales ratio: 3.0; Dividend yield: 2.5%; TSINetwork Rating: Above Average; www.3m.com) began operating as the Minnesota Mining & Manufacturing Company in 1902.

3M started off making sandpaper and abrasives for industrial customers. It later developed a variety of other consumer and manufacturing-related goods, such as pressure- sensitive masking and packaging tape, recording tape, reflective highway markings and medical bandages. The company now makes more than 55,000 different items.

The company owns a range of well-known brands, including Post-it notes, Scotch tape, Scotch-Brite household cleaning products, Scotchguard protection and Thinsulate insulation.
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