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

Canadian aerospace and transportation giant Bombardier is counting on the sales of its CSeries business jets to spur its growth. In September we reported on the new jet’s first successful test flight: click here to see the article. Here is our latest report on Bombardier’s progress from The Successful Investor. ...

Exchange traded funds (ETFs) are set up to mirror the performance of a stock-market index or subindex. They hold a more or less fixed selection of securities that represent the holdings that go into the calculation of the index or sub-index....

C.R. BARD INC. (New York symbol BCR; www.crbard.com) makes vascular products, such as stents and catheters (29% of its 2012 sales); oncology products that detect and treat various types of cancer (27%); urology products, such as drainage and incontinence devices (26%); and surgical tools and other products (18%). The company mainly makes single-use, disposable products, so customers must continually buy new ones. This continued demand for supplies helped Bard’s sales rise 20.6%, from $2.5 billion in 2008 to $3.0 billion in 2012. Earnings improved by 24.1%, from $455.4 million in 2008 to $565.3 million in 2012. The company is an aggressive buyer of its own stock. This cuts its total shares outstanding, so per-share earnings jumped 48.0%, from $4.44 to $6.57....

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

Oil prices have soared from around $18 U.S. a barrel in 1993 to around $97 U.S. today. However, new drilling technologies have made it easier to extract oil from hard-to-reach deposits, such as oil sands and shale rock formations. Rising production from these sources could hurt oil prices in the same way the shale gas boom has depressed natural gas prices....

Every Wednesday, we publish our “Investor Toolkit” series on TSI Network....

AGILENT TECHNOLOGIES INC. (New York symbol A) plans to break itself into two publicly traded companies. One of these businesses will keep the Agilent name and focus on testing equipment for medical-research labs. The second company will make testing systems for improving electronics, such as cellphones and computer equipment....

Gold has dropped over 30% from its high near $1,800 U.S. an ounce in September 2012 to $1,228 today. That’s partly because the U.S. Federal Reserve has indicated that it is likely to scale back its bond-purchasing program, known as quantitative easing. Slowing down the growth in the money supply will reduce the likelihood of a sharp increase of future inflation. Since many investors buy gold as a hedge against inflation, its price has weakened. The best way for aggressive investors to invest in gold is to buy shares of companies with rising production that will give them steady cash flow even if gold prices fall further. Here is our assessment of one of the gold stocks we cover for Stock Pickers Digest....

CAMECO CORP. $22.21 (Toronto symbol CCO; TSINetwork Rating: Extra Risk) (306-956-6200; www.cameco.com; Shares outstanding: 395.5 million; Market cap: $8.8 billion; Dividend yield 1.8%) 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.

Cameco also owns 31.6% of Ontario’s Bruce Power partnership, which operates four of the eight reactors at the Bruce plant, North America’s largest nuclear complex. As well, it owns NUKEM, a trader and broker of nuclear fuel products and services.

In the three months ended September 30, 2013, Cameco’s revenue jumped 101.7%, to $597 million from $296 million a year earlier. It sold more uranium in the latest quarter, and its selling prices also rose. Earnings per share climbed to $0.53 from $0.12.
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SHERRITT INTERNATIONAL $3.02 (Toronto symbol S; TSINetwork Rating: Speculative) (1-800-704- 6698; www.sherritt.com; Shares outstanding: 297.3 million; Market cap: $900.8 million; Dividend yield: 5.7%) is a diversified natural resource company that produces nickel, cobalt, thermal coal, oil and gas. It also manages 356 megawatts of power generation capacity in Cuba, with an additional 150 megawatts starting up soon.

The company is a major nickel producer, with operations in Cuba and Canada. As well, it has started up its 40%-owned Ambatovy mine on the island nation of Madagascar, off Africa’s east coast. Sherritt also produces oil and gas in Cuba, Spain and Pakistan and is Canada’s largest thermal coal producer.

In the three months ended September 30, 2013, Sherritt’s revenue fell 16.2%, to $286.2 million from $341.5 million a year earlier. Lower nickel and coal prices were the main reasons for the drop. Cash flow per share declined 33.3%, to $0.20 from $0.30.
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ALIMENTATION COUCHE-TARD $78.27 (Toronto symbol ATD.B: TSINetwork Rating: Extra Risk) (1-800-361-2612; www.couche-tard.com; Shares outstanding: 179.4 million; Market cap: $14.9 billion; Dividend yield: 0.5%) reports that its earnings excluding one-time items jumped 45.6% in the quarter ended October 13, 2013, to $249.0 million, or $1.32 a share. A year earlier, it earned $171.0 million, or $0.91.

The company benefited from higher fuel volumes and merchandise sales.

Couche-Tard also raised its quarterly dividend by 14.3% with the December 2013 payment, to $0.10 from $0.0875. The shares yield 0.5%. The increase followed a 16.7% hike in September 2013.
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IAMGOLD $3.55 (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) is suspending its dividend payments to conserve cash while it waits for gold prices to rebound. The move follows similar cuts by other gold miners.

Gold has dropped over 30%, from its high near $1,800 U.S. an ounce in September 2012 to $1,232 today.

IAMGold is still a buy for exposure to a rebound in gold prices....

CHEMTRADE LOGISTICS INCOME FUND $18.94 (Toronto symbol CHE.UN; TSINetwork Rating: Speculative) (416-496-5856; www.chemtradelogistics.com; Units outstanding: 41.7 million; Market cap: $777.2 million; Dividend yield: 6.3%) has confirmed that it has agreed to buy specialty chemicals maker General Chemical Corp. for $860 million.

This is a huge acquisition for Chemtrade: it will more than double its $777.2-million market cap. A major purchase like this can always backfire, but it will likely be a good fit, offering Chemtrade both growth prospects and diversification.

As well, Chemtrade estimates that General will add 17% to its cash flow per unit. That will let the fund maintain its dividend, which gives its units a high 6.3% yield.
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AMAZON.COM $395.96 (Nasdaq symbol AMZN; TSINetwork Rating: Extra Risk) (206-266-1000; www.amazon.com; Shares outstanding: 457.7 million; Market cap: $177.4 billion; No dividends paid) has expanded its AmazonFresh same-day grocery delivery service to San Francisco. The move follows the launch of the service in Los Angeles in June 2013. AmazonFresh has also been available in the company’s hometown of Seattle for some time.

AmazonFresh promises same-day or early morning delivery of over 500,000 items, including groceries and food from specialty shops. Delivery is free on all orders over $35 if the customer pays a yearly $299 subscription fee. The fee also includes the benefits of Amazon’s Prime service, such as free two-day shipping on most of the other products sold on Amazon.com.

AmazonFresh may help the company achieve its goal of same-day delivery of all its products. In addition to groceries, AmazonFresh trucks will deliver a range of toys, electronics and household goods. Eventually, these trucks could let the company ship to customers directly and do away with the services of UPS or FedEx in many markets. The trucks could also let Amazon pick up returns from customers, again cutting out the courier companies and speeding up service.
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MAJOR DRILLING $7.02 (Toronto symbol MDI; TSINetwork Rating: Speculative) (1-866- 264-3986; www.majordrilling.com; Shares outstanding: 79.2 million; Market cap: $557.3 million; Dividend yield: 2.9%) is a large contract-drilling firm that mainly serves the mining industry.

In the three months ended October 31, 2013, Major’s revenue fell 53.8%, to $92.3 million from $199.6 million a year earlier. Earnings also declined sharply, to a loss of $19.1 million, or $0.24 a share, from a profit of $22.3 million, or $0.28.

The latest earnings included $18.3 million of one-time charges, including a $12.1- million writedown of the company’s Chilean operations. Major has cut its staff by 45%, or 2,300 workers, in the past year.
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GOODYEAR TIRE & RUBBER CO. $22.59 (Nasdaq symbol GT; TSINetwork Rating: Extra Risk) (330-796-2122; www.goodyear.com; Shares outstanding: 246.9 million; Market cap: $5.6 billion; Dividend yield: 0.9%) is the world’s largest tire maker, with 52 plants in 22 countries.

In the quarter ended September 30, 2013, the weak global economy lowered Goodyear’s sales by 5.0%, to $5.0 billion from $5.3 billion a year earlier.

North American sales fell 9.1%, to $2.2 billion from $2.4 billion. As well, sales declined by 9.2% in Asia. That offset a slight increase in Europe, the Middle East and Africa, and a 1.3% rise in Latin America. Earnings per share climbed sharply, to $0.68 from $0.45. That was higher than the consensus estimate of $0.67. The higher profits came from the company’s North American operations, which sold more replacement tires (they’re more profitable than new car tires) and successfully cut its costs.
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ATLANTIC TELE-NETWORK $54.99 (Nasdaq symbol ATNI; TSINetwork Rating: Speculative) (340- 777-8000; www.atni.com; Shares outstanding: 15.8 million; Market cap: $867.3 million; Yield: 2.0%) has closed the sale of its Alltel wireless business to AT&T (symbol T on New York). Atlantic now holds cash of $594.3 million, or $37.61 a share. It has also paid off all of its debt.

Atlantic bought Alltel from Verizon Wireless for just $223 million in April 2010.

In the three months ended September 30, 2013, Atlantic’s revenue rose 8.2%, to $79.4 million from $73.2 million a year earlier. Excluding the gain on the Alltel sale, earnings fell sharply, to $1.6 million, or $0.10 a share, from $7.4 million, or $0.47.
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CHIPOTLE MEXICAN GRILL $516.89 (New York symbol CMG; TSINetwork Rating: Speculative) (303-595-4000; www.chipotle.com; Shares outstanding: 30.9 million; Market cap: $15.9 billion; No dividends paid) is launching its new catering service across the U.S. The move follows successful test marketing in certain markets, including Colorado.

Chipotle’s catering includes four different meal options to feed between six and 200 people. The meals offer its trademark highquality food, including naturally raised meat.

Customers will pick up the catering orders themselves, which means the company won’t have to hire delivery personnel.
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TIM HORTONS $62.68 (Toronto symbol THI; TSINetwork Rating: Average) (905-845-6511; www.timhortons.com; Shares outstanding: 147.1 million; Market cap: $9.1 billion; Dividend yield: 1.7%) operates 3,500 coffeeand- donut shops in Canada, 817 in the U.S. and 33 in the Persian Gulf.

In the three months ended September 30, 2013, Tim Hortons’ sales rose 2.9%, to $825.4 million from $802.0 million a year earlier. Same-store sales gained 1.7% at its Canadian outlets and 3.0% in the U.S. Earnings per share rose 6.9%, to $0.77 from $0.72.

The company continues to benefit from recently introduced menu items, such as panini sandwiches. It also raised its prices to cover higher ingredient costs. At the same time, it’s working on simplifying its menu displays and speeding up service, both in-store and at the drive-through.
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DOMINO’S PIZZA $69.96 (New York symbol DPZ; TSINetwork Rating: Average) (734-930-3030; www.dominos.com; Shares outstanding: 55.7 million; Market cap: $3.9 billion; Dividend yield: 1.1%) is the world’s largest chain of pizza stores that offer takeout and delivery. It operates 10,500 outlets in the U.S. and over 70 other countries. Franchisees run most of these stores.

The company’s earnings per share rose 18.6% in the quarter ended September 8, 2013, to $0.51 from $0.43 a year earlier. The latest figure fell just short of the consensus estimate of $0.52. Sales gained 6.9%, to $404.1 million from $378.1 million. That beat the consensus estimate of $403.0 million. Same-store sales rose 5.0% internationally and 5.4% 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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AEROPOSTALE $8.14 (New York symbol ARO; TSINetwork Rating: Extra Risk) (646- 485-5410; www.aeropostale.com; Shares outstanding: 78.5 million; Market cap: $639.7 million; No dividends paid) has adopted a shareholder rights plan. These schemes are often called poison pills, because they aim to thwart hostile takeovers by issuing many new shares to existing shareholders if someone tries to take over a company.

A number of private equity firms now hold interests in Aeropostale, and they are pushing it to put itself up for sale so one or more of them can take it private.

It’s uncertain which direction Aeropostale will take, or whether any of its private equity shareholders can force a sale. However, their involvement does highlight its underlying value and turnaround potential.
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CARFINCO FINANCIAL GROUP $12.07 (Toronto symbol CFN; TSINetwork Rating: Speculative) (1-888- 486-4356; www.carfinco.com; Shares outstanding: 26.5 million; Market cap: $321.6 million; Dividend yield: 4.0%) provides car loans to consumers who can’t meet the criteria of traditional lenders, like banks.

In September 2013, Carfinco 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. The acquisition boosted Carfinco’s loans outstanding by about 22%.

In the three months ended September 30, 2013, Carfinco’s revenue rose 17.7%, to $21.4 million from $18.2 million a year earlier. The company loaned a record $46.5 million in the latest quarter, up 9.2% from $42.6 million.
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INTACT FINANCIAL CORP. $68.29 (Toronto symbol IFC; TSINetwork Rating: Speculative) (416-341- 1464; www.intactfc.com; Shares outstanding: 131.5 million; Market cap: $9.0 billion; Dividend yield: 2.6%) 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 September 30, 2013, Intact’s revenue rose 5.7%, to $1.9 billion from $1.8 billion a year earlier. The company earned $0.39 a share, down sharply from $0.90.

However, the latest results include a one-time loss of $1.52 a share related to the Lac-Mégantic rail tragedy and major rain and hail storms in Quebec, Ontario and Alberta. One-time losses amounted to $1.02 a share a year ago.
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PASON SYSTEMS $22.28 (Toronto symbol PSI; TSINetwork Rating: Speculative) (403- 301-3400; www.pason.com; Shares outstanding: 82.1 million; Market cap: $1.8 billion; Dividend yield: 2.5%) rents equipment for monitoring and managing land-based oil and gas rigs throughout Canada, the U.S., Mexico and Argentina. It also provides communication systems to remotely collect data from drilling operations.

In the quarter ended September 30, 2013, Pason’s revenue rose 8.1%, to $104.0 million from $96.3 million a year earlier. Strong international sales and slightly higher revenue in Canada offset slower activity in the U.S. Cash flow per share jumped 51.1%, to $0.68 from $0.45.

Pason holds cash of $198.1 million, or $2.41 a share, and has no debt.
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