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PASON SYSTEMS (Toronto symbol PSI; www.pason.com) 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....

Focus on investment quality, and favour growth over momentum, and you’ll improve your chances of success with aggressive stock investing.

SHAWCOR LTD. (Toronto symbol SCL; www.shawcor.com) gets 90% of its revenue by making sealants and coatings that keep oil and gas pipelines from rusting. The remaining 10% comes from manufacturing industrial products, such as electrical wire and protective sheaths....

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

PENN WEST PETROLEUM (Toronto symbol PWT; www.pennwest.com) is one of North America’s largest oil and gas producers. Its output is 63% oil and 37% gas....

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 tips and stock market 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....

BOMBARDIER INC. (Toronto symbols BBD.A and BBD.B; www.bombardier.com) is the world’s third-largest commercial aircraft maker, behind Boeing and Airbus. It is also the world’s leading passenger railcar manufacturer. The company has just completed the first test flight of its new CSeries passenger jet. The test flight was a success. It had planned to begin flight tests in June, but needed extra time to upgrade the plane’s software....

GANNETT CO. INC. (New York symbol GCI; www.gannett.com) publishes 99 newspapers in the U.S. and U.K., including USA Today, its flagship paper. It also publishes 680 magazines and weekly papers and owns 23 U.S. television stations....

CISCO SYSTEMS INC. $24 (Nasdaq symbol CSCO; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 5.4 billion; Market cap: $129.6 billion; Price-to-sales ratio: 2.7; Dividend yield 2.8%; 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 server computers. Cisco mainly sells this equipment to large businesses and government agencies.

The company continues to profit as wireless carriers upgrade their networks to handle rising demand for video and other media. Cisco is also benefiting from a major restructuring plan, which included selling its low-margin consumer products businesses and focusing on more profitable operations, like software.


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ADOBE SYSTEMS INC. $52 (Nasdaq symbol ADBE; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 502.3 million; Market cap: $26.1 billion; Price-to-sales ratio: 6.1; No dividends paid since June 2005; TSINetwork Rating: Average; www.adobe.com) earned $164.4 million, or $0.32 a share, in its fiscal 2013 third quarter, which ended August 30, 2013. That’s down 43.5% from $291.2 million, or $0.58 a share, a year earlier. Revenue fell 7.9%, to $995.1 million from $1.1 billion.

The company is doing a good job of selling its Creative Cloud package of photo-editing and desktop-publishing programs as a subscription service instead of a one-time purchase. It added 331,000 Creative Cloud subscribers during the third quarter, compared to 221,000 in the second quarter. It now has 1.03 million subscribers and should reach its goal of 1.25 million by the end of fiscal 2013.

However, the stock trades at 35.9 times Adobe’s likely 2013 earnings of $1.45 a share. That’s a high p/e ratio for a company that’s shifting to a new business model. As well, its revenue and earnings could suffer if fewer users than expected sign up for the full version of Creative Cloud when their trial periods end.
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ABB LTD. ADRs $24 (New York symbol ABB; Conservative Growth Portfolio, Manufacturing & Industry sector; ADRs outstanding: 2.3 billion; Market cap: $55.2 billion; Price-to-sales ratio: 1.3; Dividend yield: 3.0%; TSINetwork Rating: Above Average; www.abb.com) makes transformers, transmission systems and circuit breakers for electrical power utilities. The Switzerland-based company also produces automation systems and robotics that industrial clients use to improve their productivity.

The uncertain economy is hurting equipment orders. However, an acquisition helped push up ABB’s revenue by 5.8% in the three months ended June 30, 2013, to $10.2 billion from $9.7 billion a year earlier. Earnings per ADR rose 13.8%, to $0.33 from $0.29 (each American Depositary Receipt represents one ABB common share).

ABB is a buy....

INTERNATIONAL BUSINESS MACHINES CORP. $189 (New York symbol IBM, Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 1.1 billion; Market cap: $207.9 billion; Price-to-sales ratio: 2.0; Dividend yield: 1.9%; TSINetwork Rating: Above Average; www.ibm.com) continues to add to its software expertise.

The company recently paid an undisclosed sum for U.K.-based Daeja Image Systems. This company’s products make it easier to view digital images in hundreds of different computer-file formats, without first installing the program that created the original image. Daeja’s products also help businesses mask sensitive information on computer images, and restrict access to certain files.

IBM is a buy.
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YUM! BRANDS INC. $72 (New York symbol YUM; Aggressive Growth Portfolio; Consumer sector; Shares outstanding: 446.2 million; Market cap: $32.1 billion; Price-to-sales ratio: 2.6; Dividend yield: 2.1%; TSINetwork Rating: Above Average; www.yum.com) has raised its quarterly dividend by 10.4%, to $0.37 a share from $0.335. The new annual rate of $1.48 yields 2.1%. This was the ninth annual increase since Yum began paying dividends in 2004.

The stock has held up well, even though sales at its Chinese KFC outlets continue to suffer in the wake of false allegations that they bought chicken with higher-than-permitted levels of antibiotics. Yum is responding with an advertising campaign to emphasize the quality of its ingredients. It feels this will spur its Chinese sales.

Yum Brands is still a buy....

SONY CORP. ADRs $21 (New York symbol SNE; Conservative Growth Portfolio, Manufacturing & Industry sector; ADRs outstanding: 1.0 billion; Market cap: $21.0 billion; Price-to-sales ratio: 0.3; Dividend yield: 1.3%; TSINetwork Rating: Average; www.sony.com) has rejected a plan from Dan Loeb, an activist investor who owns 7% of the company’s shares. Loeb wants Sony to sell 15% to 20% of its entertainment division, which makes movies, TV shows and music recordings and accounts for 16% of Sony’s revenue.

The company feels that owning media content gives it an edge over other electronics makers.

Meanwhile, Sony’s revenue fell 9.8% in its fiscal 2014 first quarter, which ended June 30, 2013, to $17.3 billion from $19.2 billion a year earlier. That’s partly because the company sold its chemical operations in September 2012. Weak camera demand also hurt its revenue.
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IDEXX LABORATORIES INC. $98 (Nasdaq symbol IDXX; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 52.5 million; Market cap: $5.1 billion; Price-to-sales ratio: 4.1; No dividends paid; TSINetwork Rating: Average; www.idexx.com) gets 85% of its sales by making equipment that veterinarians use to detect diseases in pets. The remaining 15% comes from sales of systems that detect contaminants in livestock, water and dairy products.

Idexx is benefiting as the improving economy encourages people to take their pets to the vet more often. That has pushed up sales of Idexx’s equipment, such as its Pro-Cyte Dx hematology analyzer, which processes animal blood tests in just two minutes.

Rising equipment sales have also spurred higher demand for consumables, such as test tubes and slides, that veterinarians must constantly replenish.
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CINTAS CORP. $51 (Nasdaq symbol CTAS; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 120.8 million; Market cap: $6.2 billion; Price-to-sales ratio: 1.5; Dividend yield: 1.3%; TSINetwork Rating: Average; www.cintas- .com) designs and makes uniforms, which it sells to over 900,000 businesses, mainly in North America. It also offers related services, including office cleaning and document shredding.

In the first quarter of its 2014 fiscal year, which ended August 31, 2013, Cintas’s sales rose 6.6%, to $1.12 billion from $1.05 billion a year earlier. Sales at the uniform business, which supplied 71% of Cintas’s overall revenue, rose 5.0%, while sales at its other divisions (29% of the total) gained 10.5%. Earnings increased 1.3%, to $77.8 million from $76.7 million. Cintas spent $107.0 million on share buybacks in the latest quarter. Due to fewer shares outstanding, earnings per share rose 5.0%, to $0.63 from $0.60.

In fiscal 2014, Cintas expects to earn $2.70 to $2.79 a share. It trades at a reasonable 18.6 times the midpoint of that range.
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J.P. MORGAN CHASE & CO. $52 (New York symbol JPM; Income Portfolio, Finance sector; Shares outstanding: 3.8 billion; Market cap: $197.6 billion; Price-to-sales ratio: 1.9; Dividend yield: 2.9%; TSINetwork Rating: Average; www.jpmorganchase.com) has agreed to pay a total of $920 million in fines to U.S. and U.K. securities regulators.

That’s because the bank failed to disclose the true amount of losses it incurred in 2012 on complex trades it used to hedge its portfolio of corporate bonds. These losses ultimately amounted to $6 billion. Morgan has since strengthened oversight over its trading operations.

The fine is equal to 14% of the $6.5 billion, or $1.60 a share, that Morgan earned in the second quarter of 2013. Unlike similar settlements, Morgan admitted that it broke the law. That will probably spur class-action lawsuits by shareholders who lost money in the wake of Morgan’s hedging losses. However, proving that the bank deliberately misinformed investors would be difficult.
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QUAKER CHEMICAL CORP. $72 (New York symbol KWR; Income Portfolio, Manufacturing & Industry sector; Shares outstanding: 13.2 million; Market cap: $950.4 million; Price-to-sales ratio: 1.3; Dividend yield: 1.4%; TSINetwork Rating: Average; www.quakerchem.com) makes lubricants and chemicals that keep mechanical parts from rusting.

Quaker continues to benefit from recent acquisitions that have expanded its international operations: it now gets 60% of its sales from overseas. The company has also cut its costs and raised its prices, which has improved its profitability.

In the three months ended June 30, 2013, earnings jumped 43.5%, to $1.22 a share from $0.85 a year earlier. Without several unusual items, including a tax refund and charges related to a client’s bankruptcy, per-share earnings rose 11.1%, to $1.00 from $0.90.
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BRIGGS & STRATTON CORP. $21 (New York symbol BGG; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 47.9 million; Market cap: $1.0 billion; Price-to-sales ratio: 0.5; Dividend yield: 2.3%; TSINetwork Rating: Above Average; www.briggsandstratton.com) is the world’s largest maker of lawn mower engines. The company also makes other home and garden equipment, such as portable generators, pressure washers and snow blowers.

In Briggs’s 2013 fiscal year, which ended June 30, 2013, its sales fell 9.9%, to $1.9 billion from $2.1 billion in fiscal 2012. That’s mainly because inventories remain high following last year’s droughts in North America and Australia, hurting demand for new lawn mowers and other equipment.

As well, Briggs recently stopped selling its products through mass retailers in the U.S. That’s because big chains demand lower prices from suppliers like Briggs, which hurts its profit margins.
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MTS SYSTEMS CORP. $64 (Nasdaq symbol MTSC; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 15.6 million; Market cap: $998.4 million; Price-to-sales ratio: 1.9; Dividend yield: 1.9%; TSINetwork Rating: Average; www.mts.com) makes equipment and software that manufacturers use to test the behaviour of materials, machines and structures. This helps its clients reduce errors and costs.

The uncertain economy is prompting manufacturers to hold off on buying the company’s gear. In its fiscal 2013 third quarter, which ended June 29, 2013, MTS’s revenue fell 4.7%, to $135.1 million from $141.7 million a year earlier.

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TENNANT CO. $62 (New York symbol TNC; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 18.4 million; Market cap: $1.1 billion; Price-to-sales ratio: 1.6; Dividend yield: 1.2%; TSINetwork Rating: Average; www.tennantco.com) makes industrial floor-cleaning equipment, including scrubbers, sweepers and polishers. It also manufactures cleaning gear for garages, stadiums, parking lots and city streets.

The company continues to enjoy strong demand for floor cleaners that use its ec-H2O technology, which uses electricity to make tap water act like a detergent. That eliminates the need for soaps and lowers the machine’s operating costs.

However, municipal governments, particularly in Europe, are spending less on cleaning equipment. As a result, Tennant’s sales rose just 0.4% in the three months ended June 30, 2013, to $200.2 million from $199.5 million a year earlier. If you exclude the negative impact of foreign exchange rates and contributions from acquisitions, sales would have risen 0.9%.
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CONAGRA FOODS INC. $30 (New York symbol CAG; Income Portfolio, Consumer sector; Shares outstanding: 419.5 million; Market cap: $12.6 billion; Price-to-sales ratio: 0.8; Dividend yield: 3.3%; TSINetwork Rating: Above Average; www.conagrafoods.com) reported that its sales rose 27.2% in its fiscal 2014 first quarter, which ended August 25, 2013, to $4.2 billion from $3.3 billion a year earlier.

That’s mainly due to private-label food maker Ralcorp, which it bought for $4.75 billion in January 2013. Ralcorp contributed $942.0 million to ConAgra’s sales in the latest quarter.

However, strong price competition is hurting sales of ConAgra’s branded foods. It also spent $26 million on developing new products.
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VERIZON COMMUNICATIONS INC. $47 (New York symbol VZ, Conservative Growth and Income Portfolios, Utilities sector; Shares outstanding: 2.9 billion; Market cap: $136.3 billion; Priceto- sales ratio: 1.2; Dividend yield: 4.5%; TSINetwork Rating: Average; www.verizon.com) is the second-largest wireless service provider in the U.S., with 100.1 million subscribers. Market leader AT&T has 107.9 million wireless customers.

Wireless now supplies 67% of Verizon’s revenue and 80% of its earnings. The remaining 33% of revenue and 20% of earnings comes from its 21.8 million phone and Internet customers.

Verizon’s revenue rose 10.7%, from $97.4 billion in 2008 to $107.8 billion in 2009. Revenue dipped to $106.6 billion in 2010 but then rebounded to $115.8 billion in 2012.
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Pat McKeough responds to many requests from members of his Inner Circle for specific advice on stocks to buy 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....

DOMINO’S PIZZA (New York symbol DPZ; www.dominos.com) 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....