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Pat McKeough responds to many personal questions on specific stocks and other investment topics from the members of his Inner Circle. Every week, his comments and recommendations on a selection of 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. Last week, one member asked about one of Canada’s more intriguing commodity investments—a high-yielding stock that supplies chemicals to the pulp and paper industry and shipping services to the oil and gas industry....

MCKESSON CORP. $87 (New York symbol MCK; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 246.1 million; Market cap: $21.4 billion; Price-to-sales ratio: 0.2; Dividend yield: 0.9%; TSINetwork Rating: Above Average; www.mckesson.com) is the largest wholesale drug distributor in the U.S. and Canada. It also owns 49% of Mexico’s largest drug distributor.

McKesson’s customers include 40,000 pharmacies, as well as doctor’s offices, hospitals and clinics. The company also supplies surgical tools and health and beauty products.

McKesson’s revenue rose 20.6%, from $93.0 billion in 2007 to $112.1 billion in 2011 (fiscal years end March 31). Earnings jumped 45.2%, from $881 million in 2007 to $1.3 billion in 2011. Because of fewer shares outstanding, earnings per share shot up 68.2%, from $2.89 in 2007 to $4.86 in 2011.

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MOLSON COORS BREWING CO. $43 (New York symbol TAP; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 180.6 million; Market cap: $7.8 billion; Price-to-sales ratio: 2.2; Dividend yield: 3.0%; TSINetwork Rating: Average; www.molsoncoors.com) earned $701.5 million, or $3.76 a share, in 2011. That’s up 5.2% from $666.9 million, or $3.56 a share, in 2010.

Sales rose 8.0%, to $3.5 billion from $3.3 billion; the company increased its selling prices in response to rising ingredient costs. That helped it offset a 0.7% drop in beer volume.

The company continues to realize big savings from MillerCoors, its joint venture in the U.S. with rival brewer SABMiller. Combined with savings from its own restructuring plan, Molson Coors cut its costs by $106.6 million in 2011.

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GENUINE PARTS CO. $63 (New York symbol GPC; Conservative Growth Portfolio, Manufacturing sector; Shares outstanding: 155.8 million; Market cap: $9.8 billion; Price-to-sales ratio: 0.8; Dividend yield: 3.1%; TSINetwork Rating: Average; www.genpt.com) is buying Virginia-based Quaker City Motor Parts Co. This privately held company distributes auto parts to 271 NAPA retail stores in several mid-Atlantic states. The company aims to close the deal in May 2012.

Genuine Parts didn’t say how much it is paying, but Quaker City will add $300 million to its annual revenue of $12.5 billion. Owning this distributor will also make it easier for the company to increase its sales on the east coast.

As well, the company has raised its quarterly dividend by 10.0%, to $0.495 a share from $0.45. The new annual rate of $1.98 yields 3.1%.

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SHERWIN-WILLIAMS CO. $107 (New York symbol SHW; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 103.8 million; Market cap: $11.1 billion; Price-to-sales ratio: 1.3; Dividend yield: 1.5%; TSINetwork Rating: Above Average; www.sherwin.com) is North America’s largest paint producer. It also operates 3,450 paint stores, which account for 55% of its sales.

The company earned $441.9 million in 2011, down 4.5% from $462.5 million in 2010. Earnings per share fell 1.7%, to $4.14 from $4.21, on fewer shares outstanding. If you exclude unusual items, such as costs to settle an income tax dispute, earnings per share would have risen 9.9%, to $4.87 from $4.43. Sales rose 12.7%, to $8.8 billion from $7.8 billion.

The stock has gained over 30% in the past year, and now trades at 18.7 times Sherwin’s projected 2012 earnings of $5.72 a share. That’s a high p/e ratio for a company that is so closely tied to the U.S. housing market. Rising oil prices could also squeeze Sherwin’s profit margins (the company uses oil to make its paint).

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WAL-MART STORES INC. $61 (New York symbol WMT; Conservative Growth Portfolio: Consumer sector; Shares outstanding: 3.4 billion; Market cap: $207.4 billion; Price-to-sales ratio: 0.5; Dividend yield: 2.6%; TSINetwork Rating: Above Average; www.walmart.com) is launching a new service that will let its customers upload their DVD and Blu-ray movies to its computer servers. That will let them download their movies from anywhere, and watch them on any device.

Demand for this new service could be strong, particularly as more people use tablet computers and smartphones to watch videos online. It will also help draw more customers to Wal-Mart’s VUDU website, which lets users purchase and download movies.

Wal-Mart is a buy.

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NEWMONT MINING CORP. $53 (New York symbol NEM; Aggressive Growth Portfolio, Resources sector; Shares outstanding: 495.1 million; Market cap: $26.2 billion; Price-to-sales ratio: 2.6; Dividend yield: 2.6%; TSINetwork Rating: Average; www.newmont.com) stopped construction of its 51.35%-owned Conga gold/copper mine in Peru in November 2011. The move was in response to protests by local farmers who fear the mine will contaminate water supplies.

An independent group is now reviewing the mine’s environmental impact, and should release its report in April 2012. Meanwhile, Newmont has cut 6,000 jobs at Conga. That will lower its losses until it can restart the project.

Newmont is a buy.

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THE BOEING CO. $75 (New York symbol BA; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 745.7 million; Market cap: $55.9 billion; Price-to-sales ratio: 0.8; Dividend yield: 2.3%; TSINetwork Rating: Above Average; www.boeing.com) has been forced to slow production of its new 787 Dreamliner passenger jet to fix a minor problem on the fuselages of some planes. Even with this delay, Boeing still feels it will deliver 30 to 40 of these aircraft in 2012.

Demand for Boeing’s other planes is also rising. As a result, its 2011 revenue rose 6.9%, to $68.7 billion from $64.3 billion in 2010. Earnings rose 21.1%, to $4.0 billion from $3.3 billion. Due to more shares outstanding, earnings per share rose 19.5%, to $5.33 from $4.46. Without a favourable tax gain, Boeing would have earned $4.81 a share in 2011.

The company expects to deliver 585 to 600 aircraft in 2012, up from 477 in 2011. However, proposed cuts to U.S. military spending could limit Boeing’s 2012 earnings to $4.52 a share. The stock trades at 16.6 times that figure.

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UNITED TECHNOLOGIES CORP. $83 (New York symbol UTX; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 908.9 million; Market cap: $75.4 billion; Price-to-sales ratio: 1.3; Dividend yield: 2.3%; TSINetwork Rating: Above Average; www.utc.com) aims to complete its purchase of Goodrich Corp. (New York symbol GR) later this year. Goodrich makes a wide range of aircraft parts, including landing gear, wheels and brakes. It also maintains and repairs planes. United Technologies is paying a total of $18.4 billion, including $1.9 billion of Goodrich’s debt.

Goodrich looks like a good fit with United Technologies’ other aerospace operations: Pratt & Whitney aircraft engines; Hamilton Sundstrand aircraft controls; and Sikorsky helicopters. Goodrich will add $8 billion to United Technologies’ yearly revenue.

Meanwhile, the company earned $5.0 billion in 2011, up 13.9% from $4.4 billion in 2010. Earnings per share rose 15.8%, to $5.49 from $4.74, on fewer shares outstanding. If you exclude writedowns of investments and other unusual items, earnings per share would have risen 9.9%, to $5.53 from $5.03. Revenue rose 7.1%, to $58.2 billion from $54.3 billion.

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TERADATA CORP. $68 (New York symbol TDC; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 168.3 million; Market cap: $11.4 billion; Price-to-sales ratio: 4.8; No dividends paid; TSINetwork Rating: Average; www.teradata.com) saw its revenue rise 22.0% in 2011, to $2.4 billion from $1.9 billion in 2010. Earnings per share rose 24.7%, to $2.32 from $1.86.

The company should continue to profit from strong demand for its analytics services, which help businesses gather and analyze large amounts of data, including customer purchasing patterns. However, at over 27 times earnings, the stock could drop suddenly if Teradata’s earnings fail to live up to expectations.

Teradata is a hold.

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ADOBE SYSTEMS INC. $34 (Nasdaq symbol ADBE; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 496.2 million; Market cap: $16.9 billion; Price-to-sales ratio: 3.9; No dividends paid since June 2005; TSINetwork Rating: Average; www.adobe.com) makes software that lets computer users create, edit and share documents in the popular PDF format. As well, graphic designers use Adobe’s software to create print publications and web pages. Adobe gets 30% of its sales from Europe.

In its fiscal 2012 first quarter, which ended March 2, 2012, Adobe’s earnings fell 21.1%, to $185.2 million, or $0.37 a share. A year earlier, it earned $234.6 million, or $0.46. Without unusual items, earnings per share fell 1.7%, to $0.57 from $0.58. Sales rose 1.7%, to $1.05 billion from $1.03 billion.

Customers are waiting for the new version of Adobe’s Creative Suite of publishing programs, which it will release later this year. That was the main reason behind the lower sales and earnings.

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SYMANTEC CORP. $18 (Nasdaq symbol SYMC; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 729.4 million; Market cap: $13.1 billion; Price-to-sales ratio: 2.0; No dividends paid; TSINetwork Rating: Average; www.symantec.com) sells anti-virus and email filtering software to businesses and consumers.

In its fiscal 2012 third quarter, which ended December 30, 2011, Symantec’s earnings rose 15.4%, to $314 million from $272 million a year earlier. Earnings per share gained 20.0%, to $0.42 from $0.35, on fewer shares outstanding. These figures exclude asset writedowns and costs to integrate acquisitions.

Sales rose 6.9%, to $1.7 billion from $1.6 billion. Symantec gets 52% of its sales from overseas. If you disregard the positive impact of exchange rates, sales would have risen 6% in the quarter.

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NORDSTROM INC. $55 (New York symbol JWN; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 207.9 million; Market cap: $11.4 billion; Price-to-sales ratio: 1.1; Dividend yield: 2.0%; TSINetwork Rating: Average; www.nordstrom.com) is now offering free shipping for all purchases made at over 100 of its 225 upscale department stores; it already offers free shipping on online purchases. Free shipping adds to its costs, but Nordstrom feels this move will give it an edge over its main rivals.

Meanwhile, Nordstrom’s sales rose 16.2% in February 2012, to $704 million from $606 million in February 2011. Same-store sales rose 10.2%.

Nordstrom is a buy.

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MOODY’S CORP. $42 (New York symbol MCO; Conservative Growth Portfolio, Finance sector; Shares outstanding: 222.9 million; Market cap: $9.4 billion; Price-to-sales ratio: 4.1; Dividend yield: 1.5%; TSINetwork Rating: Average; www.moodys.com) continues to see rising demand for its credit ratings as the global economy improves. In 2011, the company’s earnings rose 12.1%, to $564.4 million from $503.3 million in 2010. Moody’s spent $333.8 million on share buybacks during the year. Because of fewer shares outstanding, earnings per share rose 15.5%, to $2.46 from $2.13. Revenue rose 12.2%, to $2.3 billion from $2.0 billion.

For 2012, Moody’s expects to earn $2.68 a share. The stock trades at 15.7 times that estimate. The company also raised its quarterly dividend by 14.3%, to $0.16 a share from $0.14. The new annual rate of $0.64 yields 1.5%.

Moody’s is a buy.

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WESTERN UNION CO. $18 (New York symbol WU; Aggressive Growth Portfolio, Finance sector; Shares outstanding: 620.3 million; Market cap: $11.2 billion; Price-to-sales ratio: 2.0; Dividend yield: 2.2%; TSINetwork Rating: Above Average; www.westernunion.com) provides money-transfer and foreign-exchange services in over 200 countries.

In November 2011, the company paid $967.8 million for the business-payments division of U.K.-based Travelex Holdings Ltd. This subsidiary processes payments for 35,000 businesses in 14 countries.

These operations helped push up Western Union’s revenue by 5.8% in 2011, to $5.5 billion from $5.2 billion in 2010. If you exclude integration costs and other unusual items, earnings rose 4.9%, to $995.8 million from $949.2 million. Earnings per share rose 10.6%, to $1.57 from $1.42, on fewer shares outstanding.

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T. ROWE PRICE GROUP INC. $64 (Nasdaq symbol TROW; Aggressive Growth Portfolio, Finance sector; Shares outstanding: 253.5 million; Market cap: $16.2 billion; Price-to-sales ratio: 6.0; Dividend yield: 2.1%; TSINetwork Rating: Average; www.troweprice.com) sells mutual funds and wealth management services.

On December 31, 2011, the company had $489.5 billion of assets under management, up from $482.0 billion a year earlier.

That’s mainly because T. Rowe Price sold $11.0 billion of mutual funds (net of redemptions) during the year. It continues to see strong demand for its “Retirement Funds,” which invest in its other funds and automatically adjust the buyer’s portfolio balance according to their age. Retirement Funds accounted for 68% of the company’s mutual fund sales in 2011.

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EBAY INC. $38 (Nasdaq symbol EBAY; Aggressive Growth Portfolio, Finance sector; Shares outstanding: 1.3 billion; Market cap: $49.4 billion; Price-to-sales ratio: 2.7; No dividends paid; TSINetwork Rating: Above Average; www.ebay.com) operates the world’s largest auction website, with over 99 million users. It also processes online financial transactions, mostly through its PayPal subsidiary.

In 2011, eBay’s revenue rose 27.3%, to $11.7 billion from $9.2 billion in 2010. Strong international growth pushed up PayPal’s revenue by 28.4%. eBay’s auction websites saw a 16.1% revenue gain.

PayPal continues to grow rapidly; the division now accounts for 38% of eBay’s total revenue.

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APPLE INC. $603 (Nasdaq symbol AAPL; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 932.4 million; Market cap: $562.2 billion; Price-to-sales ratio: 4.4; Dividend yield: 1.8%; TSINetwork Rating: Average; www.apple.com) is up about 50% since the start of 2012, mainly due to strong sales of its iPhone smartphones and iPad tablet computers.

The company now plans to reward its shareholders by returning some of its $97.6 billion, or $104.70 a share, in cash and investments (as of the end of 2011.)

In the fourth quarter of its current fiscal year, which ends September 30, 2012, Apple will start paying quarterly dividends of $2.65 a share; the annual rate of $10.60 yields 1.8%. Apple also plans to buy back $10 billion of its shares over the next three years.

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CINTAS CORP. $39 (Nasdaq symbol CTAS; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 129.7 million; Market cap: $5.1 billion; Price-to-sales ratio: 1.3; Dividend yield: 1.4%; TSINetwork Rating: Average; www.cintas.com) provides a wide range of products and services to over 900,000 businesses, mainly in North America.

The company gets 71% of its revenue from renting uniforms, which it makes and cleans at its own factories, and renting a wide variety of related products, such as mats, towels, mops and cleaning supplies. It gets a further 11% of its revenue by selling uniforms.

In the past few years, the company has branched out into new areas. For example, it now gets 10% of its revenue by providing first aid kits, fire extinguishers, sprinklers and emergency-exit lights to businesses. In addition, Cintas helps its clients comply with local safety regulations.

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This is another in a series of video interviews in which Pat McKeough will give his advice on a variety of topics. Some will deal with his overall investment philosophy, others on specific investment strategies and still others will be comments on events that are affecting the markets and the economy. Today he has stock trading advice relating to the dilemma investors may face if there appear to be questionable dealings among insiders of a stock they own. Specifically, he refers to Canadian engineering giant SNC-Lavalin and a mysterious payment that many suspect to be tied to its involvement in Libya. Below is the transcription of Pat’s comments. ...

Your best chance of getting rich is by putting your money in your own business. But this can be risky investment advice. Many new businesses wind up failing.

TELUS CORP. (Toronto symbols T and T.A; www.telus.com) gets most of its growth from wireless services. Its 7.3 million subscribers across Canada now supply 52% of its earnings. The remaining 48% of Telus’s earnings comes from its wireline division, which mainly consists of 3.6 million traditional phone customers in B.C., Alberta and eastern Quebec. This division also includes 1.3 million Internet users and 509,000 TV customers....

Pat McKeough responds to many personal questions on investing in stocks and other investment topics from the members of his Inner Circle. Every week, his comments and recommendations on a selection of 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. This past week, one member sought long-term advice on one of North America’s best-known big-box discount chains, which faces stiff competition in a race for retail revenue that has spread well beyond North America. ...

COMPUTER MODELLING GROUP $16.07 (Toronto symbol CMG; TSINetwork Rating: Speculative) (403-531-1300; www.cmgroup.com; Shares outstanding: 37.1 million; Market cap: $596.2 million; Dividend yield: 3.2%) sells consulting services and software that help oil and gas producers use advanced recovery techniques to get more out of their existing wells. The company has customers in over 50 countries.

In the three months ended December 31, 2011, Computer Modelling’s revenue rose 31.8%, to $15.9 million from $12.1 million a year earlier. Software licence sales rose 39.1%, while consulting and professional services revenue declined 12.1%, mainly because Computer Modelling consulted on some large one-time projects in the year-earlier quarter.

Earnings jumped 62.5%, to $5.8 million, or $0.16 a share, from $3.6 million, or $0.10 a share.

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PASON SYSTEMS $13.55 (Toronto symbol PSI; TSINetwork Rating: Speculative) (403-301-3400; www.pason.com; Shares outstanding: 81.9 million; Market cap: $1.1 billion; Dividend yield: 3.0%) rents equipment for monitoring and managing oil and gas rigs. It also sells communication systems, 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 December 31, 2011, Pason’s revenue rose 32.8%, to $97.6 million from $73.5 million a year earlier. Many of the company’s clients increased their drilling, especially for shale gas and oil.

Earnings jumped 201.2%, to $31.7 million, or $0.39 a share, from $10.5 million, or $0.13 a share. The increased drilling pushed up Pason’s earnings. It also let the company raise its prices.

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