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When you join Pat McKeough’s Inner Circle, you get to address investment questions directly to me and my research associates; AND you get to see all other members’ questions, and our answers (of course, we eliminate any personal information). Plus, you get all 4 of my investment advisories, including Wall Street Stock Forecaster, our newsletter that covers the U.S. markets. (See below for more on one of the global stock market investments we cover in Wall Street Stock Forecaster. The stock has risen over 57% in the past year — and we think it could go even higher.) So you can get a sense of how the service works, I’d like to share a recent question from an investor who is interested in global stock market investing through American Depositary Receipts (ADRs)....

KRAFT FOODS INC. $30 (New York symbol KFT; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 1.7 billion; Market cap: $51.0 billion; Price-to-sales ratio: 1.2; Dividend yield: 3.9%; WSSF Rating: Above Average) is the world’s second-largest food company, after Swiss-based Nestle. Kraft has 11 brands that each generate over $1 billion in yearly sales. Aside from Kraft (cheeses, pasta and salad dressings), these brands include Philadelphia (cream cheese), Maxwell House (coffee), Nabisco (biscuits), Oreo (cookies), Trident (gum) and Oscar Meyer (meats). Wal-Mart, the company’s biggest customer, accounted for 16% of its 2009 sales. In February 2010, Kraft bought 71.7% of U.K.-based Cadbury plc, and acquired the remainder in April 2010. Cadbury is a leading maker of confectioneries, including chocolate, candy and gum....

CENOVUS ENERGY INC. $28 (New York symbol CVE; Conservative Growth Portfolio, Resources sector; Shares outstanding: 751.7 million; Market cap: $21.0 billion; Price-to-sales ratio: 1.8; Dividend yield: 2.7%; WSSF Rating: Extra Risk) operates three oil-sands properties in Alberta and one in Saskatchewan. It ships the tar-like oil (called bitumen) from these projects to refineries in Illinois and Texas. ConocoPhillips (New York symbol COP) owns 50% of these refineries, as well as 50% of the company’s two main oil-sands projects. Cenovus also owns conventional oil and gas properties. Cenovus believes its oil and natural-gas reserves will last 14.7 years. These large reserves mean that the company does not need to spend heavily on exploration. That cuts its risk. In the three months ended March 31, 2010, Cenovus earned $353 million, or $0.47 a share (all amounts except share price and market cap in Canadian dollars). That’s down 14.7% from $414 million, or $0.55 a share, a year earlier. Cash flow per share fell 3.0%, to $0.96 from $0.99. Lower natural gas prices and a drop in earnings at its refining operations were the main reasons for the declines....

ENCANA CORP. $33 (New York symbol ECA; Conservative Growth Portfolio, Resources sector; Shares outstanding: 741.7 million; Market cap: $24.5 billion; Price-to-sales ratio: 2.3; Dividend yield: 2.4%; WSSF Rating: Average) is a leading North American natural-gas producer. The company focuses on unconventional reserves, such as shale gas deposits. (Shale gas is natural gas that is trapped in rock formations. To extract it, companies must pump water and chemicals into the rock. This fractures the rock and releases the natural gas.) The company took its present form on December 1, 2009. That’s when the old EnCana Corp. split itself into two separate companies: the new Encana and Cenovus Energy. If you assume the split occurred at the start of 2009, Encana’s earnings per share fell 22.2% in the three months ended March 31, 2010, to $0.56 from $0.72 a year earlier. These figures exclude several unusual items, such as gains on hedging contracts that Encana uses to lock in its selling price for natural gas. Cash flow per share fell 15.1%, to $1.57 from $1.85. Revenue fell 3.7%, to $3.5 billion from $3.7 billion....

APACHE CORP. $92 (New York symbol APA; Aggressive Growth Portfolio, Resources sector; Shares outstanding: 337.3 million; Market cap: $31.0 billion; Price-to-sales ratio: 3.3: Dividend yield: 0.7%; WSSF Rating: Average) produces oil and natural gas from properties in the U.S., Canada, the U.K., Australia, Egypt and Argentina. It gets roughly 50% of its production from oil, and 50% from natural gas. The company recently paid $2.7 billion in cash and stock for Mariner Energy Inc., which produces oil and natural gas in the Gulf of Mexico and at onshore properties in Texas and New Mexico. Apache also bought Devon Energy Corp.’s (New York symbol DVN) oil and gas reserves on the Gulf of Mexico Shelf for $1.05 billion. The Gulf of Mexico now accounts for 26% of Apache’s production. Offshore drilling is riskier than onshore operations, but Apache has a long history of success in this region. As well, most of Apache’s projects are in shallow water, which is less risky than deepwater projects like the BP well....

CHEVRON CORP. $72 (New York symbol CVX; Conservative Growth Portfolio, Resources sector; Shares outstanding: 2.0 billion; Market cap: $144.0 billion; Price-to-sales ratio: 0.8; Dividend yield: 4.0%; WSSF Rating: Above Average) is the second-largest integrated oil company in the U.S., after ExxonMobil. Chevron gets 95% of its earnings by producing oil and natural-gas. The remaining 5% comes from its refineries, petrochemical operations and gas stations. In response to the BP oil spill, the Obama administration has banned some drilling in the Gulf of Mexico. This forced Chevron to temporarily shut down an operational well and an exploratory well. However, these shutdowns will probably have little impact on Chevron. That’s because these wells represent a small fraction of its operations in the gulf. As well, the gulf accounts for just 9% of its overall production....

We’ve long recommended these 4 stock market research tips in our newsletters and investment services. They can help you cut risk — and increase profits — in your stock portfolio. (Our special report, “Canadian Stock Market Basics: How to Trade Stocks and Make Good Investments in Canada,” is full of safe investing strategies that you can easily put into practice right away. Click here to download your copy today.) 1. Look beyond financial indicators: When they first set out to formulate an investment strategy, many investors decide to focus their stock market research on a handful of measures. For instance, they may want to see a p/e ratio (the ratio of a stock’s price to its per-share earnings) below 15.0, say, along with an earnings growth rate of 20% or more a year, and perhaps a 2% dividend yield....

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 stock trading tips on the fundamentals of successful 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: “By the time you hear bad news, its immediate impact may be over.” If you hear bad news about a stock in which you invest, it’s easy to react impulsively and sell. But all investments come under a bad news cloud from time to time. If you always sell on bad news, you’ll pay lots of brokerage commissions, but you’ll never make money for yourself....

Gold now trades at $1,240.70 U.S. an ounce. That’s up 32.7% from $935 a year ago, but down from its all-time high of $1,256.50 U.S., where it closed on June 18, 2010. Investor fears about European sovereign debt — Greek and Spanish debt in particular — have been a major factor in gold’s recent rise. These fears are prompting more investors to buy gold and gold investments, because they believe gold will provide them with additional security. (In a just-published issue of Stock Pickers Digest, our newsletter for aggressive investing, we update our buy/sell/hold advice on a gold mining stock that has risen over 132% for us in the past year. That’s more than four times the rise in the price of gold. Read on to learn more.)...

In the first quarter of 2010, India’s economy grew by 8.6% compared to the same period last year. That’s the world’s second-fastest growth rate. Only China, with an 11.9% expansion, saw stronger growth. India’s gain was largely the result of a 16.3% increase in manufacturing, as the country continued its faster-than-expected recovery from the global economic slowdown. India’s strong economic performance is expected to continue: the World Bank recently projected that the country’s economy could grow at an annual rate of 8% to 9% over the next two years....

One of our Successful Investor Wealth Management clients recently turned 70, and he wonders what effect this should have on his portfolio management. He now has 85% of his portfolio in stocks, 15% in short-term T-bills and zero in long-term bonds and other long-term fixed-return investments.

This Successful Investor Wealth Management client has a pension that provides most of the cash flow he needs....

The Canada Revenue Agency recently advised more than 70,000 Canadians that they must pay penalties for over-contributing to their tax free savings accounts in 2009. You can make tax-free withdrawals from your TFSA at any time. You can put the money back in, as well, but the main limitation here is that you have to wait until the next calendar year to do so. That’s where many of these 70,000 investors ran afoul of the TFSA rules.

Penalties stem from confusion about rules surrounding tax free savings accounts

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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 advice on the fundamentals of successful investing. Each Investor Toolkit update gives you a fundamental tip and shows you how you can use it to increase your chances of making winning stock picks. Today’s tip: “Corporate earnings statements can help you find winning stock picks if you read between the lines.” A company’s earnings are different from an employee’s salary. Earnings are indefinite and subject to revision, even years later. Companies have to estimate many costs, and make yearly write-offs against earnings, according to arbitrary rules....

It pays to be skeptical of growth stocks that rely too heavily on acquisitions. That’s because the buyer of something rarely knows as much about it as the seller. So it follows that if a company makes enough acquisitions, it might eventually buy something that has hidden problems. At some point, those problems will come out into the open and hurt the buyer’s earnings.

Big acquisitions can burden growth stocks with high debt

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We’ve long recommended that all Canadian investors own two or more of the country’s big five bank stocks. That’s mainly because of their importance to Canada’s economy. As well, investors continue to underestimate them. As a result, they consistently trade at below-average price-to-earnings ratios. (In the latest issue of The Successful Investor, we’ve published a special analysis of all five of Canada’s big bank stocks. One of the banks, CIBC, pays an especially attractive 4.9% dividend yield — and it could be poised for further increases. Read on for full details.)

Canada’s big five bank stocks look set to resume dividend hikes

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Members of our Inner Circle service often ask for our portfolio investing advice on stocks they are thinking of buying that we don’t cover in our newsletters. These companies range from the most speculative penny mines to large multinational corporations.

Many of these stocks fall into a grey area....

Hidden value is one of the key factors we look for when we’re picking high return investments to recommend in our investment advisories, including Wall Street Stock Forecaster, our newsletter that covers the U.S. stock market. By hidden value, we mean valuable assets that are not getting the attention they deserve from investors. When a company’s assets are wholly or partially hidden, the stock trades for less than it’s really worth, so you get to buy at a bargain price. Hidden assets come in many forms. For example, companies often carry their real-estate assets on the corporate books at its purchase price, even though its value has multiplied many times over the years....

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 advice on the fundamentals of successful investing and how to make better stock market picks. Each Investor Toolkit update gives you a new fundamental tip and shows you how you can put it into practice right away. Today’s tip: “Stay alert for subtle risk factors, because they may appear long before disaster strikes.” Most investors are aware of standard investment risk factors, such as disappearing profits, cuts in dividends, police investigations, etc. But it pays to be aware of more subtle signs of coming problems:...

The federal government’s new tax on income trust distributions comes into effect just under seven months from now, on January 1, 2011. This new tax will put trusts on an equal tax footing with regular corporations. Many trusts have already converted to corporations in response, or plan to do so later in 2010 or in 2011. Others will continue to operate as trusts, although they may have to cut distributions to pay the new tax.

Tax exemption sets real estate investment trusts apart from other income trusts

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Buying and selling stock options is different from regular stock transactions. You can make money in options investing, of course, but to be successful in this complex, often risky area, it’s crucial to have a firm grasp of how options investing works (and how to avoid the pitfalls that can expose you to serious risk).

How options investing works

An option is a contract between a buyer and a seller that is based on an underlying security, usually a stock. The buyer pays the seller a fee, or premium, for certain rights to the stock. In exchange for the premium, the seller assumes certain obligations.

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In the first quarter of 2010, Canada’s economy posted an annualized growth rate of 6.1%. That’s the fastest pace in more than a decade, and much stronger than the 5.8% that the Bank of Canada and consensus forecasts called for. The sharply higher growth has added to investor concerns about inflation, and was part of the reason why the Bank of Canada raised its key interest rate by 25 basis points, to 0.50%, on June 1. That’s the first time the bank has raised the rate since 2007. However, despite the sharp rise in economic growth, Canada’s current inflation rate of 1.8% (as measured by the consumer price index) is still well within the Bank of Canada’s target range of between 1% and 3%....

GLOBAL X SILVER MINERS ETF $14.40 (New York symbol SIL; buy or sell through brokers) tracks the Solactive Global Silver Miners Index. This index includes between 20 and 40 international companies that mine, refine or explore for silver. Germany-based Structured Solutions AG developed this index. Global X Silver Miners ETF is a recent new issue: it began trading on April 19, 2010. We generally advise against buying new issues. That’s because they come to market when it’s a good time for the company and its insiders to sell. This may not be, and often isn’t, a good time for you to buy....

ISHARES S&P/TSX GLOBAL GOLD INDEX FUND $22.72 (Toronto symbol XGD; buy or sell through brokers) aims to mirror the performance of the S&P/TSX Global Gold Index. This index is made up of gold stocks from Canada and around the world. The weight of any one company is capped at 25% of the index’s market capitalization. The fund’s MER is 0.55%. iShares S&P/TSX Global Gold Index Fund began trading on March 23, 2001....

PRIMARIS RETAIL REAL ESTATE INVESTMENT TRUST $17.32 (Toronto symbol PMZ.UN; Units outstanding: 67.6 million; Market cap: $1.2 billion; SI Rating: Extra Risk; Dividend yield: 7.0%) owns large malls in medium-sized Canadian cities. It also owns major shopping centres in suburbs of large cities. In all, the trust owns 28 properties that contain 10.5 million square feet of leasable area. Primaris has a 96.7% occupancy rate. Its major tenants include Hudson’s Bay Company, Sears, Shoppers Drug Mart, Loblaw, Reitmans, Canadian Tire and Best Buy. In the three months ended March 31, 2010, Primaris’s revenue rose 13.6%, to $78.4 million from $69.0 million a year earlier. Cash flow per unit rose 2.9%, to $0.36 from $0.35. the trust’s annual distribution of $1.22 gives the units a 7.0% yield....

ALLIED PROPERTIES REAL ESTATE INVESTMENT TRUST $19.87 (Toronto symbol AP.UN; Units outstanding: 39.1 million; Market cap: $777.1 million; SI Rating: Extra Risk; Dividend yield: 6.6%) owns office buildings in Toronto, Montreal, Quebec City and Winnipeg. These mainly Class I properties contain over 5.7 million square feet of leasable area. Class I refers to 19th and early 20th-century light industrial buildings that have been restored and converted to office and retail space. These properties usually feature high ceilings, natural light, exposed beams, interior brick and hardwood floors. The trust has 53 mainly Class I properties in Toronto (these contain 52.7% of Allied’s leasable area). It also has 13 Class I buildings in Montreal (35.8%), seven in Winnipeg (6.7%), five in Quebec City (3.2%) and one in Kitchener-Waterloo (1.5%)....