How do you beat the pants off this bear market?

You start by playing in the bush leagues, beating the bushes and picking stocks that don’t even make the Street’s watch list.

You shun the broad market and buy stocks, not the stock market.

You avoid tech like a Jack Grubman strong buy recommendation.

You bet on the Rodney Dangerfields of investing – boring, unloved, plain-vanilla companies with plain-Jane names in easy-to-understand businesses.

You snub the airlines and hit your big home run with a helicopter company before the Street wakes up to it. You invest in stocks that stink (garbage trucks) and have doggy breath (dog food).

That’s how Calgary portfolio manager Martin Ferguson did it.

To mark the first anniversary of Business Edge’s Pro’s Three Stars stock-picking column, we hereby present the awards to recognize the good, the bad and the ugly.

And Ferguson, who manages the small-cap New Canada Fund at Mawer Investment Management, gets the nod for the Warren Award, named in honour of stock-picking guru Warren Buffett.

Ferguson boasts a 12.5-per-cent gain with his top picks.

If you think 12.5 per cent is chopped liver, think again. Ferguson, who loves bear markets because they provide the best opportunities, made a total of 12 picks four times at three-month intervals over the past nine months in what has been one of the most disastrous years in stock market history.

The TSX – the exchange on which all of Ferguson’s picks trade – and the Dow Jones were both down about 10 per cent and the Nasdaq plummeted 28 per cent.

Even Buffett himself doesn’t have a lot to crow about, with his Berkshire Hathaway (BRK.A-NYSE) stock even over the past 12 months, trading in the $74,000-per-share range.

Ferguson’s New Canada fund boasts one of the strongest 12-month returns in Canada, up 40 per cent through September.

Overall, the Three Stars 138 picks gained 5.9 per cent. Ferguson, a 20-year veteran of the investment industry, struck his home run with CHC Helicopter, which services the energy industry. The stock (FLY.A-TSX) flew up 72.2 per cent since he made it his top pick in the Jan. 17 issue.

Ferguson also took a home-run trot with garbage truck maker Wittke, which was up 44.1 per cent when the company was taken over. Menu Foods (MEW.UN-TSX), an income trust invested in pet food, was up 2.6 per cent.

Ferguson didn’t have any major disasters. His worst pick was Fletchers Fine Foods (FFF-TSX), down 15 per cent.

Jason Donville, another Calgary expert, is nipping at Ferguson’s heels with a 10.2-per-cent gain on the back of a monster winner – CCS Income Trust (CCR.UN-TSX), a company that cleans up oilfields.

Donville, president of Lightyear Capital, made CCS (then known as Canadian Crude Separators) his first-star pick a year ago at $6.60 before the company became an income trust, which subsequently became the hottest sector in Canada.

It recently traded at $17.25, a 188.3-per-cent gain.

Donville gets the Warren Award for Star of the Year with CCS, which even outperformed hot gold picks such as Kinross (+147.6 per cent) and Eldorado Gold (112.1 per cent).

The top Three Stars sector experts were Joe Hamilton, a Dundee Securities precious metals analyst whose gold picks, including Kinross, are up 69.5 per cent, and Gord Currie, a Canaccord Capital energy analyst who had six winners amongst his six picks for a total gain of 15.8 per cent.

Other experts whose picks bucked the bear with overall gains were gold specialist John Ing of Maison Placements (+18.7 per cent), Ross Healy of Strategic Analysis (+7.3 per cent), Wayne Deans of Deans Knight Management (+6.4 per cent), Calgary portfolio manager Fred Pynn of Bissett Asset Management (+1.4 per cent) and Mark Stevens of Vancouver-based Watermark Capital Management (+0.4 per cent).

Only one brave soul, Josef Schachter, president of Calgary-based Schachter Asset Management, caught the falling knife of Nortel Networks (NT-TSX), which recently traded at 93 cents.

Schachter initially picked Nortel in the Edge at $10.15 and then averaged down twice – at $4.25 and $1.66. The initial Nortel pick wins dubious honours as the year’s stinker – down 90.8 per cent. Otherwise, Schachter’s picks performed admirably with the remaining six up 8.8 per cent. Still, Nortel dragged his overall record down to -18.1 per cent.

Research Capital analyst Rob Millham earns dubious honours for the worst performance.

Millham’s three techs for an April column tanked 63.7 per cent, courtesy of a couple of Calgary-based bombs – Wireless Matrix (WRX-TSX), down 77.3 per cent, and CSI Wireless (CSY-TSX), down 70.3 per cent.

Millham wins an all-expenses- not-paid trip to Omaha to have lunch with the president of Berkshire Hathaway.

No doubt Warren Buffett will eat his own cooking, choosing to dine at his favourite restaurant, Berkshire holding Dairy Queen.

* SAGE WORDS: “I violated the Noah rule – predicting rain doesn’t count, building arks does.”

– Warren Buffett explaining Berkshire’s damaging exposure to the insurance industry post-Sept. 11 in his 2001 annual letter to shareholders.



HOT ALBERTA STOCK: Steeplejack Industrial Group
SID-TSX $1.10
Up 30 cents (+37.5%) on 99,100 shares (for week ending Oct.18).
Even with a robust rally of blue chips in the market, some unheralded small caps continue to steal the show. Steeplejack’s business may not be exciting – it does scaffolding and other services related to industrial installation – but the Edmonton-based company does make money, a $1.3-million profit in its latest quarter.




COLD ALBERTA STOCK: Intl. Utility Structures
IUS-TSX 45 cents
Down 15 cents (-25.0%) on 3,000 shares (for week ending Oct. 18).
IUS builds metal support structures for power lines, traffic lights and telecommunications. Now, if the Calgary-based company could only figure out a way to support its stock that has plunged 75 per cent in five months. The company showed losses of $10.1 million or 88 cents per share in its latest quarter.