Barron’s financial magazine recently jazzed up its front page with a cute caricature of a raging bull – no doubt a cut-out from an old bull-market issue – and a bold headline that screamed: TIME TO BUY STOCKS!

Of course, the prudent investor, playing on the contrarian theory that bullishness is a sure sign of bearishness, responded by selling on any strength in the stock market.

Don’t be fooled by the recent bounce in the markets. These are extraordinarily volatile economic times and there could still be some tough slogging ahead, particularly with the uncertainty over the scale and implications of a war against terrorism.



Bearish signs abound:

* The Motley Fool (www.fool.com), a popular online investment service, posts a story about itself that speaks volumes of the sorry state of the economy.

In explaining a decision to lay off 75 employees, the Fools, Tom and David Gardner, write: “Our plans have proven too optimistic to withstand the current business environment, and so now we are hunkering down and battening the hatches, running a business that is ready for even very bad continued weather.”

* Patrick Slater, the most successful bear-market stock picker on the Edge’s team of pros, takes his strategy of defensive investing to a new extreme.

“People won’t stop blowing their noses and wiping their bottoms,” declares Slater, vice-president of Calgary-based QVGD Investors Inc., of one of this week’s top picks, tissue paper manufacturer Cascades Inc.

* A seemingly endless litany of grim financials and layoff notices cross the news wires.

* Several safe-harbour consumer companies that sell stuff for your mouth — food, booze, drugs, cigarettes — trade against the grain of a bear market, many flirting with new year highs or breaking new ground (ie. Loblaws, Molson, Pfizer, Rothman’s).

* Most of the stalwarts on the Toronto Stock Exchange that previously ignored the bear have their pretty charts ruined by downward spikes (ie. BCE, Forzani’s, Stantec).

* Tech analyst Robert Millham of Research Capital slashes his target price on Calgary-based Wi-Lan to $2 from $8 and downgrades the stock to accumulate from a buy. The report surfaces a day after a grim financial report resulting in the stock being hammered to 1.08, down 36 per cent.

* Traditionally volatile gold stocks show some staying power in holding on to major gains (ie. Barrick Gold, Meridian Gold and Glamis Gold).

* An American friend offers sobering thoughts via e-mail: “If you bought $1,000 worth of Nortel stock a year ago, it would be worth $80 today. If you bought $1,000 worth of Budweiser (the beer, not the stock), it would be worth $100 (on the nickel-per-bottle return on the empties).”

Sobering thoughts indeed.

PRO'S THREE STARS

Patrick Slater maintains a cautious stance.

“Staying defensive throughout the past year has worked well for us,” says the portfolio manager with QVGD Investors Inc.

“The economic clouds and the downward bias in earnings revisions have not cleared enough yet to become aggressive. But we do know from history that as we enter an economic slowdown or recession, that is typically when small-cap equities out-perform.

“Having cash for the bargain buying ahead is a key part of our current strategy. And in this environment you have to own gold exposure.”

Slater, whose March picks for the column are up 21 per cent in a stock-picking landscape akin to tip-toeing through land mines, chooses three smaller companies that don’t show up on most radar screens – Cascades Inc. (CAS-TSE), Parkland Industries (PKI-TSE) and Coreco Inc. (CRC-TSE).

Slater’s 12-month target for Cascades is $10. Its recent price is $7.90 with a year range of $6.05-$9.

Slater notes that the manufacturer of packaging, fine paper and tissue paper trades at a price-earnings ratio of less than six and offers a “safety cushion” in the form of a 1.6-per-cent yield.

Parkland (recent price $10.49, year range $6.50-$10.69) is a Red Deer-based wholesaler and retailer of gasoline. Its market is primarily in rural Western Canada with little or no competition.

The company, which pays a yield of about 1.9 per cent, is also expanding its convenience-store business.

“This company has a solid, experienced and prudent management team and could ultimately be a takeover target,” says Slater, noting that his 12-month target of $12.50 does not factor in a takeover scenario.

Coreco (recent price $5.50, year range $4.10-$7.80) builds machine vision systems for industrial quality control and medical imaging.

“This company has some exposure to a slowdown in the electronics business but, by quarter two of 2002, it should be back on a positive growth trend,” says Slater, whose 12-month target is $10.

* SAGE ADVICE: John Bogle, the investing legend who founded the Vanguard Group, urges investors to “buy the haystack, not the needle in the haystack.” In other words, diversify, diversify, diversify.

HOT ALBERTA STOCK: MAINSTREET EQUITY CORP.

MEQ-TSE $5.40

Up $2.40 (80%) on 33,000 shares (for week ending Sept. 28).

Mainstreet, an upstart Calgary-based real-estate company, broke new ground by topping the charts of hot stocks on the Toronto Stock Exchange. Mainstreet has shown rapid growth in the acquisition and management of multi-family residential properties in Calgary and Edmonton. Its latest quarterly results (through June 30) showed revenue of $2.8 million, up 75 per cent from the same period the year before.

COLD ALBERTA STOCK: SCAFFOLDING CONNECTION CORP.

SFD-TSE .045

Down 3.5 cents (-43.7%) on 137,300 shares (for week ending Sept. 28).

Less than three years ago, Scaffolding's share price hovered around the $3 mark, but the Fort Saskatchewan company has fallen on hard times. Revenue decreased 68 per cent in the first half of this year from the year before. The company, which provides scaffolding services and bleacher seating for special events, recently announced it had an agreement to extend its credit facility to Feb. 28, 2002, providing it meets certain conditions.