(Every week, Business Edge columnist Gyle Konotopetz profiles the top three stock picks of one of Canada’s most accomplished investment pros.)
FEATURED PRO: Wayne Deans is a partner and portfolio manager of Vancouver-based Deans Knight Capital Management. Deans manages the Northwest Specialty Equity Fund which focuses on small-cap stocks that aren’t widely covered by the market. Through April 30, the fund boasted a one-year return of 30.67 per cent (group average, 10.12) and three-year return of 12.53 per cent (industry average, 8.79).
Deans’ Perspective: “A lot of our stocks have appreciated in value so much in the past year that, from a price point of view, they’re not as attractive as they were a year ago. We don’t concern ourselves with the overall stock market. We focus on the price of a business versus what we think the value of the business is. We think the big-cap world, an area we don’t cover, is still really overpriced in spite of the correction we’ve had, but there is still a lot of value in our world, which is small caps. We’re very bullish on the oil-and-gas sector and think this will be a very good place to be over the next five years or so.”
(Deans does not provide risk ratings, commenting that all equities are high-risk investments).
FIRST STAR
* Menu Foods Income Fund (MEW.UN-TSX)
* Recent Price: $11.10.
* Range: $9.98-$11.10 (based on first two days of trading).
* Snapshot: The initial public offering of the income fund opened for trading May 22 with 12.9 million trust units at $10 per unit for proceeds of $129 million. The fund is invested in Menu Foods, a manufacturer of private-label wet pet food products that had sales of $800 million last year.
* President (Menu Foods): Robert Bras.
* Head office: Mississauga, Ont.
* Deans’ Comment: “It came to the market with a yield of 113/4 per cent. I love the business. They’re the absolute dominant player in this business in North America. They’ve been in business for 25 years, they’ve never lost a client, they’re well-diversified in terms of their client base and they’re innovative in product development.”
SECOND STAR
* Maxim Power Corp. (MXG-TSX Venture)
* Recent Price: $0.40.
* 12-Month Range: 0.22-$2.30.
* Snapshot: Maxim is a power company that is developing thermal and electrical energy projects. The company was formed in 2000 from a merger of Maxim Energy Group and Jupiter Power International.
* CEO: John Bobenic.
* Head office: Calgary.
* Vital Stats: Revenue (last 12 mos), $14.9 million; Profit/Loss (last 12 mos), $4.1 million loss; Market Cap, $25.1 million; Shares Outstanding, 62.7 million.
* Deans’ Comment: “Finning International, the largest distributor of Caterpillar equipment in the world, has purchased 35 per cent of this company. Finning and Caterpillar are big players in the power business and much of their future growth is predicated on becoming bigger players in the power-production business. Maxim appears to be Finning’s chosen vehicle to get there. The company is very well run with good growth projects.”
THIRD STAR
* Aber Diamond (ABZ-TSX)
* Recent Price: $26.30.
* 12-Month Range: $13.65-$27.49.
* Snapshot: Aber’s primary focus is on developing the Diavik Diamond Project, a major diamond resource at Lac de Gras, Northwest Territories. It has a 50-per-cent interest in Diavik.
* CEO: Robert Gannicott.
* Head Office: Toronto (11 employees).
* Vital Stats: Price/Earnings Ratio, 15.8; Revenue (last 12 mos), $155 million; Profit (last 12 mos), $81 million; Market Cap, $1.4 billion; Shares Outstanding, 54.6 million.
* Deans’ Comment: “Arguably, this could become one of the richest diamond mines in the world and it will begin producing diamonds this fall. Now that we’re getting close to production, we’ll see just how much cash flow this little puppy throws off.”
* Deans’ Record (with Dec. 6 and March 7 picks): +41% (Cinram International +123%, Lion Ore Mining +87%, Talisman Energy +24%, Glendale International +18%, Peak Energy -5%, Velan -4%).
* Disclosure: Deans says he personally holds positions in Maxim Power and Aber Diamond.
