(Business Edge columnist Gyle Konotopetz regularly profiles the top three stock picks of some of Canada’s most accomplished investment pros.)
FEATURED PRO: Peter Brieger is chairman and chief investment officer of GlobeInvest Capital Management, a Toronto-based wealth management firm focused on investment counselling. Brieger founded the firm in 1988.
Brieger's Perspective: "From early November to the end of March, we were in a period of enthusiasm focused on the chase for yields and anything related to energy, but there have been some pretty dramatic corrections in some stocks since then. We think the economy is going to slow down, but do we see a recession? No. Do we see slower growth? Yes. And that slower growth will be related to the higher price of energy and its impact on the consumer in Canada and the U.S. The good news, though, is that (slower growth) does put a cap on interest rates and the markets do respond to favourable interest rates. We've raised our cash positions (in client accounts) to about 15 per cent from zero, which has a lot to do with profit-taking from companies like Peyto Energy Trust (TSX:PEY.UN) that have tripled.
"A key question in the back of people's minds is whether Ford and/or General Motors go bust. If they did, the bad news, of course, is that it would have a tremendously negative impact on consumer spending as people are thrown out of work. The positive of that scenario is that if you look back at financial disasters, that has always led to a period of a more accommodating stance by central banks as they try to keep liquidity in the system."
First Star
* TD Bank (TSX:TD)
* Recent Price: $50.27.
* 52-Week Range: $42.54-$51.70.
* Snapshot: TD is Canada's third largest bank, providing retail banking services under the TD Canada Trust banner and online discount brokerage services through its subsidiary, TD Waterhouse. The company recently purchased a 51-per-cent stake in U.S.-based Banknorth (now TD Banknorth).
* CEO: Ed Clark.
* Head Office: Toronto.
* Vital Stats: Current Price/Earnings Ratio, 14.5; Revenue (last 12 mos), $16.3 billion; 5-Yr Revenue Growth, -3.2 per cent; Earnings (last 12 mos), $2.3 billion; Market Cap, $33.1 billion; Shares Outstanding, 658.3 million; Dividend Yield, 3.2 per cent.
* Brieger's View: "Relatively speaking, the banking sector is cheap and of the banks, I prefer TD. Ed Clark (CEO) essentially is returning it to be a retail bank, focusing on the consumer and mortgages. That's a lot less risky than going out and trying to finance Third World activities or corporate financial deals. I also like their approach in the U.S. Rather than relying on Canadians to build the U.S. business, they've cleverly taken a 51 per cent in Banknorth and let the Banknorth executives run that business."
* Brieger's Risk Rating: Low.
* Web Watch: www.td.com
Second Star
* Pason Systems (TSX:PSI)
* Recent Price: $36.80.
* 52-Week Range: $23.01-$42.60.
* Snapshot: Pason creates software for remote monitoring of well-drilling operations and leasing the monitoring equipment to companies.
* CEO: Jim Hill.
* Head Office: Calgary.
* Vital Stats: Current Price/Earnings Ratio, 23.4; Revenue (last 12 mos), $115.9 million; 5-Yr Revenue Growth, 33.5 per cent; Earnings (last 12 mos), $30.2 million; 5-Yr Earnings Growth, 42 per cent; Market Cap, $690.22 million; Shares Outstanding, 18.8 million.
* Brieger's View: "Pason has no debt, a consistently high return on equity and superb management. We believe that there is no other company in the world like them (in the oil service monitoring equipment sector). I think the stock is cheap. I also like Trican Well Services (TSX:TCW) in this area, but not as much as Pason."
* Brieger's Risk Rating: Medium.
* Web Watch: www.pason.com
Third Star
* Zed.i Solutions (TSX:ZED)
* Recent Price: $2.17.
* 52-Week Range: $0.60-$2.79.
* Snapshot: Zed.i manufactures equipment for monitoring and testing of oil and gas wells. The company's primary product is Smart-Alek, a wireless meter for remote monitoring of natural gas production. Zed.i recently acquired oilpatch software firm Roughneck Systems Inc. of Texas.
* CEO: Keith Smith.
* Head Office: Calgary.
* Vital Stats: Revenue (last 12 mos), $15.3 million; 5-Yr Revenue Growth, 142.9 per cent; Earnings (last 12 mos), $100,000; Market Cap, $204.6 million; Shares Outstanding, 94.3 million.
* Brieger's View: "For about $20,000, a company can have Smart-Alek installed at a well for monitoring on real time over the Internet. The payback on this equipment runs three to six months. There are a huge number of existing wells in Canada and the U.S. for which the Smart-Alek system can be quite useful. So far, the company hasn't done anything in the U.S.
* Brieger's View: "For about $20,000, a company can have Smart-Alek installed at a well for monitoring on real time over the Internet. The payback on this equipment runs three to six months. There are a huge number of existing wells in Canada and the U.S. for which the Smart-Alek system can be quite useful. So far, the company hasn't done anything in the U.S.
"Their main market now is the junior and intermediate exploration companies and natural gas trusts, but they are starting to make some penetration into some senior companies such as EnCana. One of the Russian gas companies, and I don't know which one, is testing their equipment in Siberia and, if that ever got the go-ahead, I think that would be the icing on the cake, putting a much more positive spin on this company."
* Brieger's Risk Rating: High.
* Web Watch: www.zedisolutions.com
Disclosure: Brieger says his immediate family and clients own shares in the featured companies. GlobeInvest does not have any financial relationships with any of the companies.
NOTE: This feature is presented for information purposes. Investors are advised to do their own research or consult a qualified investment professional before making investment decisions.
