Many in the investment game suffer from paralysis due to analysis of companies, feverishly racking brains with reams of form charts and financial reports while neglecting to do a proper shakedown of the most important player – the jockey.
This can be a costly oversight as John Roth, that embattled jockey with his trousers caught in the gate at Nortel Networks, has taught us only too well.
If you subscribe to the analogy that the market is a racetrack (a muddy one these days), a company is a horse and playing the market is a horse race, you know you don’t have much of a chance of finishing in the money without a competent jockey, or CEO.
When you consider the tragedy of the Nortel fiasco that has left many elderly folks tapped out of their life savings, it’s startling that the retiring Roth’s shortcomings as CEO went unnoticed by so many analysts and money managers. The guy burns cash like Alex Rodriguez, the $250-million shortstop, shops.
In light of Nortel’s recently announced quarterly loss of $19.4 billion, financial gurus should have the homes of CEOs staked out. They ought to know what the CEO is eating for breakfast, how many of the CEOs’ credit cards are maxed out (pssst, John Roth, turn in your American Express), what brand of beer he is drinking and whom he is sleeping with.
One portfolio manager who puts a premium on “jockeys” in picking stocks is Patrick Slater of Calgary-based QVGD.
In March, Slater touted Edmonton-based Stantec and its strong management team headed by CEO Tony Franceschini for this column. Since then, the stock is up 70 per cent.
Slater has also been known to trumpet the savvy management style of Cody Slater, CEO of Calgary-based BW Technologies, another company that has flourished through a bear market.
In taking stock in companies whose share prices have bucked the trend in recent months, there is one common denominator – rock-solid management boasting an ample supply of horse sense.
Among other astutely managed Alberta-based companies on a tear in the past year are Liquidation World (CEO Dale Gillespie), Forzani Group (CEO John Forzani) and Suncor Energy (CEO Rick George).
Of course, most of the easy money has been made on these firms.
Looking for a winning CEO of a company with solid fundamentals?
Look no farther than the winners’ circle.
The jockey is key. That’s why Nortel must stop the bleeding by announcing a successor to Roth – soon.
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PRO'S THREE STARS
Deb Abbey, an investment specialist in companies screened for social responsibility and ethics, is pounding the table over zero-emission engines (Ballard Power Systems, BLD-TSE), environmentally friendly diesel engines (Westport Innovations, WPT-TSE) and innovative drugs (QLT Inc., QLT-TSE).
Abbey, CEO of Vancouver-based Real Assets Investment Management, cautions that “until (Ballard) has significant sales revenues, it must be considered a speculative investment – albeit in an area with enormous potential markets.”
Ballard (recent price $66.50, year range, $51.27-$179.75) is the recognized leader in developing fuel cells for zero-emission engines for transportation and electricity generation.
Westport (recent price $10.75, year range $7-$19.90), which has developed a high-pressure direct-injection fuel system for diesel engines, has a 50-50 joint venture with Cummins Engine to develop low-emission, high-performance natural gas engines that reduce greenhouse gas emissions, and is conducting a field trial for a 1.5-megawatt low-emission natural-gas power generator in Anaheim, Calif.
QLT (recent price $31.98, year range $26.23-$120) is a pharmaceutical company whose lead therapy, Visudyne, is used in treating age-related macular degeneration (AMD).
“With 500,000 new cases annually and no other effective treatment options, sales could reach $500 million US by 2004,” says Abbey.
Abbey remains bullish on two of her three picks for the column in January – Calgary-based Canadian Hydro Developers (KHD-TSE) and Whole Foods Markets International (WFMI-Nasdaq).
Her other January pick was Nortel, down 79 per cent from its then price of $55.75. Nortel is the largest holding (7.63 per cent) in the Real Assets Canadian Social Equity Fund.
“The lack of forward business visibility continues to hurt Nortel’s share price, and telecom spending may not pick up until well into 2002,” says Abbey, co-author of The 50 Best Ethical Stocks For Canadians.
“Nortel has moved from No. 6 in 1995 to No. 1 in market share and is likely to be at the front of the pack when spending resumes.”
Abbey’s Record: -34% (Nortel -79%, Canadian Hydro -17%, Whole Foods -5%). * CHEERS: To John C. Anderson, the CEO who was instrumental in capitalizing and revamping the operations of Calgary-based Alternative Fuel Systems in the past two years. Anderson resigned July 16 due to health reasons.
* JEERS: To Report On Business TV for its soft coverage of Nortel’s $19.4-billion loss and the company’s refusal to offer guidance to investors. The quarterly deficit was the second largest in history and the largest in Canadian history.
HOT ALBERTA STOCK: Cell-LOC
Up 40 cents (+32.3%) on 503,164 shares (for week ending July 20).
Disgruntled shareholders were dying for something, anything, to revive the battered stock and Cell-Loc delivered in the clutch with news of a milestone.
The Calgary-based developer of network-based wireless location technologies confirmed the first-ever demonstration of location-based messaging in the U.S., delivering emergency alert messages to groups of cellular handsets in targeted locations in Austin, Tex.
Gyle Konotopetz can be reached at: email@example.com