(Every week, Business Edge columnist Gyle Konotopetz profiles the top three stock picks of one of Canada’s most accomplished investment pros.)

FEATURED PRO: Josef Schachter, president of Calgary-based Schachter Asset Management, has been this column’s top stock picker over the past year, boasting a 69.7-per-cent return on his six picks. His two-year Edge record is 69.6 per cent.

Schachter’s Perspective: “I think company earnings have been better than expected and that is what’s driving equity prices higher. I particularly like the upside for the Canadian market.

“We’re a commodity nation so our forest products and base metals companies will do better (than those in the U.S.). Going forward, our insurance companies will be out of the doghouse versus the lousy numbers of this year and financial institutions will do better. With the American economy improving, our exports will pick up, even with a 75-cent dollar.”

Schachter’s Market Outlook: Dow, 10,000 before year end (recently at 9600), 11,000 for 2004; TSX/S&P 8,000 before year end (recently at 7,711), 9,500 for 2004.



FIRST STAR
* Vaquero Energy (VAQ-TSX)
* Recent Price: $2.32.
* 52-Week Range: $0.54-$2.60.
* Schachter’s 12-month target: $3.60.
* Snapshot: Vaquero is an oil and gas company with a vast array of properties in west central Alberta.
* CEO: Robert Waldner.
* Head Office: Calgary (10 employees).
n Vital Stats: Current Price/Earnings Ratio, 46.8; Revenue (last 12 mo.), $11.1 million; 5-Yr Revenue Growth, -14%; Earnings (last 12 mos), $1.9 million; Market Cap, $93.31 million; Shares Outstanding, 40.22 million.
* Schachter’s View: “Going through the numbers, I’ve got the company with 133-per-cent growth in production in 2004 from 1,340 (barrels of oil equivalent) this year to 3,120 (boe) next year. That gives me a cash flow per share of 50 cents next year.
“The company is drilling and bringing on more volume. That is why its (production) is going up. It’s not multiple expansion or anything like that. It’s just massive success with the drill bit.”
* Schachter’s Risk Rating: Medium.
* Web Watch: www.vaquero.ca



SECOND STAR
* Oiltec (OLT-TSX)
* Recent Price: $1.23.
* 52-Week Range: $1.05-$2.35.
* Schachter’s 12-month target: $2.
* Snapshot: Oiltec is an oil and gas company focused on a drilling-based growth strategy and high-impact prospects in Alberta, B.C., Saskatchewan and Nova Scotia.
* CEO: Richard Schuster.
* Head Office: Calgary.
* Vital Stats: Current Price/Earnings Ratio, 13.5; Revenue (last 12 mos) $16.5 million; 5-Yr Revenue Growth, 5.2%; Earnings (last 12 mo.) $2 million; Market Cap, $38.7 million; Shares Outstanding, 31.46 million.
* Schachter’s View: “There are two plays that I particularly like here, one at Laprise in northeastern B.C. and one at Redwater in Alberta. The stock fell because they had a dry well (at Sukunka, B.C.) but to me that’s not as meaningful as the other two plays. My target price ($2) is based on those plays only.”
* Schachter’s Risk Rating: High.
* Web Watch: www.oiltec.com



THIRD STAR
* Dynegy (DYN-NYSE)
* Recent Price: $3.56 US.
* 52-Week Range: $0.60-$5.42.
* Schachter’s 12-Month Target: $8.
* Snapshot: Dynegy is an energy products and services company marketing products such as natural gas,
electricity, coal, emissions, crude oil and liquid petroleum gas. The company’s assets also include power plants.
* CEO: Bruce Williamson.
* Head Office: Houston.
* Vital Stats (U.S. dollars): Revenue (last 12 mo.), $5.3 billion; 5-Yr Revenue Growth, -11.6%; Earnings/Loss (last 12 mos), $2.6 billion Loss; Market Cap, $1.33 billion; Shares Outstanding, 374.63 million.
* Schachter’s View: “This is an energy, utility and pipeline company in the U.S. that was hurt badly by the Enron scandal like a lot of companies. This one is controlled by ChevronTexaco (CVX-NYSE), so you’ve got a deep-pocketed parent and my view is that the company will be profitable in ’04 and potentially the company has earnings power of $1-plus, which could imply an $8 to $10 (US) stock price.”
* Schachter’s Risk Rating: Medium.
* Web Watch: www.dynegy.com
* Schachter’s Edge Record: +69.6%. Best Pick: Nortel Networks (NT-TSX) +265.1%. Worst Pick: Calpine Corporation (CPN-NYSE) +2.3%.
* Disclosure: Schachter provides research on a contract basis to Toronto-based firm Maison Placements, which has participated in a financing for Vaquero Energy in the past 12 months. Schachter’s family owns shares in Oiltec.