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

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Wayne Deans, partner and portfolio manager of Vancouver-based Deans Knight Capital Management. Deans manages the Northwest Specialty Equity Fund which scouts small-cap stocks that are not yet recognized or are overlooked by the market. The fund has appreciated by 28.75 per cent in the past 12 months (through Jan. 31).

Deans’ Strategy: “We look for companies with market caps of less than $1 billion that are good, solid franchise businesses and aren’t properly priced and analysed in the marketplace. We also look for good management and good ownership of the stock.”

FIRST STAR



* Velan Inc. (VLN-TSE)

* Recent Price: $17.11.

* 12-Month Range: $13.25-$19.

* Snapshot: Velan manufactures industrial steel valves through 11 plants, including five in Canada. It is the world’s largest manufacturer of steel gate, globe and check valves. The valves are used in the power generation, chemical and petrochemical, oil and gas, pulp and paper, cryogenic and shipbuilding industries.

* CEO: A.K. Velan.

* Head Office: Montreal (1,475 employees).

* Vital Stats: Price/Earnings Ratio, 14.5; Revenue (last 12 mos), $300.1 million; Profit (last 12 mos), $26.3 million; Market Cap, $109.72 million; Shares Outstanding, 6.4 million; Dividend Yield, 1.8%.

* Deans’ Comment: “They have manufacturing facilities in Canada, the United States, Europe and the Far East. They make advanced-technology steel valves for power companies and gas- and oil-transmission companies. Because it’s not a well-known company, it’s attractively priced.”

* Web watch: www.velan.com

SECOND STAR



* Peak Energy Services (PES-TSE)

* Recent Price: $2.39.

* 12-Month Range: $1.85-$4.16.

* Snapshot: Peak, founded in 1996, is an oilfield services company providing drilling and production services in Western Canada.

* CEO: Christopher Haslam.

* Head Office: Calgary (325 employees).

* Vital Stats: Price/Earnings Ratio, 4.1; Revenue (last 12 mos), $57.9 million; Profit (last 12 mos), $12.8 million; Market Cap, $73.05 million; Shares Outstanding, 31.08 million.

* Deans’ Comment: “The oil and gas prices have been down and drilling activities have dropped off substantially in North America, but that gives you an opportunity to buy these smaller-capitalization service companies at pretty good valuations. Here’s a company that basically has no debt, it has a bunch of cash on the balance sheet and it’s in a position to make acquisitions. Our bet is that in the next year or two, we’re going to see a move upward in oil-and-gas prices, probably before year end. If we get that and more activity in drilling and a need for other services, companies like Peak can do very well. And I don’t think you’ve got a large amount of downside. Maybe it goes to $2 or $1.90 for a while, I’m not sure, but that’s not much downside compared to the potential upside.”

* Web watch: www.peak-energy.com

THIRD STAR



* Glendale International Corp. (GIN-TSE)

* Recent Price: $3.35.

* 12-Month Range: 0.65-$3.50.

* Snapshot: Glendale, founded in 1971, is focused on two core operations – recreation vehicles and electronics. It primarily serves the leisure, aerospace and industrial markets and its principal business is the manufacture and sales of RVs in Canada and the U.S.

* CEO: Edward Hanna.

* Head Office: Oakville, Ont. (669 employees).

* Vital Stats: Revenue (last 12 mos), $142.8 million; Loss (last 12 mos), $3.7 million; Market Cap, $42.93 million; Shares Outstanding, 12.27 million; Dividend Yield, 3.2%.

* Deans’ Comment: “They do about $100 million a year in travel trailer and RV sales. The real growth part of their business is in the sales of their products into the United States. Winnebago (RV company) has been on fire. Their order backlog is at record levels and their sales and profit records are just screaming. And Glendale, which has about 30 to 40 per cent of the Canadian market, is really getting a boost from their export sales into the U.S. and they’re being helped by the weak dollar. The whole company is being valued at about $38 million. They also have an electronics division that does reasonably well. If you put all the pieces of the business, you could probably find $5 or $6 of value in this company and it trades at $3.35.”

* Web watch: www.glendaleint.com

* Deans’ Record (Dec. 6 picks): +43% (Cinram +69%, LionOre +52%, Talisman Energy +9%). Dean continues to own these three stocks.

* Disclosure: Dean says he personally holds positions in some of the stocks he covers.