(Business Edge columnist Gyle Konotopetz regularly profiles the top stock picks of some of Canada’s most accomplishment investment pros.)

Martin Ferguson

FEATURED PRO: Martin Ferguson is a partner and portfolio manager with Mawer Investment Management (www.mawer.com). He manages the Mawer New Canada Fund and co-manages the Mawer Canadian Equity Fund.

Fund Form: The Mawer New Canada has a five-year annualized return of 19 per cent compared to the group average of 11.3 per cent. The fund’s one-year return is 39.3 per cent (group average, 42.8 per cent). Management Expense Ratio (MER): 1.46 per cent.

Ferguson’s Perspective: “Right now, we have two opposing forces in the market. The first force is the prospect of higher interest rates and the threat of inflation, which is putting a downward pressure on the market. On the plus side, there is good earnings growth and continued economic growth.

“My view is that economic growth will continue, but probably at a slower rate than previously and slower than expected. Earnings will continue to grow, albeit the biggest part of the earnings growth is over.

So there’s probably a little froth in the market, but I’m still finding stocks at decent prices.

“Small caps have had an impressive three-year run and they’ve definitely given up some ground to the large caps in the second quarter. Probably, the outlook is for small caps to move more in step or in line with the S&P/TSX index for the rest of the year.”



FIRST STAR
* Global Railway Industries (GBI-TSX)
* Recent Price: $4.70.
* 52-Week Range: $2.10-$5.35.
* Snapshot: Global Railway manufactures, markets and installs rail gear equipment for the railway industry and also manufactures railroad instrumentation and vehicle monitoring equipment.
* CEO: Michael Kohut.
* Head Office: Calgary (193 employees).
* Vital Stats: Current Price/Earnings Ratio, 19.3; Revenue (last 12 mos), $22.8 million; Earnings (last 12 mos), $2.3 million; Market Cap, $47.57 million; Shares Outstanding, 10.12 million.
* Ferguson’s View: “This company has done what I consider a very good acquisition of a company called YSD Industries that makes doors for rail cars. My belief is that they purchased YSD for a fraction of revenues. The acquisition price was $2 million US and the company had peak (annual) revenues of $45 million US.”
* Ferguson’s Risk Rating: Medium (relative to the small-cap market).
* Web Watch: www.globalrailway.com



SECOND STAR
* Buhler Industries (BUI-TSX)
* Recent Price: $6.80.
* 52-Week Range: $5.46-$7.30.
* Snapshot: Buhler manufactures a wide array of agricultural equipment, including tractors, front-end loaders, grain augers, tillers, mowers, feed processing equipment and grain dryers.
* CEO: John Buhler.
* Head Office: Winnipeg (315 employees).
* Vital Stats: Current Price/Earnings Ratio, 12.7; Revenue (last 12 mos), $198.6 million; 5-Yr Revenue Growth, 21 per cent; Earnings (last 12 mos), $12.3 million; 5-Yr Earnings Growth, 18.5 per cent; Market Cap, $170 million; Shares Outstanding, 25 million; Dividend Yield, 1.9 per cent.
* Ferguson’s View: “This company has the only tractor- manufacturing business in Canada. This is an unexciting industry, but this company has a fairly good return on equity and on invested capital. It trades at a reasonable (price/earnings) multiple and they have good cost controls.”
* Ferguson’s Risk Rating: Medium.
* Web Watch: www.buhler.com



THIRD STAR
* Home Capital Group (HCG.B-TSX)
* Recent Price: $22.45.
* 52-Week Range:$8.85-$27.84.
* Snapshot: Home Capital is a financial-services company. Through its subsidiary Home Trust, it provides deposit and mortgage-lending services to market niches not serviced by larger financial companies.
* CEO: Gerald Soloway.
* Head Office: Toronto (199 employees).
* Vital Stats: Current Price/Earnings Ratio, 23.0; Revenue (last 12 mos), $155.1 million; 5-Yr Revenue Growth, 26.2 per cent; Earnings (last 12 mos), $33.5 million; 5-Yr Earnings Growth, 31.7 per cent; Market Cap, $755.82 million; Shares Outstanding, 33.67 million; Dividend Yield, 0.5 per cent.
* Ferguson’s View: “The company just came out with very good first-quarter results (net earnings of $10 million or 30 cents per share) and the industry looks strong. Basically, they’re in alternative first-mortgage residential lending, serving anybody who doesn’t qualify for a bank mortgage such as recent immigrants, self-employed persons or university students. They’ve also branched into other areas such as secured credit cards.”
* Ferguson’s Risk Rating: Medium.
* Web Watch: www.homecapital.com

Ferguson’s Edge Record: +37.3 per cent.

Best Pick: Russel Metals (RUS-TSX) +110.6 per cent. Worst Pick: Shawcor (SCL.A-TSX) -15.8 per cent.

Disclosure: Mawer partners are restricted from owning individual stocks held in their funds but may own shares in the funds.