(Business Edge columnist Gyle Konotopetz regularly profiles the top stock picks of some of Canada's most accomplished investment pros.)
FEATURED PRO: Martin Ferguson is a partner and portfolio manager with Calgary-based Mawer Investment Management (www.mawer.com). He is the lead manager of the Mawer New Canada small-cap fund.
Fund Form: The Mawer New Canada fund has a five-year annualized return of 22.8 per cent compared to the group average return of 16.7 per cent.
Management Expense Ratio: 1.5 per cent.
 |
| Martin Ferguson |
Ferguson's Perspective: "Going forward, we expect the economy to slow but we do not expect a recession. The valuations of stocks aren't too far out of whack with that view but we'll probably see what I call less than historical rates of return in the market. I'm still positive, but small caps over the last five to 10 years have been up 10 to 12 per cent per annum on average. That's probably a little aggressive for what we see, given the fact that the economy is slowing.
"Our style fits (the scenario of an economic slowdown) quite well. We tend to use a fairly conservative approach. We're looking for companies that do well regardless of economic conditions - stalwarts perhaps, but companies that have a complete business model and produce cashflows currently, as well as in the future. The overall market tends to have stocks that are more highly leveraged to the economy and those tend to move up and down a lot more than the stocks in our portfolio."
First Star
* Transat A.T.
(TSX:TRZ.B)
* Recent Price: $23.69.
* 52-Week Range: $15.90-$27.01.
* Snapshot: Transat is a holiday travel company with tour operators in Canada, France and the U.K. and also provides airline and travel agent services. In August, Transat expanded its operations by acquiring British tour operator The Airline Seat Co., operator of the Canadian Affair brand.
* CEO: Jean-Marc Eustache.
* Head Office: Montreal.
* Vital Stats: Current Price/Earnings Ratio, 13.4; Revenue (last 12 mos), $2.4 billion; 5-Yr Revenue Growth, 4.2 per cent; Earnings (last 12 mos), $55.5 million; 5-Yr Earnings Growth, 8.7 per cent; Market Cap, $801.4 million; Shares Outstanding, 33.8 million.
* Ferguson's View: "We think Transat has made a great acquisition (of The Airline Seat Co.). Transat has very strong fundamentals, the (strengthening) Canadian dollar is working in its favour and we think next year, after it integrates this acquisition, there will be some positive growth."
* Ferguson's Risk Rating: Moderate.
* Web Watch: www.transat.com Second Star
* Equitable Group Inc. (TSX:ETC)
* Recent Price: $29.
* 52-Week Range: $23.52-$30.50.
* Snapshot: Equitable provides first-mortgage financing through its subsidiary, Equitable Trust, and is primarily focused on the Greater Toronto Area market.
* CEO: Geoffrey Bledin.
* Head Office: Toronto.
* Vital Stats: Current Price/Earnings Ratio, 15.2; Revenue (last 12 mos), $112.2 million; 5-Yr Revenue Growth, 112.2 per cent; Earnings (last 12 mos), $23 million; 5-Yr Earnings Growth, 30.2 per cent; Market Cap, $345.21 million; Shares Outstanding, 11.9 million.
* Ferguson's View: "This company is a mortgage lender for residential, commercial and construction projects, but it is focused on non-prime (customers) that the banks turn down. This is a very well-run and very conservatively managed company. They've got a great track record and since the hiccup (earnings disappointment) that Home Capital (another mortgage lender) experienced in the first quarter, this stock has been ignored by investors. We see it as a strong company with a good valuation. One of the great things about this company is that they manage risk very well. However, there is always the risk of a housing market collapse. Equitable Group is focused on the Greater Toronto Area so, specifically, if there were a housing market collapse in Toronto it would be bad news for them. I'm not expecting that to happen, certainly not one of any great magnitude."
* Ferguson's Risk Rating: Moderate.
* Web Watch: www.equitablegroup.ca
Third Star
* Constellation Software Inc. (TSX:CSU)
* Recent Price: $20.
* 52-Week Range: $17.25-$23.90.
* Snapshot: Constellation acquires, manages and builds software businesses, servicing customers in numerous industries from offices in Canada, U.S., Barbados, U.K., Denmark and Australia.
* CEO: Mark Leonard.
* Head Office: Toronto.
* Vital Stats: Revenue (last 12 mos), $217.5 million; Earnings/Loss (last 12 mos), $10.1 million Loss; Market Cap, $423.8 million; Shares Outstanding, 21.2 million.
* Ferguson's View: "This is a software company focused on the vertical market software, which is software specifically tailored to an individual industry. Constellation Software is a very diversified company with seven operating groups serving 22 different vertical markets and it also has over 10,000 clients. It's a very well-run company that focuses on return on invested capital.
"This is a company that does not believe in (stock) options. There are no options. It believes in aligning its management and employees with shareholders so there's insider ownership and, as well, the (executive) bonus is based on return on invested capital."
* Ferguson's Risk Rating: Moderate.
* Web Watch: www.csisoftware.com
Ferguson's Edge Record (last 12 mos): +6.7 per cent. Best Pick: Sico (TSX:SIC) +41.8 per cent (based on takeover price). Worst Pick: EGI Financial Holdings (TSX:EFH) -22.6 per cent.
Disclosure: The featured stocks are held in the Mawer New Canada fund. Mawer partners are restricted from owning individual shares in the funds they manage, but may own shares in the funds.
(This feature is provided for information purposes. Investors are advised to do their own research or consult a qualified investment professional before making investment decisions.)
