(Business Edge writer Sharon Adams regularly profiles the top stock picks of some of Canada's most accomplished investment pros.)
FEATURED PRO: Ross Healy is CEO of Toronto-based Strategic Analysis Corp.
Fund Form: The Accumulus Talisman 'A' Fund has a one-year return of -6.4 per cent compared to the group average of 16.8 per cent.
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| Ross Healy |
Management Expense Ratio: 1.95 per cent.
Healy's Strategy: "Strategic Analysis (SAC) uses proprietary mathematical methodology to determine the economic or fair market value to every stock it follows, and then adds a final technical overlay to determine stock purchase timing and sales.
SAC tends to concentrate its holdings in high-quality, high-value companies, and will not hold any stocks in sectors where the risks clearly outweigh any possible rewards.
"For some time, our approach has been one of considerable caution as the quality of the U.S. balance sheet continues to deteriorate and is now accentuated by the near collapse in housing and the concomitant rise in financial risks within the U.S. (and global) system.
We believe financial stocks, especially the banks, are likely to be the centre of any resultant financial storms. We neither hold nor recommend any stocks in this sector.
We are particularly cautious towards the real estate sector, especially the REITs, where over-enthusiasm has left current investors badly exposed to downside risks.
"The area of highest potential returns (and risks) remains the commodity sectors. While the general global economic expansion appears to remain reasonably robust, it would be foolish to expect the U.S. could enter a recession while the rest of the world cheerfully continues to grow. Those investors who remain steadfastly optimistic continue to believe, or hope, that the U.S. Federal Reserve Board will cut interest rates and thereby bail the U.S. out of its current problems.
"While the Fed has raised rates since their one-per-cent lows, it never slowed down its rate of credit expansion. Credit availability is no longer the issue; it is now one of ability to continue to borrow and that is what's in question."
First Star
* Petro-Canada Inc. (TSX:PCA)
* Recent price: $55
* 52-week range: $40.25 to $61.50
* Snapshot: Petro-Canada explores for and produces natural gas, crude oil and fuel in Canada and the U.S., participates in offshore projects, is active in the Alberta oilsands and operates in North America, Europe, Africa, the Near East and Latin America.
* CEO: Ron Brenneman
* Head Office: Calgary
* Vital Stats: Price/Earnings Ratio: 10.99; Revenue (last 12 mos): $18.67 billion; Earnings: (last 12 mos) $1.74 billion; Market Cap: $27.36 billion; 3-Yr. Revenue Growth: 12.51 per cent; 3-Yr. Earnings Growth: 1.79 per cent.
* Healy's View: "With a fair market value of over $150 and a solid balance sheet, Petro-Canada is among the very cheapest of the integrated oil companies in Canada and the U.S. The availability of energy supplies in the longer run remains one of the most vexing of challenges to global growth."
* Risk Rating: Moderate. "No stock will be able to stand aside if there is a U.S. recession and accompanying bear market, but Petro-Canada has solid long-term fundamentals as well as shorter-term quality appeal."
* Web Watch: www.petro-canada.ca
Second Star
* Barrick Gold Corp. (TSX:ABX)
* Recent price: $38
* 52-week range: $39.53-29.74
* Snapshot: Barrick is the world's largest gold producer with 27 operating mines in five continents and 123 million ounces of gold reserves, six billion pounds of copper reserves and 964 million ounces of silver reserves.
* CEO: Gregory Wilkins
* Head Office: Toronto
* Vital Stats: Price/Earnings Ratio, 27.19; Revenue (last 12 mos): US$5.87 billion; Earnings: (last 12 mos) US$1.5 billion; 3-Yr Revenue Growth: 32.64 per cent; 3-Yr Earnings Growth: 118.47 per cent; Market Cap: US$33.5 billion; Shares Outstanding: 864 million; Dividend Yield 0.89
* Healy's View: "Weakness in the U.S. dollar is likely to continue to result in higher bullion prices. Barrick has a solid and conservative balance sheet, which combined with a solid fair market value potential of over $60, and a reasonably cheap valuation, should offer investors a fairly safe haven in turbulent times."
* Risk Rating: Moderate to low
* Web Watch: www.barrick.com Third Star
* Bell Aliant Regional Communications Income Fund (TSX:BA.UN)
* Recent price: $31.75
* 52-week range: $26.41-$35.15
* Snapshot: Bell Aliant provides telecommunications and informational technology services in Eastern Canada. The company also provides IT professional services throughout Canada and in the U.S. and Ireland.
* CEO: Stephen Wetmore
* Head Office: Saint John, N.B.
* Vital Stats: Price/Earnings Ratio: 8.01; Revenue (last 12 mos): $164.1 million; Earnings (last 12 mos) $163.1 million; Dividend Yield: 8.85; Market Cap: $4.187 billion.
* Healy's View: "As a rule, we do not like the income trust sector, which is being phased out as it were by government fiat. As a result, we are pessimistic as to their growth prospects and consequently, their yields. However, Bell Aliant has a high fair market value of over $50, as well as a decent balance sheet, and should be worth its current value after the income trust expiry term in 2011."
* Risk Rating: Modest
* Web Watch: www.aliant.ca (Sharon Adams can be reached at sharon@businessedge.ca)