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

FEATURED PRO: Wayne Deans is a 25-year investment veteran and partner with Deans Knight Capital Management, which manages the Northwest Specialty Equity Fund for Northwest Mutual Funds.

Fund Form: The Northwest Specialty Equity Fund has returned 23.8 per cent in the past 12 months compared to the group average of -8.2 per cent.

The three-year annual compound return is 18 per cent compared to the group average of -5.2 per cent. The fund has a 33-per-cent weighting in oil and gas stocks.

Deans’ Perspective: “The outcome of this war is important to us but from an investment standpoint let’s just throw that out. I don’t think the war is a particularly good valuation technique for stocks, so let’s just disregard that and get on with more important matters to determine whether or not we’ll buy or sell something. I don’t think the war is going to have much to do with the next 10 years of earnings for one of the companies I own.

“We’re still sticking to the same strategy, tending to avoid all of those companies and industries that had access to too much cheap capital in the late 1990s because they continue to suffer from over- capacity problems and lack of pricing power.

“We continue to look for opportunities in those areas where there was not a lot of capital provided at any price in the late 1990s, such as in the exploration and production for gold, base metals, natural gas and crude oil, and simple businesses that are easy to understand that didn’t need capital or were denied capital.”



FIRST STAR
* Peyto Exploration (PEY-TSX)
* Recent Price: $12.24.
* 52-Week Range: $5.05-$14.35.
* Snapshot: All is well with Peyto, an oil and gas company heavily weighted in natural gas with its wells in the Deep Basin area of Alberta.
* CEO: Don Gray.
* Head Office: Calgary.
* Vital Stats: Current Price/Earnings Ratio, 18.5; Revenue (last 12 mos), $56.8 million; Profit (last 12 mos), $23.2 million; Market Cap, $531.85 million; Shares Outstanding, 43.45 million.
* Deans’ View: “This is a company that is extremely well run with terrific exploration success and a strong exposure to natural gas, which is a commodity that we think will trade at a much higher price on average over the next five years.”
* Web watch: www.peyto.com



SECOND STAR
* First Quantum Minerals (FM-TSX)
* Recent Price: $5.00.
* 52-Week Range: $2.76-$5.30.
* Snapshot: First Quantum may be on the verge of a big leap in production with its mining operations centred on the copper and cobalt sectors in Africa.
* CEO: Philip Pascal.
* Head Office: Vancouver.
* Vital Stats: Revenue (last 12 mos), $119.2 million; Profit/Loss (last 12 mos), $33.7 million loss; Market Cap, $217.78 million; Shares Outstanding, 43.56 million.
* Deans’ View: “They have just completed and released a final feasibility study on a new mine in Zambia and they have that financed, so it doesn’t look like they need to dilute us with any more equity (financing). The kicker here is that it is not only a large project, but the cash costs of copper production are 35 to 40 cents per pound, which should make this project enormously profitable.
“There are hurdles and obstacles to getting this mine to production over the next couple of years, but the people who operate First Quantum have a very good track record, they’re very solid people and we believe they’ll get this mine up and running. With cash costs in that low range, it puts them amongst the lowest-cost producers in the world, which will make it a cash-flow machine going forward.”
* Web watch: www.first-quantum.com



THIRD STAR
* Cinram International (CRW-TSX)
* Recent Price: $9.70.
* 52-Week Range: $5.31-$11.25.
* Snapshot: Cinram has been playing a sweet tune as one of the world’s largest producers of CDs, DVDs, CD-ROMs, VHS videocassettes and audio-
cassettes for the music, movie and software industries.
* CEO: Isidore Philisophe.
* Head Office: Scarborough, Ont. (3,000 employees).
* Vital Stats: Current Price/Earnings Ratio, 9.8; Revenue (last 12 mos), $851.9 million; 5-Yr Revenue Growth, 10.5%; Profit (last 12 mos), $45.8 million; Market Cap, $531.92 million; Shares Outstanding, 54.84 million; Dividend Yield, 1.237%.
* Deans’ View: “This company is the largest
manufacturer of DVDs in Canada and the stock
generates an enormous amount of free cash flow. There’s no debt, there’s net cash on the balance sheet and they continue to churn out cash flow because of the growth and demand for DVDs, which shows no signs of letting up in the near term.”
* Web watch: www.cinram.com
* Deans’ Record (15 picks): +22.1%. Best Pick: LionOre (LIM-TSX) +155.0%. Worst Pick: Maxim Power
(MXG-TSX Venture) -47.5%.
* Disclosure: Deans says he may hold positions in the
featured stocks.