(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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Patrick Slater is vice-president and portfolio manager of Calgary-based QVGD Investors Inc. (www.qvgd.com). He manages the Clarington Canadian Small Cap Fund, which has recorded a gain of 45.2 per cent in the past year (through Feb. 28).

Slater’s Outlook: “Short-term, we think some caution is warranted as the recent rally has been strong, especially in small caps. Intermediate to long term, we are quite bullish as the historical evidence is compelling on small-cap outperformance, post-recession or slowdown. Furthermore, small-cap valuation, growth and risk characteristics still look far more favourable in their risk/reward balance than they do for large caps.”

FIRST STAR



* Coreco Inc (CRC-TSE)

* Recent Price: $6.90.

* 12-Month Range: $4.10-$8.50.

* Slater’s 12-Month Target: $9.

* Snapshot: Coreco designs,

manufactures and markets machine vision systems for industrial, medical and multi-media markets.

* CEO: Keith Reuben.

* Head Office: Montreal (150 employees).

* Vital Stats: Revenue (last 12 mos), $44.4 million; Profit/Loss (last 12 mos), $4.5 million loss; Market Cap, $49.9 million; Shares Outstanding, 7.2 million.

* Slater’s Comment: “Coreco spends heavily on R&D (research and development) and traditionally has been successful in converting R&D into design wins and ultimately new product sales with a lag of six to 15 months. The acquisition of Imaging Technology Inc. in June 2000, and associated integration costs have suppressed earnings, but the company is now twice its pre-acquisition size and better positioned in its key markets than ever to reignite earnings.”

* Slater’s Risk Rating: Low to medium. “It has some exposure to the semiconductor industry which is dampening performance.”

* Web watch: www.coreco.com

SECOND STAR



* Danier Leather (DL-TSE)

* Recent Price: $15.50.

* 12-Month Range: $8.75-$15.85.

* Slater’s 12-Month Target: $20 (Danier was also one of Slater’s top picks here Dec. 20 when it was trading at $11.70).

* Snapshot: Danier is an integrated designer, manufacturer and retailer of high quality fashion leather and suede outerwear and accessories.

* CEO: Jeffrey Wortsman.

* Head Office: Toronto (1,050 employees).

* Vital Stats: Price/Earnings Ratio, 8.6; Revenue (last 12 mos), $181.6 million; Profit (last 12 mos), $12.4 million; Market Cap, $106 million; Shares Outstanding, 6.8 million.

* Slater’s Comment: “Danier is one of the best-managed retailers in Canada with profit margins twice the retail average. Its quality control, sophisticated and highly targeted marketing and growing accessories business, where profit margins are still higher, make Danier attractive even after its 30- to 40-per-cent share-price appreciation in the past three months. The stock should enjoy a multiple expansion as Bay Street starts to pay attention.”

* Slater’s Risk Rating: Low to medium. “Some additional risk if debt-laden consumers start to pull in their horns.”

* Web watch: www.danier.com

THIRD STAR

* AltaGas Services (ALA-TSE)



* Recent Price: $7.25.

* 12-Month Range: $4.60-$8.

* Slater’s 12-Month Target: $10.

* Snapshot: AltaGas gathers, processes, transports and delivers natural gas and natural-gas liquids, as well as providing marketing and transportation management services. It owns extensive midstream infrastructure in the natural-gas industry and is about to venture into electricity marketing as a new line of business.

* CEO: David Cornhill.

* Head Office: Calgary (190 employees).

* Vital Stats: Price/Earnings Ratio, 14.8; Revenue (last 12 mos), $579.4 million; Profit (last 12 mos), $17.8 million; Market Cap, $214 million; Shares Outstanding, 29.5 million; Dividend Yield, 2.9%.

* Slater’s Comment: “AltaGas has struggled a little over the past couple of years to build critical mass in agglomerating infrastructure and in delivering an attractive return on capital. But it has learned to negotiate better and has adjusted its cost structure as it builds critical mass in its core business and now can boost earnings per share by over 40 per cent in its new electrical power business. A modest P/E ratio of 14 on prospective earnings per share of 70 cents delivers a $10 target.”

* Slater’s Risk Rating: Low. “The dividend pays the investor modestly while we wait for AltaGas to deliver earnings growth. The balance sheet is stretched, however, and more equity will be needed in this capital-intensive business.”

* Web watch: www.altagas.ca

* Slater’s Record (with Dec. 20 picks): +21% (Home Capital Group +40%, Danier +32%, MFP Financial -10%).

* Disclosure: Slater does not personally own shares in the companies featured.