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

FEATURED PRO
Ian Nakamoto of Toronto-based Bonham & Co. (www.bonham.com) is portfolio manager of the Bonham Canadian Equity Fund, which focuses on medium and large corporations.

Nakamoto’s Outlook: “Some people think the economy is off to the races because the first-quarter GDP (gross domestic product) in the U.S. might be three to four per cent growth, and I think it will be about one-and-a-half per cent (growth) for the balance of the year. That’s not too impressive, because coming out of an economic downturn, we usually come out with six to seven per cent growth. So, I look for special situations in this environment like Fairmont Hotels (a previous pick for the column). I also look for strong companies in rotten industries with attractive valuations. I should also point out that I still like my other previous picks (from Nov. 29), Domtar and Magna International, and we also still own them in the fund.”



FIRST STAR
* Fairmont Hotels and Resorts (FHR-TSE)
* Recent Price: $38.90.
* 12-Month Range: $20.49-$41.
* Snapshot: Fairmont is a hotel-management company operating in Canada, the U.S., Mexico, Bermuda and Barbados.
* CEO: William Fatt.
* Head Office: Toronto.
* Vital Stats: Current Price/Earnings Ratio, 3.2; Revenue (last 12 mos), $579.76 million; Profit (last 12 mos), $235.32 million; Market Cap, $3.02 billion; Shares Outstanding, 78.6 million; Dividend Yield, 0.2%.
* Nakamoto’s Comment: “Fairmont probably has the best balance sheet in the hotel industry in Canada and the U.S. High-profile U.S. analysts have picked up coverage on Fairmont and the company is doing a lot of marketing in the U.S. (to promote the stock). I also think that, over time, they will likely buy other hotels in the U.S. at attractive prices and people will see what an astute buyer of assets they are. Right now, they don’t have many hotels in the U.S., which makes the stock even more appealing. Travellers are generally choosing Canada over the U.S.”
* Nakamoto’s Risk Rating: Low.
* Web watch: www.fairmont.com



SECOND STAR
* Sobeys Inc. (SBY-TSE)
* Recent Price: $33.42.
* 12-Month Range: $20-$34.90.
* Snapshot: Sobeys operates a range of supermarket banners, such as Sobeys, IGA and Price Choppers, as well as a complementary mix of franchised and corporate stores, and with a food-service operation.
* CEO: Bill McEwan.
* Head Office: Stellarton, N.S. (32,000 employees).
* Vital Stats: Current Price/Earnings Ratio, 39.8; Revenue (last 12 mos), $11.7 billion; Profit (last 12 mos), $59.1 million; Market Cap, $2.16 billion; Shares Outstanding, 65.46 million; Dividend Yield, 0.7%.
* Nakamoto’s Comment: “When people look at buying a grocery chain, they generally look at Loblaws, and Sobeys is under the radar screen of most people. Yet, Sobeys is a very dependable business with a reliable revenue stream, and people are not going to stop going to the grocery store. There’s also a very big valuation gap between Loblaws, which is recognized as Canada’s premier grocery company, and Sobeys. I think the valuation gap is unjustified. I think that gap will narrow.”
* Nakamoto’s Risk Rating: Low.
* Web watch: www.sobeys.com



THIRD STAR
* Dofasco Inc. (DFS-TSE)
* Recent Price: $28.
* 12-Month Range: $20.11-$28.65.
* Snapshot: Dofasco is one of Canada’s largest steel producers, serving customers throughout North America with flat-rolled and tubular steels.
* CEO: John Mayberry.
* Head Office: Hamilton, Ont. (7,360 employees).
* Vital Stats: Current Price/Earnings Ratio, 79.5; Revenue (last 12 mos), $3 billion; 5-Yr Revenue Growth, 0.6%; Profit (last 12 mos), $26.7 million; Profit Growth (last 12 mos), -20.9%; Market Cap, $2.09 billion; Shares Outstanding, 74.95 million; Dividend Yield, 3.9%.
* Nakamoto’s Comment: “Dofasco is in an unloved industry. Who really rants and raves about the steel industry? Not a lot of people. But Dofasco is one of the only integrated steel mills in North America to make a profit in 2001. That’s one hell of an accomplishment. A large number of integrated steel makers in the U.S. are in bankruptcy.”
* Nakamoto’s Risk Rating: Low.
* Web watch: www.dofasco.ca
* Nakamoto’s Record (with Nov. 29 picks): +14% (Domtar +17%, Fairmont +16%, Magna International +9%).
* Disclosure: Nakamoto says he does not personally own any of the individual stocks. All three are in the Bonham Canadian Equity Fund, each with an approximate weighting of 2.5%.