(Business Edge columnist Gyle Konotopetz regularly profiles the top three stock picks of some of Canada’s most accomplished investment pros.)

FEATURED PRO: Randy Oliver is president and senior portfolio manager of Hesperian Capital Management (www.hesperiancapital.com). The company manages the Norrep Funds – Norrep I and Norrep II.

Fund Form: The Norrep I fund has a three-year annualized return of 31.5 per cent compared to the group average of 13.3 per cent. Management Expense Ratio (MER): 2.53 per cent.

Oliver’s Perspective: “We think the market is very expensive relative to the underlying fundamentals in Canada. The trailing price-to-earnings multiple is 19.4 on the S&P/TSX Index and that multiple is at 46 times on the Nesbitt Burns small-cap index. We find this very pricey.

“However, as always, we can find equities that don’t trade on market parameters that are relatively nicely priced in today’s market. We’re not having trouble buying.

“We’re very positive on the resource sectors right across the board. It doesn’t matter whether it’s trees, mining or oil and gas. We see the world demand, particularly because of demand from China and India, putting pressure for the next 10 years on raw material prices. What’s quite neat about China right now is that the Olympics are there in 2008 and they’re not going to let things deteriorate prior to the Olympics. They’re going to do everything in a balanced way to maintain their economic growth because this is their showpiece to the world.”

FIRST STAR



* Global Railway Industries (GBI-TSX)

* Recent Price: $5.00.

* 52-Week Range: $2.10-$5.15.

* Snapshot: Global Railway provides recapitalization services to railway suppliers and, through its subsidiaries, supplies rail gear, event recorders, rail cars and replacement parts.

* CEO: Mike Kohut.

* Head Office: Calgary (193 employees).

* Vital Stats: Current Price/Earnings Ratio, 20; Revenue (last 12 mos), $22.8 million; Earnings (last 12 mos), $2.3 million; Market Cap, $50.60 million; Shares Outstanding, 10.12 million.

* Oliver’s View: “The interesting thing about the railway industry is that the rail cars in North America average about 20 years old, so there’s a huge replacement cycle going on for everything from doors to railway equipment. So the industry dynamics are super.

“Global Railways is a consolidator that has been buying up the mom-and-pop companies that service this industry in North America. They’ve made five acquisitions over the past three years. It’s a very fragmented industry with small companies all over the place, often owned by 70-year-olds or 75-year-olds who are looking to get out.”

* Oliver’s Risk Rating: Medium.

* Web Watch: www.globalrailway.com

SECOND STAR



* Tusk Energy (TKE-TSX)

* Recent Price: $4.25.

* 52-Week Range: $2.75-$4.60.

* Snapshot: Tusk is an oil and gas company with numerous properties in Alberta, B.C. and Saskatchewan. The company’s revenue tripled in the fourth quarter of 2003 compared to the year-ago period.

* CEO: Norman Holton.

* Head Office: Calgary.

* Vital Stats: Current Price/Earnings Ratio, 11.1; Revenue (last 12 mos), $48.2 million; 5-Yr Revenue Growth, 50.9 per cent; Earnings (last 12 mos), $12.6 million; Market Cap, $87.75 million; Shares Outstanding, 20.65 million.

* Oliver’s View: “Tusk has been a favourite of mine since it was in the $1 range. The company has increased its production from 600 barrels per day (boepd) to close to 6,500 barrels per day over the last three years. It is one of the few oil stocks priced at its asset value, being what is reflected by the value of the assets in the ground. The stock is one of the few oil stocks trading at three times cash flow (per share) versus a typical industry cash-flow multiple of five-and-a-half to six times. Companies like Tusk that are cheap relative to the industry are the only oil and gas stocks I would be emphasizing right now.”

* Oliver’s Risk Rating: Medium.

* Web Watch: www.tusk-energy.com

THIRD STAR



* Strongco Inc. (SQP-TSX)

* Recent Price: $5.00.

* 52-Week Range: $1.32-$5.40.

* Snapshot: Strongco is a multi-line industrial equipment distributor operating throughout Canada with the bulk of its market in the resource sector.

* CEO: Larry Pirnak.

* Head Office: Mississauga, Ont. (729 employees).

* Vital Stats: Current Price/Earnings Ratio, 9.4; Revenue (last 12 mos), $336.8 million; 5-Yr Revenue Growth, -11.7 per cent; Earnings/Loss (last 12 mos), $2.6 million Loss; Market Cap, $46.93 million; Shares Outstanding, 9.39 million.

* Oliver’s View: “This company sells and services everything from backhoes to graders to the resource sector, including the forest products industry, the mining industry, and oil and gas industry. We like the company because it has been restructured well, it has a very low price/earnings multiple, earnings are on the upturn and it’s trading slightly below its book value right now.

“Sometimes, you’re smart to move one step away from the industry you like and look to the industry that supplies the industry.”

* Oliver’s Risk Rating: High.

* Web Watch: www.strongco.com Oliver’s EDGE Record: +67.6 per cent. Best Pick: Major Drilling Group (MDI-TSX) +114.3 per cent. Worst Pick: Tusk Energy (TKE-TSX) +38.4 per cent.

Disclosure: Oliver says he does not own the individual stocks, but owns positions in the Norrep funds in which the featured stocks are held.