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

FEATURED PRO: Wayne Deans is a partner and portfolio manager of Vancouver-based Deans Knight Capital Management. Deans is manager of the Northwest Specialty Equity Fund which emphasizes small-cap plays.

Through July, the Northwest fund had a one-year return of 22.92 per cent compared to the group average of 0 per cent, and a three-year return of 6.91 per cent compared to the group average of 3.12 per cent. All of the featured stocks are held in the fund.

Dean’s Perspective: “These picks are all of the same ilk with very low prices relative to underlying asset
values or potential cash generated by the business and they’re our top three picks for the balance of this year.
“We particularly like the oil and gas sector right now. I think the fundamentals of oil look terrific right now and the fundamentals for natural gas will improve from now until winter. We also like certain base metals, particularly nickel. But we don’t pay a lot of attention to picking sectors. We use a company-by-company approach here.”



FIRST STAR
* Lion Ore International Mining (LIM-TSX)
* Recent Price: $3.65.
* 12-Month Range: $1.50-$4.75.
* Snapshot: Lion Ore is an international mining company that keys on nickel production and is also in the process of developing a major gold project in Australia. Lion Ore is by far the largest holding in the Northwest Specialty Equity Fund with a 12.9-per-cent weighting.
* CEO: Colin Steyn.
* Head Office: Toronto (120 employees).
* Vital Stats: Revenue (last 12 mos), $8.8 million;
5-Yr Revenue Growth, 33.6 per cent; Profit/Loss (last 12 mos), $1.8 million loss; Market Cap, $441.08 million; Shares Outstanding, 120.8 million.
* Dean’s Comment: “This stock is really cheap. By our reckoning, it’s probably trading at about four times 2003 cash flow (per share). It’s a very low-cost nickel producer with rapidly increasing production volumes over the next two years.”
* Web watch: www.lionore.com



SECOND STAR
* Petrobank Energy & Resources (PBG-TSX)
* Recent Price: $2.33.
* 12-Month Range: $1.10-$2.65.
* Snapshot: Petrobank operates primarily in two core areas – southeastern Saskatchewan and northwestern Alberta – and is also pursuing opportunities in South America, North Africa and the Middle East.
* CEO: John Wright.
* Head Office: Calgary (16 employees).
* Vital Stats: Revenue (last 12 mos), $45.0 million; 5-Yr Revenue Growth, +57.2 per cent; Profit/Loss (last 12 mos), $2 million loss; Market Cap, $78.44 million; Shares Outstanding, 33.7 million.
* Dean’s Comment: “They’ve got some producing assets in Western Canada but the real sizzle and the major contributor to future growth in revenues and cash flows is property in Colombia that they acquired earlier this year from EnCana. These are properties that the guys from Petrobank used to own when they ran Pacalta which was taken over by Alberta Energy, which then became EnCana (through a merger). So they’re getting their own properties back. They know them. They’re getting ready to drill them. In fact, as we speak, there’s probably some bits turning in the ground down there. They believe, and we believe them, that this is not a difficult exploration exercise to generate some
serious growth in production from these wells over the next six months to a year.”
* Web watch: www.petrobank.com



THIRD STAR
* Velan Inc. (VLN-TSX)
* Recent Price: $14.50.
* 12-Month Range: $13.50-$20.
* Snapshot: Velan is a manufacturer of industrial steel valves through 11 plants, including five in Canada. It is the world’s largest manufacturer of steel gate, globe and check valves. Its valves are used in several industries, including power generation, chemical, petrochemical, and oil and gas.
* CEO: A.K. Velan.
* Head Office: Montreal (1,475 employees).
* Vital Stats: Current Price/Earnings Ratio, 14.4; Revenue (last 12 mos), $290.4 million; Profit (last 12 mos), $22.6 million; Market Cap, $324.23 million; Shares Outstanding, 22.4 million; Dividend Yield, 2.1 per cent.
* Dean’s Comment: “Here’s a little sleeper. It’s very, very, very inexpensively priced by almost any measure you can look at. This company has always been profitable and it has been in business for over 50 years. They always generate free cash flow. I can’t buy Velan (personally) because it’s hard to buy (due to a lack of liquidity) and every time there is stock available I buy it and give it to my clients. I’d love to own it myself.”
* Web watch: www.velan.com
* Dean’s Record (with Dec. 6, March 7 and May 30 picks): +14 per cent. Best: Cinram International (CRW-TSX) +87 per cent. Worst: Maxim Power (MXG-TSX) -55 per cent.
* Disclosure: Deans says he personally owns shares in Lion Ore and Petrobank.