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

FEATURED PRO: Evan Spiropoulos is chief financial officer and portfolio manager of Hesperian Capital Management (www.hesperiancapital.com).

FUND FORM: Calgary-based Hesperian manages the small-cap Norrep Funds. The Norrep Fund is up 8.6 per cent in the past 12 months (through June 30) compared to the group average of -6.6 per cent. The Norrep II Fund is up 18.6 per cent in the past 12 months compared to the group average of -6.6 per cent.

MANAGEMENT EXPENSE RATIO: 2.53 per cent. Spiropoulos’s Perspective: “Economic events have indicated to me that we’re clearly not heading into a double-dip recession and we’re going to have a good recovery. I don’t think we’ll see really good numbers until ’04, but I truly believe we’ve seen the bottom in the economy and we’re in an up trend.

“Having said that, I think the market has anticipated most of that already, so I would not be surprised to see a significant pullback in the fall here, with an adjustment of prices and re-evaluating of the fair market. I’m very optimistic about the long run, but in the short run there could be some contraction in the market. I think you’re still going to have to search for undiscovered value to make money in the marketplace.”



FIRST STAR
* Major Drilling Group (MDI-TSX)
* Recent Price: $5.50.
* 52-Week Range: $2.25-$5.65.
* Snapshot: Major is a major international player in drilling services for metals and minerals with operations in Canada, the U.S., South and Central America, Australia, Indonesia, Turkey, Tanzania and Mongolia.
* CEO: Francis McGuire.
* Head Office: Moncton, N.B. (915 employees).
* Vital Stats: Current Price/Earnings Ratio, 34.4; Revenue (last 12 mos), $139.9 million; 5-Yr Revenue Growth, -3.3%; Profit/Loss (last 12 mos), $6.0 million Loss; Market Cap, $88.02 million; Shares Outstanding, 16 million.
* Spiropoulos’s View: “Even at a higher price now, I think it’s a better story than it has ever been. They’ve raised some money to clean off the balance sheet a bit and we participated in that, buying another 100,000 shares of the stock at $5.25. You’re seeing gold prices sustain themselves and now you’re seeing base metals prices starting to kick in. Base metals represent about half of Major Drilling’s business. I’m more confident now than I’ve ever been in the story and I think
individuals should ignore the fact that the stock has gone up and buy more right here.”
* Spiropoulos’s Risk Rating: High (based on volatility of
commodity prices).
* Web watch: www.majordrilling.com



SECOND STAR
* Cinram International (CRW-TSX)
* Recent Price: $25.
* 52-Week Range: $5.31-$25.75.
* Snapshot: Cinram is one of the world’s largest producers of CDs, DVDs, CD-ROMS, VHS video cassettes and audio cassettes, and is getting bigger. The company recently boosted operations by purchasing AOL Time Warner’s DVD and CD operations for $1.05 billion US in cash.
* CEO: Isidore Philisophe.
* Head Office: Scarborough, Ont. (3,000 employees).
* Vital Stats: Current Price/Earnings Ratio, 22.3; Revenue (last 12 mos), $892.4 million; 5-Yr Revenue Growth, 8.9%; Profit (last 12 mos), $61.4 million; Market Cap, $1.4 billion; Shares Outstanding, 55.84 million; Dividend Yield, 0.48%.
* Spiropoulos’s View: “The stock is trading at a new high after the announcement of the acquisition (of the AOL division). A lot of guys are saying that they’ve missed the stock, but they haven’t. You still have a fair bit of upside. The market’s waking up to the reality that the DVD business is more profitable than they suspected. I bought this stock when it was half the size without the market exposure and the U.S. exposure, and now it’s bigger, better, more diverse and cheaper. I still think there’s $5 or $6 (upside) and I think the risk level has gone down.”
* Spiropoulos’s Risk Rating: Medium.
* Web watch: www.cinram.com



THIRD STAR
* CPI Plastics Group (CPI-TSX)
* Recent Price: $5.51.
* 52-Week Range: $4.86-$8.30.
* Snapshot: CPI is a designer and manufacturer of thermoplastics used in numerous applications, including decking, fencing and garbage bags.
* CEO: Peter Clark.
* Head Office: Mississauga, Ont. (900 employees).
* Vital Stats: Current Price/Earnings Ratio, 9.0; Revenue (last 12 mos), $136.6 million; Profit (last 12 mos), $7.5 million; Market Cap, $69.97 million; Shares Outstanding, 12.7 million.
* Spiropoulos’s View: “They have a new product for plastic decking and I think that’s an excellent market that had a bad start this year because summer was delayed across North America, which delayed their ability to distribute that product. The market has punished the stock a little bit, even though I think the prospects for the business are very good.
“I think there’s a great opportunity when you can buy a company with a high ROE (return on equity), which is generally in the teens, and pay very little on an
earnings basis with a growth engine in place with the
plastic decking product. This is a story most guys haven’t heard of, but they’ll hear about it later, once the stock starts to make its move.”
* Spiropoulos’s Risk Rating: High.
* Web watch: www.cpiplastics.com
* Hesperian Capital’s Edge Record: +32.9% (with president Randy Oliver’s March 13 picks). Best Pick: Home Capital Group (HCG.B-TSX) +44.3%. Worst Pick: Tusk Energy (TKE-TSX) +23.5%.
* Disclosure: Spiropoulos says he has a position in the Norrep funds in which the featured stocks are held, but does not own the individual stocks.