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

FEATURED PRO: Martin Ferguson is a partner and portfolio manager with Calgary-based Mawer Investment Management (www.mawer.com). He manages the Mawer New Canada Fund that focuses on small caps and is also part of the team that manages the Mawer Canadian Equity Fund.

Calgary-based BW Technologies is the largest holding in the New Canada Fund (3.7 per cent).

Fund Form: The Mawer New Canada Fund boasts a three-year return of 16.5 per cent compared to the group average of -6.0 per cent. The one-year return is 1.49 per cent (group average, -16.9 per cent).

Ferguson’s Perspective: “The market has been a little more efficient as of late. There are always opportunities, but they are not as big or as plentiful as in the past. Overall, this has been a sideways market and I don’t really see any momentum in the short term. Our job is to find undervalued situations and quite often we can find stocks that are mispriced.”



FIRST STAR
* FirstService Corp. (FSV-TSX)
* Recent Price: $17.50.
* 52-Week Range: $16.24-$41.75.
* Snapshot: FirstService is a service company involved in residential property management, security and consumer services.
* CEO: Jay Hennick.
* Head Office: Toronto (10,500 employees).
* Vital Stats: Current Price/Earnings Ratio, 8.6; Revenue (last 12 mos), $839.5 million; 5-Yr Revenue Growth, 26.3%; Profit (last 12 mos), $28.5 million; 5-Yr Profit Growth, 27.2%; Market Cap, $236.64 million; Shares Outstanding, 13.52 million.
* Ferguson’s View: “FirstService recently came out with disappointing results and lowered its guidance. They sort of got blindsided on the business side and from the general malaise in the U.S.
“However, I believe that the business model is intact and I believe the stock represents good value at the current price. This is not a risk-free stock. They have a fairly levered balance sheet but, at the same time, their business model is such that they don’t require a lot of capital and there is typically a lot of free cash flow.
“I’m aware of the risk, but I’m willing to believe that their business model and management will pull them through.”
* Ferguson’s Risk Rating: High.
* Web watch: www.firstservice.com



SECOND STAR
* Impact Energy (IEY-TSX)
* Recent Price: $1.43.
* 52-Week Range: $1.08-$1.91.
* Snapshot: Impact’s drills are bent on making an impact with an ambitious exploration base that includes approximately 130,000 acres of undeveloped land in the gas-prone, deeper western part of the Western Canadian Basin in Alberta, northeastern B.C. and Montana.
* CEO: Peter Bannister.
* Head Office: Calgary.
* Vital Stats: Current Price/Earnings Ratio, 69.0; Revenue (last 12 mos), $8.2 million; Profit (last 12 mos), $800,000; Market Cap, $102.06 million; Shares Outstanding, 73.96 million.
* Ferguson’s View: “Impact recently released its 2002 results, which were far from impressive. They had a number of delays and problems, but they really laid the groundwork on a go-forward basis. They have a great management group that has been involved in running much larger companies. True to its name, Impact is focused on higher-impact natural-gas plays, so it is riskier. The company has been working in northeastern B.C. and early indications are that they’ve been successful there. They are natural-gas levered and the stock hasn’t really reflected their potential should natural gas prices remain strong and should they be successful.”
* Ferguson’s Risk Rating: High.
* Web watch: www.impactenergy.ca



THIRD STAR
* Russel Metals (RUS-TSX)
* Recent Price: $5.59.
* 52-Week Range: $4.10-$5.65.
* Snapshot: Russel is one of the largest metals distributors and processors in North America and operates in three metals segments: energy sector pipeline, tube valves and fitters, and import/export. The
company is in the process of acquiring Leroux Steel, a major player in Quebec.
* CEO: Bud Siegel.
* Head Office: Mississauga, Ont. (1,924 employees).
* Vital Stats: Current Price/Earnings Ratio, 7.9; Revenue (last 12 mos), $1.4 billion; 5-Yr Revenue Growth, -4.2%; Profit (last 12 mos), $29.2 million; 5-Yr Profit Growth, -6.1%; Market Cap, $213.08 million; Shares Outstanding, 38.12 million; Dividend Yield, 4.65%.
* Ferguson’s View: “Russel recently announced an
agreement to buy the holdings of (Leroux Steel). Leroux is also in the same business as Russel and it’s quite strong in Quebec, which adds to the synergies between the two companies. If the deal closes, it looks very accretive and is another example of Russel’s excellent management adding value to the company. They also pay a fairly healthy dividend.”
* Ferguson’s Risk Rating: Medium.
* Web watch: www.russelmetals.com
* Ferguson’s Edge Record (15 stocks): +15.5%. Best Pick: CHC Helicopter (FLY.A-TSX) +41.4%; Worst Pick: FirstService Corp. (FSV-TSX) -30.9%.
* Disclosure: Mawer partners are restricted from owning individual stocks that are in funds they manage but may hold the stocks indirectly through the funds.