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

FEATURED PRO: Randy Oliver is president and senior portfolio manager of Hesperian Capital Management (www.hesperiancapital.com)

Fund performance: Calgary-based Hesperian manages the Norrep Funds (Norrep and Norrep II). The Norrep Fund was recently ranked by Maclean’s as the top Canadian fund in the small-cap category for its five-year compound return of 23.3 per cent. For the 12 months ending Jan. 31, the Norrep Fund was up 22.6 per cent compared to the group average of -5.0 per cent, and the Norrep Fund II was up 13.4 per cent compared to the group average of -5.1 per cent.

Oliver’s Perspective: “The only place I see some level of comfort is in companies that can be assessed on their asset value such as some of the mining companies, some of the oil companies and maybe some of the real estate companies where maybe you can estimate what they’re worth in terms of hard value.

“Otherwise, there’s a lot of concern out there because people don’t know how to revalue and value equities at this point in time and there’s not a comfort level. Every time an area takes off and does well for a short time, as some of the high technology and biotechnology companies did in the fourth quarter (2002), selling comes in and knocks it back and says, ‘No, that’s too much!’ So we get that relearning process covering about 70 per cent of the market, because there’s no generally accepted thesis as to what is good value and it’ll take some time to learn that.”



FIRST STAR
* Home Capital Group (HCG.B-TSX)
* Recent Price: $15.25.
* 52-Week Range: $10.90-$16.
* Snapshot: Loan, anyone? Home Capital is a holding company that offers financial services such as mortgage lending and credit card issuing through its subsidiary, Home Trust Company. It targets niche markets in Alberta, B.C. and Ontario that aren’t serviced by major institutions.
* CEO: Gerald Soloway.
* Head Office: Toronto (80 employees).
* Vital Stats: Current Price/Earnings Ratio, 12.2; Revenue (last 12 mos), $107.1 million; 5-Yr Revenue Growth, 26%; Profit (last 12 mos), $19.2 million; 5-Yr Profit Growth, 37.4%; Market Cap, $236.5 million; Shares Outstanding, 15.51 million; Dividend Yield, 0.75%.
* Oliver’s View: “Its specialty is lending to owners of small business and to immigrant families. They’ve mastered the skill of who’s a good credit bearer and have a niche beside the banks. They have a much higher return on equity than the banks and are only trading at 10 times next year’s earnings potential. It’s very attractive for the near-term.”
* Oliver’s Risk Rating: Medium.
* Web watch: www.homecapital.com



SECOND STAR
* Major Drilling Group Int. (MDI-TSX)
* Recent Price: $4.20.
* 52-Week Range: $2.10-$5.10.
* Snapshot: Major’s drills span the globe with metals and minerals contract drilling services operating 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: Revenue (last 12 mos), $121.3 million; 5-Yr Revenue Growth, -4.4%; Profit/Loss (last 12 mos), $9.9 million loss; Market Cap, $67.11 million; Shares Outstanding, 15.98 million.
* Oliver’s View: “I would highlight that in the last mining cycle, and don’t expect to get this as performance, it got as high as $35, but they have issued more equity since then. Probably if this cycle reflected the last cycle with the expanded number of shares, it wouldn’t be unrealistic (to match previous performance). It’s generating lots of cash flow, around 61 cents (per share), in the current (fiscal) year which ends at the end of April.
“Why I like it really is that if we’re going back into a mining cycle where the mining companies raise money and explore, the first place they have to spend it is on drilling and Major is a significant player around the world in every significant play.”
* Oliver’s Risk Rating: High.
* Web watch: www.majordrilling.com



THIRD STAR
* Tusk Energy (TKE-TSX)
* Recent Price: $3.07.
* 52-Week Range: $1.11-$3.39.
* Snapshot: Tusk has its teeth dug into several drill holes in Western Canada with production expected to surpass 4,000 barrels of oil equivalent per day by the end of the first quarter.
* CEO: Norman Holton.
* Head Office: Calgary.
* Vital Stats: Current Price/Earnings Ratio, 20.5; Revenue (last 12 mos), $14.1 million; 5-Yr Revenue Growth, 23.5%; Profit (last 12 mos), $2.4 million; Market Cap, $55.94 million; Shares Outstanding, 18.22 million.
* Oliver’s View: “Over the last two years, they’ve grown from 600 barrels a day in production to about 4,000 barrels a day in production. We expect that earnings for the coming year will be in the 35-cent (per share) range. They have an equal mix of oil and natural gas and they’re riding a very hot hand with the properties they have right now.”
* Oliver’s Risk Rating: Medium.
* Web watch: www.tusk-energy.com
* Disclosure: Oliver says he does not own the individual stocks, but owns the funds in which they are held.