(Business Edge writer David Hatton regularly profiles the top stock picks of some of Canada's most accomplished investment pros.)
FEATURED PRO: Fred Pynn is president, chief investment officer and a portfolio manager with Calgary-based Bissett Investment Management (www.bissett.ca).
Fund Form: The Bissett Canadian Equity Series A units returned -5.8 per cent during a six-month period ended Dec. 31, 2007. This compares with the S&P/TSX Composite Index return of 0.7 per cent. (All index returns are calculated on a total return basis in Canadian dollar terms.)
During the second half of 2007, equity markets were dealing with the strong Canadian dollar, erratic commodity prices and sub-prime mortgage problems, causing concerns about an economic recession in the United States and even a potential slowdown in global economic growth, according to a recent report from Toronto-based financial services giant Mackenzie Financial.
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| Fred Pynn |
Analysts noted for the final six months of last year, only three of the 10 sectors in the index experienced positive returns - materials returned 16.4 per cent, information technology returned 27.8 per cent and utilities came in at 11.7 per cent - and the market's breadth deteriorated noticeably from earlier periods in this Canadian equity bull market.
Management Expense Ratio: 2.86 per cent (as of June 30, 2007).
Pynn's Strategy: "We think we're in a bear market. You have to choose very carefully. There have been a lot of individual stars and the Toronto index is showing strength in the area of commodities. The price of gold has been hitting an all-time high; (Research In Motion) is having an excellent quarter. So the broad market is lower, but there are individual pockets of strength. We're staying the course and trying not to time the market. You have some excellent buys out there if you look at your fundamentals."
FIRST STAR
* Rogers Communications (TSX:RCI-B)
* Recent Price: $39.19
* 52-Week Range: $52.20-$36.38 (07/23-02/05)
* Snapshot: Rogers Communications Inc. is a communications and media company engaged in three primary lines of business. Rogers Wireless is a wireless voice and data communications services provider; Rogers Cable and Telecom offers cable TV, HS Internet access, residential telephony services and video retailing; and Rogers Media has businesses in radio, television broadcasting and publishing.
* CEO: Edward Rogers
* Head Office: Toronto
* Vital Stats: Price/Earnings Ratio (trailing twelve months), 44.50; Revenue (last fiscal year), $8.8 billion; Earnings Per Share $0.88; Market Cap $25,042 million.
* Pynn's View: "They continue to benefit from strength in the wireless sector. (Market) penetration rates in Canada are low so there is still a lot of growth potential. I believe Canada is 50 per cent and the U.S. is around 75 per cent. Cashflow is in excess of what they need. I believe they have built out their network, too, so Rogers has the infrastructure for growth already in place. The current price is well below their 52-week high, so that's one of the reasons we feel this is a good buy right now. The cloud hanging over the company in the short term is the auction of additional spectrum."
* Risk Rating: Medium
* Web Watch: www.rogers.com
SECOND STAR
* Manulife Financial Corp. (TSX:MFC)
* Recent Price: $39
* 52-week range: $44.23-$33.77 (10/31-01/21)
* Snapshot: Manulife Financial is a financial services company that offers clients a diverse range of financial protection products and wealth management services.
* CEO: Dominic D'Alessandro
* Head Office: Toronto
* Vital Stats: Price/Earnings Ratio (ttm), 13.90; Revenue (last fiscal year), $34 billion; Earnings Per Share (ttm), $2.81; Market Cap, $58,539 million.
* Pynn's View: "There are issues with the banks right now and exposure to risk. Manulife, however, recently announced no write-downs and no write-offs. The biggest problem with lifecos is their operations are often U.S.-based. "That creates a challenge with the Canadian dollar relative to the U.S. dollar. Even though the currencies are fairly close right now, they haven't been in the past and there's no telling what might happen. When the U.S. dollar is higher, it certainly creates a problem."
* Risk Rating: Low
* Web Watch: www.manulife.com
THIRD STAR
* Saputo Inc. (TSX:SAP)
* Recent Price: $26.55
* 52-Week Range: $32.99-$20.06 (12/06-06/05)
* Snapshot: Saputo Inc. operates in two sectors: Dairy products and grocery products. Its production facilities are located in five countries. Saputo produces, commercializes and distributes products under such brands as Saputo, Alexis de Portneuf, Armstrong, Dairyland, De Lucia, DuVillage de Warwick, Frigo, La Paulina, Nutrilait, Ricrem, Stella, Treasure Cave, Hop&Go!, Rondeau and Vachon.
* Vital Stats: Price/Earnings Ratio, 19.80 (ttm); Total Revenue, $4 billion; Earnings Per Share, $1.34; Market Cap, $5.5 billion.
* CEO: Lino Saputo Jr.
* Head Office: Saint-Leonard, Que.
* Pynn's View: "Saputo have made a series of recent acquisitions and have been good so far at integrating them into their corporate structure. The last two acquisitions have been in the United States: California and Wisconsin. They still manage to have good cashflow; increasing their dividend on a regular basis. The dairy industry is stable with demand not as cyclical as in other businesses."
* Risk Rating: Low
* Web Watch: www.saputo.com
Pynn's Edge Record (last 12 mos): +6 per cent. Best Pick: NuVista Energy Ltd. +22.3 per cent (TSX:NVA). Worst Pick: Thomson Corp. (TSX:TOC) -7.2 per cent.
Disclosure: Pynn owns shares in the Bissett funds in which the featured stocks are held.
(This feature is provided for informational purposes. Investors are advised to do their own research or consult a qualified investment professional before making investment decisions.)
