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

FEATURED PRO: Wayne Deans is a partner with Vancouver-based Deans Knight Capital Management and manages two funds – the Northwest Specialty Equity Fund and the TDK Resource Fund. He has more than 25 years of experience in investment management and specializes in building portfolios of small emerging companies with distinct competitive advantages and growing market shares.

Fund form: The Northwest Specialty Equity Fund has a one-year return of 3.7% versus the group average -13.3%, and a compound annual three-year return of 19.1% versus the group average of -2.1%. The TDK Resource Fund has a one-year return of 16.9% versus the group average of -5.2%.

Management Expense Ratios: Northwest Fund, 2.67%; TDK, 2.50%.

Deans’ Perspective: “Pickin’s are gettin’ a little slimmer. When your stocks have gone up in value so much over the past three years as ours have, you’re sitting on a portfolio in which the stocks aren’t as cheap anymore. Therefore, we don’t expect as much upward revaluation in the near future, but we’re longer-term players.”



FIRST STAR
* CAE Inc. (CAE-TSX)
* Recent Price: $6.08.
* 52-Week Range: $2.76-$12.60.
* Snapshot: CAE provides integrated training solutions and advanced simulation and controls technologies to the civic aviation, military and marine markets.
* CEO: Derek Burney.
* Head Office: Toronto (6,000 employees).
* Vital Stats: Current Price/Earnings Ratio, 10.8; Revenue (last 12 mos), $1.1 billion; 5-Yr Revenue Growth, 3.5%; Profit (last 12 mos), $117.2 million; 5-Yr Profit Growth, 13.2%; Market Cap, $1.26 billion; Shares Outstanding, 219.64 million; Dividend Yield, 2.094%.
* Deans’ View: “They earned 60 cents per share in their latest fiscal year and should do better than that in their next fiscal year. They still have a little too much debt, but they’ve been paying down the debt out of cash flow so it looks like a reasonable bet. If they get back to earning $1 a share, the stock’s going to trade through $10 again one day.”
* Web watch: www.cae.com



SECOND STAR
* CFM Corporation (CFM-TSX)
* Recent Price: $9.60.
* 52-Week Range: $7.92-$16.85.
* Snapshot: CFM markets hearth products such as gas fireplaces and gas space heaters under the Majestic brand, and outdoor products such as gas barbecue grills through its Vermont Castings brand.
* CEO: Colin Adamson (until July 28).
* Head Office: Mississauga, Ont. (2,400 employees).
* Vital Stats: Current Price/Earnings Ratio, 9.0; Revenue (last 12 mos), $663.7 million; 5-Yr Revenue Growth, 17.9%; Profit (last 12 mos), $42.8
million; 5-Yr Profit Growth, 14.8%; Market Cap, $381.06 million; Shares Outstanding, 40.11 million.
* Deans’ View: “They’re the largest manufacturer of gas fireplaces in North America and there has been a distinct trend towards burning natural gas in fireplaces as opposed to burning wood. In many jurisdictions in North America, there is legislation that you can’t build new homes with wood-burning fireplaces.
“They’ve lost a major U.S. customer (Lowe’s) and put out a profit warning recently. The momentum players have hammered the stock from the $13 to $14 range to the $9 range where we started accumulating it. The company is still profitable and we’ve seen them solve issues like this before and continue to grow their business.”
* Web watch: www.cfmmajestic.com



THIRD STAR
* Aventure Energy (AVR-TSX)
* Recent Price: $4.55.
* 52-Week Range: $3.25-$4.55.
* Snapshot: Aventure is an oil and gas company focused on assets in Trinidad. The Vermilion Energy Trust (VET.UN-TSX) owns 72 per cent of the company.
* Interim CEO: Lorenzo Donadeo.
* Head Office: Calgary (two employees).
* Vital Stats: Current Price/Earnings Ratio, 108.7; Revenue (last 12 mos), $4.1 million; 5-Yr Revenue Growth, 51.3%; Profit (last 12 mos), $100,000; Market Cap, $194.34 million; Shares Outstanding, 44.68 million.
* Deans’ View: “This one is a little more speculative. They have one producing well in Trinidad at the moment which they believe is capable of producing 100 million cubic feet of natural gas per day. They’ve been testing it and selling to the Trinidadian government. They also have a second well on which we’re awaiting results.Trinidad is a fairly significant natural gas region and we think their first well justifies the value of the business as it sits today, and we believe there may be an acquisition of this company by a bigger player within 12 months.”
* Deans’ Edge Record (18 picks): +39.1%. Best Pick: Cinram International (CRW-TSX) +288.1%. Worst Pick: Velan (VLN-TSX) -36.0%.
* Disclosure: The featured stocks are held in at least one of the funds managed by Deans Knight.