(Business Edge columnist Gyle Konotopetz regularly profiles the top stock picks of some of Canada’s most accomplished investment pros).

FEATURED PRO: Gene Vollendorf is president of Savoy Capital Management (www.savoycapital.com). The Calgary-based firm focuses on fundamental research in the Canadian market through its flagship fund, Gladiator LP, a long/short hedge fund. Fund Form: The Gladiator LP fund is up 42.1 per cent in the past year compared to the group average of 35.9 per cent. Its three-year annualized return is 24.9 per cent (group average 4.6 per cent). The management expense ratio (MER) is 1.5 per cent, plus performance fees.

Vollendorf’s Perspective: “The macro-environment for stocks is still healthy as interest rates remain low and corporate profits, most notably in the U.S., are growing. However, the market is anticipating concerns over the next six months hinging on employment growth. Specifically, if employment growth doesn’t follow through, that would signal a weak economy and potential deflationary environment. Conversely, if employment growth does follow through, which we believe it will, we will experience a self-sustaining and growing economy but at the expense of inflation. Inflation would be harmful to the bond market and would eventually cause central banks to raise interest rates, effectively capping equity valuations. In summary, the bond market offers little potential return in 2004 and the stock market is boxed in as well. Investment strategies should therefore focus on companies that are nimble and tactical and can adjust to different environments.”



FIRST STAR
* Terra Payments (TPI-TSX)
* Recent Price: $4.34.
* 52-Week Range: $1.80-$5.60.
* Snapshot: Terra Payments was spun out from BCE Emergis in 1998 as a transaction process company for online gaming sites. The company has since expanded to offer transaction processing for second-tier online
merchants, doing credit checks, cash management
and returns management. Service fees are about five
per cent per transaction.
* CEO: Mitchell Garber.
* Head Office: Montreal.
* Vital Stats: Current Price/Earnings Ratio, 16.9; Revenue (last 12 mos), $58.4 million; 5-Yr Revenue Growth, 52.2 per cent; Earnings (last 12 mos), $4.4 million; Market Cap, $70.31 million; Shares Outstanding, 15.2 million.
* Vollendorf’s View: “Terra Payments is a high-risk
situation but the combination of strong earnings momentum and cheap valuation make the upside potential upwards of 50 per cent in the next six months. The company has cut expenses, focused on high-margin businesses and is looking to make at least one accretive acquisition by the end of the first half of the year.”
* Savoy’s Risk Rating: High.
* Web watch: www.surefirecommerce.com



SECOND STAR
* Steeplejack Industrial Group (SID-TSX)
* Recent Price: $4.05.
* 52-Week Range: $1.30-$4.35.
* Snapshot: Steeplejack is one of the largest scaffolding contractors in Canada, serving the oil and gas, power generation, and pulp and paper industries in Alberta and Saskatchewan. *
CEO: Jim Ross.
* Head Office: Edmonton.
* Vital Stats: Current Price/Earnings Ratio, 5.2; Revenue (last 12 mos), $80.6 million; 5-Yr Revenue Growth, 19 per cent; Earnings (last 12 mos), $5.6 million; 5-Yr Earnings Growth, 27.8 per cent; Market Cap, $31.34 million; Shares Outstanding, 7.74 million.
* Vollendorf’s View: “Steeplejack is a play on large-scale oilsands project growth in Alberta. Visibility is solid, as oil and gas companies are with cash and are committed to developing the oilsands over the long term. Current estimates call for an estimated $40 billion of oilsands expansion projects in northern Alberta over the next seven years. With new catalyst investors involved, this opportunity could increase Steeplejack’s revenues four- to five-fold over the next seven years.”
* Savoy’s Risk Rating: Medium.
* Web watch: www.steeplejack.ca



THIRD STAR
* Dorel Industries (DII.B-TSX)
* Recent Price: $44.75.
* 52-Week Range: $33.29-$47.50.
* Snapshot: Dorel designs, markets and distributes a wide range of products from infant carseats to ready-to-assemble furniture. Early this year, the company acquired Pacific Cycle, maker of Schwinn bicycles.
* CEO: Martin Schwartz.
* Head Office: Westmount, Que.
* Vital Stats: Current Price/Earnings Ratio, 14.1; Revenue (last 12 mos), $1.5 billion; 5-Yr Revenue Growth, 15.9 per cent; Earnings (last 12 mos), $96.6 million; 5-Yr Earnings Growth, 24.2 per cent; Market Cap, $1.20 billion; Shares Outstanding, 28.86 million.
* Vollendorf’s View: “Management owns more than 10 per cent of the company and has a track record for
creating value. The company has very attractive growth and value characteristics. It trades at 10 times this year’s earnings, which are expected to grow in excess of 40 per cent year over year. With the acquisition of Pacific Cycle, we expect cash-flow generation of $4 per share in the current year, which will mostly go toward paying down debt. We expect a 20-per-cent return over the next year as the company executes on its strategy.”
* Savoy’s Risk Rating: Medium.
* Web watch: www.dorel.com
Vollendorf’s Edge Record: +26.6 per cent. Best Pick: Cinram International (CRW-TSX) +186.9 per cent. Worst Pick: Evolved Digital Systems (EVD-TSX) -48.3 per cent.
Disclosure: The featured stocks are held in the Gladiator LP Fund managed by Vollendorf.