Saturday, January 4, 2003
Madeleine Northfield was never in doubt about which toy she'd use to make her stock pick — a Barbie doll. The only question was: When you have a veritable army of the things, which one do you choose?
After some pondering, the three-year-old daughter of Report on Business National Editor Stephen Northfield settled on a doll sporting an emerald-coloured mini-skirt and gravity-defying hairdo held in place with a garbage bag twist-tie.
Dipping a dainty, pink toe in a couple of her favourite paint jars, Madeleine jabbed the Barbie at a page of the ROB stock listing, smearing the colours across our wild-card entry in the 2003 stock picking competition: Manulife Financial Corp. (MFC-TSX).
Madeleine is up against eight market wizards who are competing for a Globe and Mail mug in this, our seventh annual My One and Only stock-picking contest.
The contest's current champion, York University finance professor Moshe Milevsky, has once again dipped into the junior energy stock pool for his pick.
"In a contest like this, the name of the game is to beat your competitors," the professor deduces. "Mathematically speaking, you are looking for a stock that has highest probability of beating other stocks. You don't want a stock that moves with the TSX, you don't want a stock that's trading at $50."
At $1.50, Canadian Superior Energy Inc. (SNG-TSX) started this year near the low end of its range. "You are getting an upside and [in a contest like this] you don't care about the downside."
Prof. Milevsky calls himself "a fan of the oil and gas industry. Prices are heading higher, measured on a month-by-month basis." He's also gambling that an escalation of the tensions between the United States and Iraq will push prices upward. "I'm betting on the war here — a profiteer."
Runner-up Sharon Ranson's pick this year is Sun Life Financial of Canada Inc. (SLF-TSX). The retired fund manager says she is a big believer in the financial services industry. "Sun Life has been beaten up lately, but it's a well-managed company. I believe in insurance from a demographic and growth point of view."
Steven Misener, the only contestant to have made the cut every year since the competition's inception six years ago and the winner of the 1999 contest, has decided to drop out of the contest this year as his professional investing focus has changed to global stocks. Mr. Misener, chief equity strategist for Sentry Select Capital Corp., holds the contest's record increase for a stock in a single year — a stunning 459.6-per-cent gain for BCE Emergis in 1999.
Each year, the top four contestants from the previous year go on and the bottom four are dropped, making room for four new players. However, with Mr. Misener's resignation this year, fund manager Veronika Hirsch survives to enter the current contest despite finishing fifth in the 2002 contest.
Her pick this year is Aber Diamond Corp. (ABZ-TSX), because Ms. Hirsch declares "as the song says, 'Diamonds are a girl's best friend.'
"It's almost impossible to pick what the market's theme will be [in 2003]," Ms. Hirsch said. "Aber should do well regardless."
The company's mining production plant at 40-per-cent-owned Diavik is on budget and ahead of schedule, meaning the company's big expenses are behind it and the investment will soon start to generate revenue, Ms. Hirsch said.
Diamond sales from Diavik should begin in the first half of 2003. Ms. Hirsch expects Aber to complete repayment of the debt it incurred on the project within three years. "I expect they'll be increasing their exploration budget," she said.
This year's choice of technical analyst Ron Meisels is Toronto-based construction company, Aecon Group Inc. (ARE-TSX). Mr. Meisels, president of Montreal-based P&C Holdings Inc., said he picked the Toronto-based construction company for "totally technical" reasons.
"The stock had a huge base going back to 1993 at about $3 to $4. It's already had a breakout and recently went up to $7. It began the year at $4.75, "a correction of the initial move, which I believe is healthy." Mr. Meisels has targets of both $8 and $10 on the stock.
This year we welcome four new contestants to the contest.
Lesley Scorgie, a business student at the University of Alberta, has picked WestJet Airlines Ltd. (WJA-TSX), which has its headquarters in her home town of Calgary. The 19-year-old second-year student was featured on Oprah Winfrey's TV show two years ago because of the extraordinary investing savvy she showed as a teenager.
Discount airline WestJet, founded in Calgary in 1996, has a "well-crafted vision and they have taken the airline industry by storm," Ms. Scorgie says. "They have provided and continue to provide low fares and high quality to customers despite the ramifications that Sept. 11, 2001, has had on the airline industry as a whole.
"WestJet has a healthy level of equity financing, allowing them to pursue their goals of further expansion into Canada and North America. They also maintain high employee and customer morale, which is an asset to any business."
David Skarica, publisher of the Addicted to Profits newsletter and the addictedtoprofits.com Web site and writer for timingwallstreet.com , has chosen Eldorado Gold Corp. (ELD-TSX) for his pick. "For the past two years, we at Addicted to Profits have been predicting that due to the bursting of the technology bubble, the coming weakness in the U.S. dollar and massive printing of money by the U.S. Federal Reserve, gold would skyrocket to more than $400 (U.S.) an ounce. We feel 2003 will be the year gold makes the move to $400.
"To position ourselves properly for such a move we wanted to be in well-run gold companies with strong management. Eldorado fits the bill perfectly."
Nick Majendie, senior vice-president of Canaccord Capital Corp. of Vancouver, has picked steel maker Stelco Inc. (STE.A-TSX) "on the assumption that North America does not have a double-dip recession — that's the key." Mr. Majendie thinks Stelco could earn between 80 cents and $1.20 a share next year. It lost 15 cents a share for the first nine months of 2002.
"I think that most people are worried about auto production [and its relationship to] the steel industry. They fail to realize that the dynamics of the steel industry have changed. The extent of excess capacity is less than what it was." "Stelco is sound financially and with its customers. It's in the lower end of its trading range and could see some good gains this year. It could hit $8 within 12 months." The stock opened the year at $3.77.
Playing for the house this year is Janis Mackey Frayer, host of The Close on Report on Business Television. Ms. Mackey Frayer, who also writes a Saturday column, Selective Disclosure, for Report on Business, has chosen transportation giant Bombardier Inc. (BBD.B-TSX), which fell 67 per cent in 2002.
"Business has been rough, but the dividend still holds," she says. "Management change could mean operations are streamlined and some mysteries are dispelled about Bombardier Capital."
They're off and running in 2003
The seventh annual My One And Only stock picking contest
Dec. 31, '02
Player Stock (symbol) Price Madeleine Northfield Manulife Financial Corp. (MFC-TSX) $34.39 Moshe Milevsky Canadian Superior Energy Inc. (SNG-TSX) 1.50 Sharon Ranson Sun Life Financial of Canada Inc. (SLF-TSX) 26.71 Veronika Hirsch Aber Diamond Corp. (ABZ-TSX) 30.75 Ron Meisels Aecon Gruop Inc. (ARE-TSX) 4.75 Leslie Scorgie WestJet Airlines Ltd. (WJA-TSX) 16.15 David Skarica Eldorado Gold Corp. (ELD-TSX) 2.07 Nick Majendie Stelco Inc. (STE.A-TSX) 3.77 Janis Mackey Frayer Bombardier Inc. (BBD.B-TSX) 5.32
SOURCE: BLOOMBERG FINANCIAL SERVICES