A champion high-school stock picker is taking on a pack of pros in our 10th annual My One and Only stock-picking contest.
This year we welcome to our competition Jason Snow of Thornlea Secondary School in Thornhill, Ont., winner of the most recent Wilfrid Laurier University high-school stock-picking contest. Jason was a one-person team at Thornlea, which has defeated high-school teams from across the country an unprecedented six times.
Like several of our contestants this year, Jason has dipped into the oil patch. That's not surprising, given the 60-per-cent gain by the energy sector of the S&P/TSX composite index last year, let alone the 5-per-cent rise so far in 2006. (The two top picks in the 2005 contest were energy stocks.) Jason says he picked Petrobank Energy and Resources Ltd. (PBG-TSX) because it's "an energy company that has not yet grown to its full potential." Petrobank began the year at $8.90.
The 18-year-old student, winner of a $1,000 scholarship to Wilfrid Laurier, joins seven other contestants in The Globe and Mail competition, in which entrants are allowed to pick a stock trading at $1 or more on the Toronto Stock Exchange and compete for a somewhat lesser prize, a Globe coffee mug.
Robert Callander, vice-president and portfolio manager at Toronto-based Caldwell Securities Ltd., is sticking with his 2005 pick for this year's contest. CGI Group Inc. (GIB.SV.A-TSX), a Montreal-based information technology and business outsourcing company that gained 16.25 per cent last year. Mr. Callander thinks it will do better in 2006. It started the year at $9.30.
He points out that the Montreal-based company has been increasing revenue and profit at a 25-per-cent annual rate since 2001, it has a "really good pipeline" of potential long-term contracts and notes that it has bought back 100 million shares from BCE Inc. It is focusing more on U.S. contracts, and trades at a discount to its U.S. peers, which include International Business Machines Corp.
Marco den Ouden, publisher of The Break Out Report, a twice-monthly investment advisory out of Vancouver, has opted for Pareto Inc. (PTO-TSX), a promotional services company that operates as an adjunct to clients' marketing and sales departments, providing such things as, direct mail marketing, customer loyalty programs and corporate events.
"One major client, Shoppers Drug Mart, recently renewed with a three-year contract," Mr. den Ouden says.
Revenues and earnings have been growing strongly for this company, though it hasn't shown up in shares earnings because of the issuing of new shares, the advisory writer says. "I think Pareto will continue to expand as a promotional services company as the economy continues to improve." Pareto began the year at $1.25.
Jean-François Tardif, senior portfolio manager at Sprott Asset Management Inc., has picked Strongco Income Fund (SQP.UN-TSX), which began the new year at $16.26.
Mr. Tardif, manager of the Sprott Opportunities Hedge Fund, notes that Strongco, a distributor of heavy equipment used in mining and construction, currently gives a $1.80 distribution for a yield of more than 10 per cent.
"I like the stock not only because we are making a very nice return on the distribution but also because that distribution is likely to increase substantially over the next year."
It reported some strong results, with earnings up more than 100 per cent for the third quarter and nine-months results, the Sprott fund manager notes. "They will probably make $1.75 of earnings per unit in 2005 and $2.25-$2.50 in 2006, making this stock very cheap on a price-to-earnings basis as well."
Mr. Tardif believes the stock has the potential to go between $20 and $28 by the end of 2006 for an expected total return of between 40 and 90 per cent.
The fund manager notes that the company "will obviously benefit from the huge boom that we are seeing in commodities across the country and the economic boom in Western Canada."
Unsurprisingly, Peter Linder, vice-president of investments at DeltaOne Energy Fund of Calgary, has picked an energy company based in his city, Find Energy Ltd. (FE-TSX). The company is opening a new natural gas plant that will ramp up production from 3,400 barrels of oil equivalent a day to 6,000 boe/d. Find started 2006 at $9.27.
Mike Lathigee, chairman and founder of the Freedom Investment Club, with members across Canada, has also ventured into the oil patch for his pick. Mr. Lathigee oversees the Vancouver-based club, which specializes in the energy sector, with heavy weightings in oil, uranium, gas and coal.
He has chosen Connacher Oil and Gas Ltd. (CLL-TSX), which began the year at $3.84. "CLL is an excellent market play on the oil sands and we believe oil prices will remain north of $60 (U.S.) a barrel in the long term. Given the huge reserves of CLL and higher oil prices we believe this company will do well over the next 12 months."
Michele Robitaille, a portfolio manager of Canadian equity investments at Guardian Capital, has chosen Cathedral Energy Services Trust (CET.UN-TSX), a niche player providing specialized directional and horizontal drilling applications. Ms. Robitaille notes that Cathedral recently added production testing and wire-line logging services through two acquisitions in 2005.
"Cathedral has a strong track record of per unit growth -- in line with the industry but has been able to achieve significantly better returns on capital employed. In addition, CET is financially strong with no debt, low capital requirements and a low distribution payout ratio."
Ms. Robitaille believes that Cathedral should benefit from strong drilling activity levels through the winter drilling season. It began 2006 at $11.90.
Our house player this year, Kim Parlee, co-host of Stars & Dogs on Report on Business Television, has chosen Winnipeg-based Medicure Inc. (MPH-TSX).
The reason: "Fabulous pharma," Ms. Parlee says. "It's a bit of a flyer, but with a number of big blockbuster drugs coming off patent next year, the big pharma's are looking for ways to boost their prospects. Medicure's heart drugs may be on their radar. Plus Medicure has raised some money, has a successful Phase 2 study of its heart drug MC-1, and is expecting more study results in the first quarter." The stock opened the year at $1.56.
With her pick Ms. Parlee is hoping to break the house-player jinx of finishing last in the contest.
So who is winning the sprint after nine trading days in the new year? Jason Snow's Petrobank Energy has bolted out of the gates with a stunning 20-per-cent gain.
A warning: Don't try this at home. Many of these stocks are small capitalization and volatile, and heavily weighted to a cyclical sector. They would not form the basis of a balanced portfolio.
Next year we plan to revamp the invitational contest as it begins its second decade.
They're off and running in 2006
The 10th annual My One And Only stock-picking contest
| Player | Stock (symbol) | Dec. 30, '05 price |
| Jason Snow | Petrobank Energy and Resources (PBG-TSX) | $8.90 |
| Robert Callander | CGI Group Inc. (GIB.SV.A-TSX) | 9.3 |
| Marco den Ouden | Pareto Inc. (PTO-TSX) | 1.25 |
| Jean-François Tardif | Strongco Income Fund (SQP.UN-TSX) | 16.26 |
| Peter Linder | Find Energy Ltd. (FE-TSX) | 9.27 |
| Mike Lathigee | Connacher Oil and Gas (CLL-TSX) | 3.84 |
| Michele Robitaille | Cathedral Energy Services Trust (CET.UN-TSX) | 11.9 |
| Kim Parlee | Medicure Inc. (MPH-TSX) | 1.56 |
© The Globe and Mail
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