The following is excepted from an article in
The Toronto Star that appeared on October 10, 1998.
Star readers have their fingers crossed after plunking down $100,000 in play money for
The Star’s latest Investment Challenge.
Their deadline for entering was last Wednesday.
While everyone waits for the first report on results later this month, here’s a sneak preview of the stocks our panel of four investment professionals chose. With as many as 60,000 entrants, and so many possible combinations, it’s a mathematical certainty that several amateurs will do better than the pros…
Benj Gallander, publisher of
Contra the Heard, an investor newsletter and author of
The Uncommon Investor: A Contrarian’s Guide to Investing in the Stock Market.
His picks include:
Miramar Mining Corp., $30,000
Cypress Energy Inc. A, $30,000
Slocan Forest Products Ltd., $1,000
Forzani Group Ltd., $30,000
Devtek Corp. A, $ 1,000
Home Capital Group Inc. B, $8,000
Gallander’s investment newsletter tracks the stocks he holds. He claims a stellar average return of 27 percent per year over the past 10 years.
A year ago Gallander warned on CBC Radio’s
This Morning that problems in Asia would be more devastating than others were predicting at the time. He was right. Last April, as markets started to slump, he told readers of his newsletter he would not buy stocks until after tax-loss selling season in December, unless there was a special situation.
"We have only purchased one stock since then,” he said, except of course with play money for the Investment Challenge.
Like Chabot, he’s betting on a recovery in oil and gold with his choices of Miramar and Cypress. "Miramar has a clean balance sheet and has been at least quadruple its current price every year during the last five."
"They have also sold 99,000 ounces of gold forward at an average price of $409 (U.S.) until the year 2000. If people return to gold in this uncertain economic time, this company could benefit handsomely."
"Cypress is exceeding expectations even with the low oil prices, with revenues up 213 percent in the first half."
"This past summer, over $20 million was raised, significantly improving the balance sheet. With winter approaching, it is a good bet oil prices will go up. Plus, there is the OPEC wild card. Maybe they will finally begin to really stick to targets."
"Lastly, with the U.S. greenback being overvalued, a fall here could stimulate oil prices."
"Slocan has been making smart deals but they aren’t reflected in the stock price. They have also been cutting costs effectively. It is a certainty that the forestry sector will turn around, but questionable whether it will happen in the next three months, particularly with weak Asian demand."
"Slocan is an excellent long-term play that might jump sooner. Forzani Group, a retailer, is in the midst of a very strong turnaround. Sales were a record $125 million for the second quarter of the fiscal year and up 21.3 percent in the first six weeks of the back-to-school period."
"People might batten down the hatches with the recent economic news, but Christmas should do well by this company."
"Devtek, a maker of auto parts, has been getting its financial house in order. The company’s debt-to-equity ratio has been improving and its book value has been increasing dramatically in percentage terms."
"If there is a slowdown in the automotive sector it would impact Devtek’s revenues substantially. Fortunately a new contract for $200 million signed in August should help future revenues."
"Home Capital Group is a mortgage lender that specializes in lending to self-employed persons who may not qualify for a loan from a major bank."
"The company has reported tremendous growth in earnings but the stock got slammed when Canadian interest rates spiked to protect the dollar. With a price-to-earnings ratio of about 6.5 and lower rates likely, this one could take off again. Also, they are getting active on the Internet."