A banner year

Benj Gallander and Ben Stadelmann
Friday, January 9, 2004

Two weeks ago, we discussed the results of our US picks in 2003, and the time has arrived to home in on our Canadian choices. Fortunately, currency-exchange losses, which were a kick in the rear to our US results, don’t apply on this side of the ledger.

Copper was a major highlight of the portfolio, with the metal shooting up in value and companies in the field responding with strong gains. We owned two. Aur Resources, featured a couple years ago when it stood at $3.45, finished the year at $6.75. In August, Corriente Resources was highlighted while a tad north of a buck. Unfortunately, 70 percent was sold prematurely in October at $1.69. It finished the year at $3.30 and, auspiciously, a chunk is left to dangle.

Another stock that has been lovely is the hardware distributor and retailer Sodisco-Howden Group. Featured at $1.60, it capped off 2004 at $2.98. This outfit is looking to merge or be acquired. If a suitable partner can be found, more upside is likely in store.

We preferred the Legacy REIT debentures last April to the trust. The units have since eliminated their payout, while the debs continue to pay 7.75 percent.

The thinly-traded fish and pasta retailer High Liner Foods briefly jumped like a frog stung by electrodes after we reported on it. The surge from $9.50 to $12 was not maintained, as it settled back to $10.50.

In October 2003, the two companies highlighted in an article titled “Guide for the Young Contrarian” were the clothing retailer Pantorama Industries and the mineral explorer TVI Pacific. Our idea was to look at stocks higher up on the risk scale, but worthy of youthful trail blazers who can afford to shoot higher and further, but recover if the hunt comes up empty. Both of these stocks have performed admirably, with Pantorama up better than 100 percent on management’s takeover volley, and TVI dancing a double-plus. Maybe the Contra Guys should go for more of that youthful exuberance.

Alas, drawing us back to reality have been the unsuccessful forays. Though written about after the fact, Stelco was a twice-purchased disaster on which we took a tax loss, retrieving about a third of our investment. Since sold, the stock has doubled to toss additional egg on our face.

Magna International looked like a good short to us when it sat at $92. We are under water on this one; however, companies whose top brass take excessive remuneration do tend to tumble.

An interesting one to watch will be the flight of Air Canada after it emerges from bankruptcy. Our column about this company in January 2002 was less than complimentary, and a recent missive could not be defined as “nice.” However, depending on the refinancing deal and who pilots the operation, this airline could offer some tremendous recovery potential. Until additional turbulence is navigated, our Aeroplan points will be cashed as passengers, not investors.

And a drum roll, please, for our final numbers. Our combined portfolio was up a total of 68.4 percent. That increases our five-year annualized returns to 29.8, but actually knocks down the ten-year number to 24.5 percent. How sweet it was!