Pinetree Capital: Investing in an Investor
By Eric Pratt
www.ResourcexInvestor.com
Seldom a week passes without news of another investment by Pinetree Capital Ltd. (TSX:PNP) in an emerging resource or technology company. Pinetree has a lean corporate structure and visionary business model that makes it part investment fund, part investment bank.
But unlike funds, who evaluate potential investments largely according to formulas and criteria that meet a pre-defined investment model, Pinetree chooses investments based on sector, asset quality, and management. When they see a company they like, they are able to structure a financing in the target company that is good for both Pinetree and the company in whom they invest.
Pinetree's investment approach is to build a macro position in a sector, find the micro-cap opportunities in that sector and work with those companies to build them to commercial production and create an exit.
Its like having your own fund managed by pros with a transparent track record of triple (not double) digit growth.
Triple digit growth? Sounds like the claims of fringe newsletter writers.
But looking at Pinetree’s performance on an annualized basis from June 04 to June 07 demonstrates a 165.5% over the three year period. Over five years, that number is 122.3%.
How many funds deliver that kind of performance?
Since its founding in 1992, Pinetree has tended to bet heavily on sectors it sees as in the early stages of a growth period. Initially focused on technology, its investments are now almost exclusively resource sector explorers, with a heavy bias towards precious and base metals, as well as energy.
Which means that it suffers when the commodities suffer. Pinetree reported a loss of $92.3 million during the third quarter of 2007, and its share price dropped $10 since its high of just over $16.00 back in April.
But does that make Pinetree shares cheap in the $4 to $6 range? The company remains bullish.
"August was a difficult month for global financial markets as a result of credit issues primarily in the United States," commented Sheldon Inwentash, chairman and chief executive officer of Pinetree Capital. "However, our investment strategy has fundamentally not changed. We maintain a very positive outlook for resources and commodities, driven largely by growth in Asia and India. We think that the recent decline in the market values of the junior types of resource companies that we invest in, together with the recent completion of a $72-million financing, represents an attractive investment environment for us."
Pinetree’s recent investment activity bears testimony to the statement.
So far in the month of February alone, Pinetree has invested in 5 companies, including Aldershot Resources (TSX.V:ALZ), Gold Summit Corp (TSX.V:GSM), newly public Colossus Minerals (TSX:CSI), Nyah Resources (TSX.V:NRU), and Rockgate Capital (TSX.V:RGT) . Pinetree currently holds investments in over 450 companies of which the vast majority are TSX Venture-listed companies.
Pinetree was founded in 1992 by Sheldon Inwentash to be a venture investor in early stage, emerging technology companies. It was initially capitalized with approximately $4 million in order to acquire a 30% stake in a Montreal-based biotechnology company called BioSignal Inc. which was subsequently acquired by Perkin Elmer.
In 1994, Mr. Inwentash founded Genevest Inc. to be a venture investor in early stage, emerging biotechnology companies. Its initial capitalization was also about $4 million, and that money was used to start Visible Genetics Inc.
VGI was the world’s first company specializing in pharmacogenomics, went public on NASDAQ in 1996, had a peak market value of over US$1 billion and was eventually sold to Bayer. Genevest’s profits on this investment totaled over $35 million. In 2006,
Pinetree ranked 5th out of 300 small cap companies by Canadian Business Magazine for total 1 year return.
Mr. Inwentash, an Ontario-based chartered accountant and philanthropist, recently donated $15 million to the Faculty of Social Work at the University of Toronto with his wife, Lynn Factor. The gift is the largest ever made to a social work faculty in North America.
The donation will establish 50 graduate student scholarships and five endowed chairs. In recognition of the donors, the faculty will be renamed the Factor-Inwentash Faculty of Social Work. |
