Friday, January 14, 2000
Rallying through higher interest rates
Buy growth stocks with proprietary technologies
Sonita Horvitch
Financial Post
The North American equity market managed to absorb rising interest rates very successfully last year and should continue to do so, says Philip Strathy, vice-president and chief investment officer at Strathy Investment Management in Toronto.
"It is widely expected that the U.S. Federal Reserve will raise rates by at least another 50 basis points this year," he says. The challenge for Alan Greenspan, Fed chairman, "is to move ahead of the bond market by tightening significantly to dampen inflationary expectations."
The firm manages money for institutional clients and high net worth individuals. For the equity component in portfolios, it is emphasizing growth stocks. Mr. Strathy and colleague Peter Schendel are focusing on technology stocks, choosing companies they consider have a proprietary technology in strong demand.
Mr Strathy selected:
- Book4golf.Com Corp. (BFG/ CDNX), which closed recently at $9 and has a 52-week high of $10.95 and a low of 30½. The software company, which was founded in Toronto but is now based in Scottsdale, Ariz., provides an Internet-based golf tee-off reservation system.
In a significant move late last year, the company signed a five-year agreement to allow its online system to be accessed by Sabre, a reservation system used by 42,000 North American travel agents. "Golf is a key sport for Baby Boomers who tend to travel to destinations where they can play the sport," says Mr. Strathy.
Another plus is the company's recent agreement with Jencess Software & Technologies Inc. of Edmonton. This will integrate Book4golf.com tee-off reservation system with Jencess' golf course point-of-sale software. This integrated application will provide individual golf courses with an improved marketing tool. Jencess has a significant client base in Canada and the United States.
A U.S. tech stock he likes is:
- Compaq Computer Corp. (CPQ/NYSE) $29 5/16 ($51 1/4-$18 1/4) (all related figures in U.S. dollars). The Houston-based computer company produces a wide range of products. "It is a major personal computer vendor and these sales are strong."
- Bell Canada International Inc. (BI/TSE) $33.25 ($38-$14.50). Montreal-based BCI develops and operates telecom systems primarily in Latin America and Asia focusing on wireless systems.
He notes that Latin America has settled down and is showing strong growth and that the company is well positioned there. It also has a very strong presence in Mexico, he adds. "The stock is a play on the growth of wireless use in developing countries," says Mr. Strathy.
He has sold his holding in BCE Emergis Inc. (IFM/TSE) $88 ($92-$14.50), a global provider of electronic commerce products and services. This stock was recommended in an October, 1999, column when it was trading around $32.80. "Even though we consider that the stock is still not overvalued, it had a tremendous move and we took our profits."
Mr. Schendel favours:
- Applied Terravision Systems Inc. (TER/CDNX) $1.75 ($1.90-30½).
The Calgary-based software company provides e-business information solutions to manage revenue-producing assets for corporations and governments. Its origins are in providing key software for the oilpatch, but it has broadened its reach. "The company fits our investment theme, it has a proprietary technology, the use of which is growing very rapidly," Mr. Schendel says.
Last fall, Bank of America entered into a five-year contract with Applied Terravision to use its software in the bank's private client division, which manages oil, gas and mineral properties. Applied Terravision has acquired several companies, mainly in the United States, to expand its scope to a broader range of industries.
- Visible Genetics Inc. (VGIN/ NASDAQ) $40 1/2 (US) ($47-$8 7/8). The Toronto-based biotechnology firm makes automated DNA sequencing systems and complete diagnostic kits for the analysis of genes linked to a disease. Its product allows doctors to more accurately prescribe drugs, and it is being applied in the treatment of AIDS.
Mr. Strathy continues to champion Research In Motion Ltd. (RIM/TSE) $77 ($92-$9), which makes and markets products for the mobile personal communications market. Its products include a two-way pager. He selected the stock in April, 1998, when it traded around $6.20.
He also still recommends Wi-LAN Inc. (WIN/TSE) $36.60 ($49.50-$15.15), which designs and sells a wide range of wireless networking technologies. It was a pick in the column this past July, when it was trading around $9.60. "We like companies with products based on wireless systems," notes Mr. Strathy.
Strathy Investment Management may hold positions in securities mentioned. |
