CANADA TIP SHEET: Aggressive Growth Manager Likes Techs
DJ CANADA TIP SHEET: Aggressive Growth Manager Likes Techs
By Mary Weil
TORONTO (Dow Jones)--Brendan Kyne, manager of Marathon Mutual Funds' Marath
on
Plus Aggressive Growth fund, likes technology and biotechnology stocks.
In his aggressive growth style of investing, Kyne said he looks for five fa
ctors
in selecting companies. He looks for companies with a key leadership position i
n
a new area. Strong revenue growth is also key, although Kyne notes it's not
important to him if the company has earnings.
Kyne looks past valuations as he thinks they are no longer very important.
The
valuations he looks at are relative to U.S. companies, not Canadian ones.
A strong technical posture and a low profile in the investment community ar
e also
factors Kyne looks for. He said his focus is on getting in early, not too early
,
but before U.S. investors hit the scene.
Unlike many other investors, Kyne doesn't think value investing will return
. Fund
managers who manage money in Canada according to value paramaters or growth at
a
reasonable price are "just getting killed," he said.
"I think there's a paradigm shift going on in the Canadian market and it's
been
going on for about 12 months. The only new money coming into the Canadian marke
t
is U.S. capital" and it wants
to chase technology stocks, he said.
Likewise, more and more Canadian investors are putting their money outside
of
Canada in clone funds and in foreign funds, as the RRSP foreign content limit h
as
been raised to 25% from 20%, Kyne said.
"So I think there's an underpinning selling that's going on out there that'
s
going to continue," he said, adding that's why the Toronto Stock Exchange's 300
composite index has split into two different markets - the technology side, whi
ch
is responsible for most of the market's gains, and the old-economy stocks which
aren't doing much.
Likes Descartes, Global Thermoelectric, Certicom
Kyne said there are several stocks that, as of today, will provide "great"
upside.
He likes Descartes Systems Group Inc. (DSGX), a business-to-business e-comm
erce
company, because of its operations in e-commerce logistics solutions.
Descartes recently agreed to purchase privately-held E-Transport Inc. for U
S$80
million in
stock. E-Transport provides software and logistics exchange solutions
to 80% of the ocean-transportation market, so Descartes will be able to link
shoreside rail and truck operations with ocean carriers, the company said at th
e
time of the buy.
Kyne's target on the stock is C$200, and he said he thinks U.S. investors w
ill
pick up on the story. Descartes is trading Thursday morning at 95.00 in Toronto
.
Global Thermoelectric Inc. (T.GLE) is another favorite. The company is deve
loping
solid oxide fuel cell power generators for both home and industrial uses.
Until recently, Global Thermo only had an agreement with Delphi Automotive
Systems Corp. (DPH) but at a recent auto show, BMW AG said it is studying Globa
l
Thermo's fuel cell, Kyne said.
Kyne's current favorite stock is Interprovincial Satellite Services Ltd. (V
.ISS),
which provides value-added wireless data and fax services. The company is
targetting the Canadian oil and gas industry and recently signed
up several new
companies, including Talisman Energy Inc. (TLM), Renaissance Energy Ltd. (T.RES
),
Cypress Energy Inc. (CYZ.A) and Cabre Exploration Ltd. (T.CBE).
Interprovincial Satellite will provide the oil-patch companies with wireless d
ata
application services which will allow continuous monitoring and control of remo
te
assets, such as gas wells, through a standard Internet Web browser from the
office and via handheld wireless devices from the field.
Kyne said Interprovincial Satellite is completely unknown in the U.S. and i
s
fairly unknown in Canada, which is one of the best times to invest.
Despite the spectacular run Certicom Corp. (T.CIC) has had, Kyne is still u
pbeat
about the future for the network security solutions provider.
Certicom has applied for a Nasdaq listing, which should invite the U.S.
investment community to pick up the story, he said. Investors ask if the has
stock gone too far - Certicom has risen from a 52-week low of 10.35 in July,
topping out at 250.00 earlier this month - but Kyne notes other Canadian stocks
have risen ahead of their Nasdaq listings and still taken off after. Certicom i
s
trading Thursday at 215.00 in Toronto.
On the biotechnology side, Kyne likes Dimethaid Research Inc. (T.DMX), whic
h is
waiting for U.S. Food & Drug Administration approval for Pennsaid, its topical
lotion developed to relieve osteoarthritic pain.
Kyne noted the company recently acquired a manufacturing plant in Quebec to
produce commercial quantities of Pennsaid in anticipation of further regulatory
marketing approvals. The U.K. Committee on Safety of Medicines has recommended
that a marketing authorization be granted for Pennsaid.
Leery Of Canadian Energy Stocks
Kyne said he's been told to get into Canadian energy stocks, but he cites t
he
money-flow issue as holding them back. "The Canadian market has changed. Money
flow makes a big difference. It didn't used to because all the Canadi
an equity
funds used to get money in by the week. Now, 90% of them are having to pay mone
y
out so instead of buying stocks, they have to sell them to fund redemptions," h
e
said.
Kyne said he's comfortable with between 25 and 30 stocks in the fund and he
likes
to carry 5% to 10% cash.
Although the fund hasn't been around long, it has done well, with a return
of
about 112% year-to-date and 220% since it was founded in mid-December, he said.
Kyne said he knows his limitations and therefore decided to close the fund
when
it reached C$100 million in assets, a level it attained Feb. 23, just over two
months after the inception of the fund.
Following his company's strict code of ethics, Kyne said his entire net wor
th is
tied up in the mutual fund.
Kyne said he isn't concerned about the possibility of a correction, as
corrections in the past few years have been excellent buying opportunties.
Investors should own good stocks and hold them for the long-te
rm, he said. Kyne
has a six-to-12-month timeframe when he buys stocks.
A typical stock cycle is about 24 months long from an unknown company to a
U.S.
listing, Kyne said, adding he tries to get in on the third to sixth month, and
ride it to the 18th month.
In terms of his outlook, Kyne said he expects the Canadian market will cont
inue
to be volatile because of the increasing number of U.S. investors in the market
.
-Mary Weil, Dow Jones Newswires; 416-306-2028;
mary.weil@dowjones.com
(END) Dow Jones Newswires
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Sorry about the format folks but that's the way it came off my Investor's Edge news report and I don't have the time to fix it.
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