Gentry a top pick!
Here is an article written by Stuart Weinberg of Dow Jones newswire highlighting Tom Stanley's (of Thomas Kernaghan) Resolute Growth Fund and its stellar performance during the past 12 months.Please note that Gentry Resources, among other oil and gas stocks, is one of Tom's top picks and performers.
By Stuart Weinberg
Of DOW JONES NEWSWIRES
TORONTO (Dow Jones)--Keep on ignoring those small caps. Suits Tom
Stanley, portfolio manager at Thomson Kernaghan, just fine.
And why not? The manager's Resolute Growth Fund is up 35% for the 12
months ended Feb. 28, according to GlobeFund. That compares to a 13% decline
by its peers during the same period and a 9.5% drop by the Nesbitt Burns
Canadian Small-Cap Index.
For the three months ending Feb. 28, the C$22.5 million fund
returned 19.15%, compared to -0.20% by its peers and 3.17% by the index. While his style is bottom up, Stanley doesn't adhere to any single investing philosophy. Some stocks in the portfolio, such as Sherritt International Corp.(T.S), can be characterized as value stocks, while others are considered growth stocks.
"I buy what makes sense," Stanley said. "If the market starts
looking too much at value and not looking at growth, then I would look for growth opportunities. I think the key is to be flexible."
Stanley maintains a portfolio of only 14 stocks, which gives him an
opportunity to get to know the companies in which he's investing. It
also means he's investing in his top choices.
"I prefer to put money in my very best ideas rather than number 91
or number 92 on my list of choices," Stanley said.
Two-Thirds Weighted In Oil And Gas
About a year and a half ago the fund was 66% weighted in biotech and
health-related stocks. At the end of the first quarter of 2001, the
fund was about 68% weighted in oil and gas stocks.
The shift to oil and gas occurred in early 2000. At the time, the
fund's biotech stocks were fully valued and Stanley was casting about for
other opportunities. He noticed that natural gas prices were surging even
though last winter was one of the warmest on record. Normally, a warm winter
results in a natural gas surplus, as gas isn't needed as much for heating.
That didn't happen last year due to the tight supply of natural gas. Yet, while
energy prices surged, this wasn't reflected in the share prices of oil and
gas stocks.
"One of the things that investors often do is they look in the
rear-view mirror and say, 'Well, oil and gas haven't been doing very well for
the previous few years, so why would they do well now?,' " Stanley said.
They'll do well because reserves are declining, particularly in the
case of natural gas, and no significant new discoveries are anticipated for
several years. In addition, water reserves in the U.S. are low, so
hydro-electric power production will decline, meaning reliance on electricity derived
from natural-gas-fueled power plants will be even higher than usual this summer,
Stanley said.
Some of the oil and gas stocks in the portfolio include: Tethys
Energy Inc.(T.TET), Zargon Oil & Gas Ltd. (T.ZAR), Summit Resources Ltd. (T.SUI),Courage
Energy Inc. (T.CEO), Danoil Energy Ltd. (T.DAN) and Gentry Resources Ltd.(T.GNY).
<em> While these companies have benefited from rising energy prices, they
have also increased production and expanded reserves, Stanley said. "Sure,
their earnings and cash flow are growing because commodity prices are
higher," he said. "But I've looked for companies that have inherent growth in them
as well."
Stanley also looks for companies that are prepared to invest in themselves -it shows that they have faith in their ability to run the company, he said. In addition, management has an obvious incentive to make sure the company performs.
All of the oil and gas stocks in the fund, as well as Canadian Crude Separators Inc. (T.CCR), the fund's lone oil and gas field services company, have instituted share-buyback programs during the past 18 months,
which also indicates that the managers of these companies felt their share prices were undervalued.</em>
Stanley said he doesn't fear the onset of a bear market. Indeed, he
said he welcomes it as a "friend," as it opens up new opportunities. He has
added to the fund's lone remaining biotech holding, Cangene Corp. (T.CNJ), but
is otherwise holding his cards close to his chest.
One thing Stanley does advise is not to overlook thinly traded
stocks. Too many investors are hunting for the quick profit and invariably shun
thinly traded, relatively illiquid small caps. But often, that's exactly
where bargains are found.
"I wouldn't hesitate to buy a large-cap (stock) if the opportunity
presented itself," Stanley said. "But the opportunities are so good in the
small-cap sector."
-Stuart Weinberg, Dow Jones Newswires; 416-306-2026;
stuart.weinberg@dowjones.com
DOW JONES NEWS 04-10-01 |
