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Gold/Mining/Energy : Nuvo Research Inc -- Ignore unavailable to you. Want to Upgrade?

To: Cal Gary who wrote (6183)	12/13/2000 6:02:13 PM
From: David Graham	Respond to of 14101

CG, I was hoping Graham would be kind enough to post what criteria DMX needs to meet in order for an (aggressive, bio, science, consumer or just plain big reputable) equity fund to take a position. Criteria really boil down to size and the company’s profile. The fact is that DMX is a small cap stock, and will be considered so probably until it cracks the TSE 100, a long way away. Until then, it will generally be ignored by large cap Canadian equity managers, unless they have become convinced of the company’s prospects. It is very rare for large cap managers to buy small cap companies. The one positive thing we’ve got going for us is that there are so few quality drug companies in Canada that managers have to look hard at the sector. This situation only got worse with Monday’s BioChem announcement. The only likely buyers right now are small cap and health/biotech funds. There will be exceptions, I’m sure, but by and large, big money management firms buy shares in big companies. Think of it like this, if Manager A runs a portfolio with only 40 stocks (not uncommon), and has $10 billion in assets, and they want to add a 2% weight in DMX to their portfolios, they need 10,000,000,000 * 2% = $200,000,000 worth of stock. That’s roughly half the market cap. Where the hell are they gonna get that from? (Maybe Wolf can lighten up?[ggg]). What if more than one manager wants to buy it? If somebody did buy that much, they'd run DMX, and, money managers do not buy controlling stakes in companies. Again, we're hurt by the small cap situation, and we're hit again by the small float if this 40% institutional ownership business is correct. Not that I doubt the number, I just wonder how committed these "institutions" really are. Don't take this too negatively. Those are pretty much the Peter Lynch arguments for buying small cap stocks, get 'em before the big boys find out about them. Then when the share price goes up to $25 and the market cap closes in on $1 billion, the big buys should start buying. And as long as DMX executes (still a wild card despite all the cheerleading), prospects will look good, more people will want to buy, and POOF! DMX is suddenly a mo-mo stock. (I might be getting carried away, but you get the picture) If 40% of DMX shares are in institutional hands: - what exactly does that mean? - What criteria do these institutional firms use? - I believe someone here posted DMX was in a Dynamic fund, but again which one of their portfolios? I’d love to know who these institutions are. I’m pretty sure they are not large cap Canadian equity funds.