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Meet Canada's best stock picker Alan Knowles

Haywood Securities' Alan Knowles was named the top stock picker in Canada

Chris Bolin Photography Inc./© 2010

Alan Knowles is in a line of work where profit lies in predicting and uncertainty is an enemy.

That's why he has never much liked natural gas.

"It's very much weather-dependent," he said, "And you can't really predict that unless you read the Farmer's Almanac."

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Oil, on the other hand, is a more reliable commodity, riding the more predictable waves of the global economy. And for Mr. Knowles, a Haywood Securities analyst who covers mostly oil-focused companies, oil has been a far more lucrative commodity, too.

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Last year, amid the tumult of the economic crisis and the subsequent hope of a rebounding economy, his stock picks beat the market by 32.2 per cent, earning him the StarMine analyst award as Canada's top stock picker.

Leaning on oil, which more than doubled in value over the course of 2009, didn't hurt.

Neither did Mr. Knowles' deep knowledge of Canadian companies with international operations. Those companies suffered extraordinary declines in late 2008, as market uncertainty prompted investors to bring their money closer to home. But they also staged a stronger than average return.

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Mr. Knowles began to cultivate his knowledge of the international space half a decade ago, when he realized it was an area that lacked coverage but had the potential for great returns.

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"The companies that I'm covering with international assets have exposures to what could be very significant events [new discoveries]whereas in Canada, it's a different kind of strategy."

In other words, there may be more oil left to find elsewhere than there is in an Alberta land base already poked through with drill holes.

The major exception: companies using new technology to pull new volumes of crude from reservoirs considered too tapped out or impossible to produce. Following those names - which include PetroBakken Energy Ltd. and Crescent Point Energy Trust - has proved profitable, as they discover new reserves.

"There's still also a lot of undeveloped land that's within drilled areas," Mr. Knowles said. "It's likely going to be productive ultimately."

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Mr. Knowles has worked as an analyst for 14 years, all but the first four with Haywood. He began his oil patch career working on the corporate side, where he rose to the position of chief financial officer at Petrorep Resources Ltd., a small junior company. But the other side of the Street had always looked appealing, and he eventually became a certified financial analyst.

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He likes the action of being an analyst, and he likes the freedom.

"You're dealing with numerous companies so it's always interesting," he said. "And at Haywood I was given the opportunity to pick companies I thought were good value stories as opposed to being assigned companies."

The old corporate skills have come in handy, though. He understands how companies run on the inside and has a strong appreciation for good management and still knows a lot of people he first met before he became an analyst.

It has also given him an appreciation for what he calls "hard value assets" - the kind of lands that can be turned into lucrative property by drilling them and discovering oil. Markets often don't sufficiently value those lands until they are proven to hold reserves. But companies who have potential to discover more in their portfolio have "the ability to grow if they spend the capital," he said.

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Sticking with that kind of company has proved to be a good strategy. Take Petrominerales and Petrobank Energy and Resources Ltd., both exploration-focused companies that were hit hard early last year by the downturn. Mr. Knowles hung in with them.

"The underlying value was there so we stuck to our guns and those were stocks that came back stronger than the others because they were hurt more," he said.


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About the Author
Asia Bureau Chief

Nathan VanderKlippe is the Asia correspondent for The Globe and Mail. He was previously a print and television correspondent in Western Canada based in Calgary, Vancouver and Yellowknife, where he covered the energy industry, aboriginal issues and Canada’s north.He is the recipient of a National Magazine Award and a Best in Business award from the Society of American Business Editors and Writers. More

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