Fund manager Veronika Hirsch says it's important to be a "nimble" stock picker now because she is expecting a tough ride on the Canadian market.
"I am not particularly bullish," says the president of Toronto-based Hirsch Asset Management Corp. "I do see the market ending the year on the upside -- but not by a lot -- probably a single-digit return."
The Toronto Stock Exchange 300-stock index has rebounded 18.75 per cent from its 52-week low of 6,301.52 on Sept. 21. Year-to-date, the index is off 2.67 per cent.
Ms. Hirsch says the market rally last fall stemmed from expectations of an economic recovery, but it was "a little overexuberant."
The market now wants to see proof of improving corporate profit, but that will not come until at least the second half of this year, she adds.
Ms. Hirsch is co-manager of iPerform Canadian Opportunities Hedge Fund and runs other mutual funds. She has been buying companies that will deliver decent earnings in the first half of 2002. "I don't trust the market to overlook bad numbers."
The manager looks for growth stocks at reasonable prices, but will pay for ones with strong management and growth prospects at the right part of the economic cycle. Stocks she recently bought or added to positions include:
Magna International Corp. (MG.A-TSE): The Aurora, Ont.-based auto parts maker, which closed yesterday at $97.35, hit a 52-week low of $65 last February, and a 52-week high of $111.85 on Jan. 7. Ms. Hirsch bought more shares recently when they dipped after Magna's chief executive officer Belinda Stronach took on the additional post of president after James Nicol quit. The manager says she is not too worried about the change, saying Magna has good growth prospects and trades reasonably at 11 times the 2002 profit estimate of $9 a share. She says Magna could hit $150 over the next year.
Masonite International Corp. (MHM-TSE): The Mississauga-based maker of doors, which closed yesterday at a 52-week high of $22.40, hit a 52-week low of $7.15 last February. Ms. Hirsch says Masonite, formerly known as Premdor Inc., has new management depth after buying supplier Masonite Corp. and will benefit from an economic recovery. She says Masonite -- which trades between eight and nine times its calendar 2003 profit estimate of $2.50 a share -- could reach $30 in 12 months if it achieves that earnings projection.
PanCanadian Energy Corp. (PCE-TSE): The Calgary-based oil and gas producer, which closed yesterday at $45.40, traded at a 52-week low of $35.05 last September, and a 52-week high of $52.30 last June. Ms. Hirsch bought the stock prior to the recent proposed merger of PanCanadian with Alberta Energy Co. Ltd. but expects the merged entity to be revalued higher if the deal goes through. She says PanCanadian's price-earnings multiple is two to three times lower than U.S. comparables. The stock of the merged firm could hit $50 in a year, she says.
Newmont Mining Corp. (NEM-NYSE): The Denver, Col.-based gold miner, which closed yesterday at $24.13 (U.S.), hit a 52-week low of $14 last February, and a 52-week high of $25.90 Wednesday. Newmont recently won a takeover battle for Australia's Normandy Mining Ltd. Ms. Hirsch likes Newmont because it is a way to "participate in the present gold rally," and is also a hedge in her portfolio because gold stocks tend to do well in weak markets.
Ms. Hirsch recently sold computer services provider CGI Group Inc. (GIB.A-TSE) to take profits and buy cheaper stocks that will benefit from a recovery. CGI closed yesterday at $10.01 (Canadian), down from its 52-week high of $12.89 on Jan. 7. Best Bets outlines what money managers are buying and selling.