Wednesday, October 27, 2010

Ryan Irvine, Toronto Money Show 2010

The next speaker I heard was Ryan Irvine from KeyStone Financial Publishing Corp. Keystone publishes two investment letters, one on Small-Cap stocks at Report and one on Dividend Stocks at Report. Every one else was willing to give at least one stock pick, but they would talk about past picks, but would not say anything about their current stock picks. They want you to buy their investment letters to get this information.

The full title of Irvine’s talk was “How To Beat The Market By Investing In Profitable, High Growth/Low Valuation, Small-Mid Cap Stocks”. He said the sort of companies they recommend is ones that will provide growth at reasonable rates. How they get paid is from clients that buy their investments reports.

For Small-Cap Growth stocks, they have 3 simple rules. The first is to buy great companies, with strong balance sheets and limited debt. What you want to buy is undervalued stocks. You also want to picks stocks that have good growth potential. Irvine says that they are investors not traders. The second rule is to have a realistic Time Horizon. (What they think is a reasonable time horizon is 1 to 3 years.) His third rule is that you want to construct an effective portfolio.

He said what you want to buy is undervalued stock. You want one that has real products and real customers. It may be hard to decide what a stock is really worth, but you need to focus on the fundamentals. You want a profitable company at a discount price. If a company has no earnings and no cash flow, do not buy. Irvine says you should not lose patience with a stock, that you should allow management to perform and the stock to react to growth in earnings and cash flow. A Trader keeps a stock for 1 day to 6 months. An investor waits longer and is patient with a good stock. Even if the stock goes down after you purchase it, if nothing has changed for the stock, you should keep it and wait. If there has been a fundamental change in the stock that would be a reason to sell it.

He says that a good past pick for KeyStone was Bridgewater Systems Corp (TSX-BWC). They picked it, as it was a profitable business. Another of the good past picks was Alliance Gain Traders (TSX-AGT) which was a profitable pick for their clients. However, he feels that this stock is now rated as a Hold. Another good past pick was China Agritech (NASDAQ –CAGC). They have now sold this stock completely.

Irvine says that an effective portfolio has 6 to 12 stocks of growth small-caps. You want to have 5 to 8 sectors represented. You should not have 20 plus small cap stocks in your portfolio. This is too many. You would want to diversify by sectors of oil and gas; tech; manufacturing; gold and precious metals; financial and retail. You would also want to diversify by region and have some Chinese and Indian companies off the US exchanges. You also will want to buy periodically.

He says to be an investor; you want to buy for the long term (that is 1 to 5 years). You also want to buy a business and this is the fundamental style. A speculator invests for 5 minutes to 6 months and buys symbols. A speculator is taking undue risk to try to produce a “blue sky” return.

He mentioned another past pick of Zungui Haixi (TSXV-ZUN). This company makes footwear in China. It has growth and a good valuation. (It is not an exporter. It has increasing revenues and a strong balance sheet. It also has a strong cash flow. They have recently launched new stores that they own (rather than have their footwear in other people’s stores). They have gone with their own stores because it will give them higher margins. They are also increasing their own production (rather than outsourcing some of their production). This company is thought of as a basic goods manufacturer.

Another company he mentioned as a good past pick was Asia Bio-Chem Group (TSX-ABC). This is a company that has moved from the TSX Venture exchange to the TSX. They will sell half their shares when the shares reached $1.75. They like this company because it has rising revenues. The next stock he mentioned was Orvana Minerals (TSX-ORV). This company was started in 2003 and it is a junior gold and copper play in Bolivia. Bolivia is a night mare place to have a mine, but this company has done well. It is now moving into Spain and the US. In Spain, they bought a mine with copper, gold and silver. They first bought this company at $.90 and it is now about $2.45. However, they still feel that this company is a buy.

Some one asked what Irvine thought of San Gold Corporation (TSX-SGR) and he said he did not like is as well as he liked Orvana and the company did not make their cut. He said that small companies go up and down a lot, but if you are patient, you will get long term growth.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website for stocks followed and investment notes. Follow me on twitter.

No comments:

Post a Comment