Friday, September 16, 2011

Money Show, Ryan Irvine

First of all, I would like to say that this is the last blog entry on the Money Show. On Monday, I will again start to review individual stocks, starting with AGF Management Ltd.

Ryan Irvine is from KeyStone Financial Publishing Corp. His talk was on “How to Construct a Small-Cap Growth Stock Portfolio – Top Small-Cap Stocks for the Fall of 2011”.

Ryan says he has 5 stocks to share today. The first is a cash rich software company, the 2nd is a cash rich junior gold stock, the third is an Auto Engineering firm, the fourth is a high growth IP company and the last a junior gold producer.

If you want to beat the market, you cannot be the market. That is you should not have too many stocks in your portfolio. 20 stocks should be the limit. At the 20th stock, you come as close to general market risk as you will ever come. You should go for a Focused diversification. Although Warren Buffet generally has around 33 stocks, 5 of his stocks make up 75% of his portfolio.

For a small cap portfolio, you should have 8 to 12 stocks, spending around $10,000 on each stock. Diversify them by area, such as manufacturing, gold and precious metals, oil, gas, healthcare, finance, tech and retail. Also you should diversity your portfolio by geographical area such as Canada, US, China, India and other BRIC countries.

Buy companies with solid cash flow, strong Balance Sheet and no or little debt. Such companies can not only weather storms, but they can take advantage of bad times. You should layer into positions. That is break up your investments into several purchases. Enter stock positions gradually. Buy KeyStone recommendations over time. Do not buy them all at once.

The first company is Enghouse Systems (TSX-ESL). This company has a pristine balance sheet. $3.50 of their share value is in cash. The dividend rate is 2.2%. They are a cash cow. They expect 2011 EPS to be $.59, which is a P/E of 15.5. However, if you strip out the $3.50 cash per share, P/E is at 9.59. They have raised their dividends each year for the past 3 years.

The next company is Monument Mining Limited (TSX.V-MMY). This is a cash rich junior gold producer. Their stock price is $.63. The company has no debt and is a low cost producer (around $317 per ounce). In Q3 2011 they made $.04 per share. For 2011 KeyStone expects EPS of $.16 with a P/E of 6.8. In 2012 they expect EPS to be $.12. At that time cash per share would be in the $.30 to $.35 range.

The next company is Exco Technologies Limited (TSX-XTC). It is a strong yield and growing auto engineering company selling at around $2.90. 2011 EPS is expected to be $.43 with a P/E of 7.1. It has around $.28 in cash per share and no debt. They have gradually raised their dividends over the years and currently has a 4% yield. We are going through an auto refresh cycle. So this makes this stock attractive.

The next company is WiLan Inc (TSX-WIN), a cash rich high growth IP Company. This company has lots of patents. He does not think that WiLan and Mosaid will come together. This company has $1.68 cash per share. 2011 revenues are expected to be $110 to $115M. EPS is expected at $.64 with a P/E of 10.82 (less cash P/E is 8.19). At the end of 2011 the company should have $2.00 in cash. Dividend yield is 1.4%.

The last company is Endeavour Mining Corp (TSX-EDV). It is a cash rich junior gold producer with a merger pending. It has $1.70 per share in cash and this is some 70% of its market cap. This company is in merger talks with Adamus Nzema to form MergCo. Its technical chart has been flat for the past year and this makes now a good entry point.

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.


  1. Susan,

    Thank you kindly for writing the blog entries on the Money Show. There is so much information (actually too much) and it is difficult to digest all of it. If you have the time, is it possible for you to summarize, in a couple of paragraphs, the most valuable information you have learned from the Show?

    I have learned that we should be: (1) buying gold and junior gold stocks; (2) investing in dividend paying stocks; (3) avoiding bank stocks until Europe stabilizes. Am I out to lunch?


  2. Personally I do not have gold or gold stocks, but a lot of people, especially at this show did. They thought everyone should have some, but most said to limit gold in your portfolio to 5%.

    Most felt it was just a matter of time for Greece to default. They were quite worried about French banks as they have a lot of Greek debt.

    Most also felt there was nothing wrong with our banks, but if there is another banking crisis that started in Europe, our banks will get hit initially, but will recover.

    And yes, a lot of people thought that buying dividend paying stocks to see you through the current stock market problems was a good ide.