While I was at it, I thought I would collate all the stock recommendations Tom Stanley has made in the past.  Personally, I find it way more helpful learning from examples.  The following gives you an excellent peek into how the world’s best portfolio manager thinks, and how he values stocks.



1996-09-04 – Mutual funds Small size no bar to fat returns

Scintrex Ltd., a scientific instrument maker in Concord, Ont., is one of his favourite stocks. It makes up 32 per cent of the fund. He bought shares for $3.81 and they closed yesterday at $25.15 on the Toronto Stock Exchange.

"The company makes a very good portable bomber sniffer and it has just developed a portable narcotics sniffer," he said. "It currently trades at about 15 times earnings and I think there is a lot more potential."

Mr. Stanley also likes pharmaceutical company Cangene Corp. (CNJ.TO) of Mississauga, which is 87 per cent owned by generic drug maker Apotex Inc. of Toronto.

And he is keen on pharmaceutical company Dimethaid Research Inc. (DMX.TO)  of Markham, Ont., which is developing a prescription arthritis pain reliever and another drug to stimulate the immune system of AIDS patients. Not listed on the major exchanges, it trades on the Canadian Dealing Network.



2000-10-14 – Hot Hand

In mid-September, Mr. Stanley bought Sherritt International Corp. (S.TO), a Toronto-based firm with a $360-million market capitalization that mines nickel and cobalt in Cuba and produces oil and gas. Purchased at $5.20 a share as a opportunistic play on its low valuation, at $4.90 it's priced at four times earnings of $1.29 a share for the past four quarters, and 60 per cent of book value of $8.20 a share, Mr. Stanley says.

"This stock is cheap because people worry about the stability of its Cuban operations," he says. "Some discount for the Cuban base is reasonable, but this discount is just too large." Earnings are zooming because of skyrocketing prices for oil, gas and nickel, he says.

As well, he bought Benson Petroleum Ltd. (BEN.TO), a Calgary-based upstream oil and gas producer with a small, $42-million market cap. Purchased in late summer for an average cost of $1.85 a share, the firm, which is trading at $1.98, 4.2 times trailing cash flow of 47 cents a share and only 1.8 times net asset value per share of $1.13, is a victim of its low visibility. Revenue, which rose 47 per cent in 1999, compared with 1998, should rise even further in 2000 as oil and gas prices remain high, Mr. Stanley says. The firm is also buying back its stock, which supports its price, he says.

In the summer, Mr. Stanley also bought Tethys Energy Inc., a Calgary-based oil and gas producer, at an average cost of $1.80 a share. With a $50-million market cap, the firm is a play on rising oil and gas prices. "Tethys is trading at $1.71, 6.3 times trailing earnings of 27 cents a share and 4.3 times trailing cash flow of 40 cents a share." It's another oil company that's selling at a big discount because of its small size, he says. "If this were a large oil and gas producer, its ratio of price to cash flow per share would be appreciably higher. And if this firm gets to be larger, it will be more appealing to the market."



2001-09-28 – Tom Stanley

Among the $34-million fund’s holdings is TSE-listed Continental Home Healthcare Ltd., a Vancouver-based consolidator and manager of health-care equipment retailers.

“It's cheap, well-managed and in a fast-growing industry,” says Stanley, adding that Resolute Growth’s small size allows him to take meaningful position in Continental, which recently had a market cap of only $12 million.



2003-01-06 – 25 ways to play

Stanley likes to concentrate on stocks that are below most investors’ radar. This usually means investing in smaller companies (often, management of the companies he’s bought into have told him he’s been the first institutional investor to make contact or take a position) though Stanley says he won’t hesitate to put money into a larger-cap stock if it fits his philosophy and comfort level. Currently, only two stocks among his holdings—nickel, coal and oil producer Sherritt International Corp. (S.TO) and insurer Fairfax Financial Holdings Ltd. (FFH-SV.TO)—are large enough to be found on the S&P/TSX Composite index. He is also careful not to load his funds with too many companies. In mid-December he had only 15 stocks in his portfolio, the ones “that make the most sense” to him. “I might hold 12; I might hold 20. I would never expect to hold 100,” he says.

Stanley also says he doesn’t mind investing in a company that’s become unpopular, if, after due diligence, he feels it’s a sound choice. Sherritt, for example, trades at less than half of book value, in part because of what Stanley calls the “Cuba discount”—the nervousness surrounding the company’s hotel operations there. As for Fairfax, the stock, which once topped more than $600 a share, dropped to less than $120 recently. But Stanley says Fairfax “is still a strong company,” with its book value growing at an average annual rate of 30% over the past 15 years, yet trades at half its book value of $240 a share. He also points out the company’s chairman and chief executive, Prem Watsa, and other Fairfax insiders have been buying back shares. This fits into another strategy Stanley employs: favoring companies “where management eats its own cooking.”

One low-profile stock that Stanley took an interest in is Morguard Corp. (MRC.TO), a real estate holding company based in Toronto. It trades at about two-thirds of book value and three times cash flow. It also pays a 3% dividend. “There’s tremendous value here,” Stanley says, noting the stock softened after it was taken off the S&P/TSX index, mainly because it didn’t meet liquidity requirements. But Stanley isn’t afraid of stocks with little liquidity, saying he’s quite prepared to slowly accumulate “a meaningful position” if the company meets his criteria.

Another holding in the Resolute Growth Fund is Pulse Data Inc. (PSD.TO), a growing Calgary-based company that specializes in marketing and licensing “high-quality” seismic data to the oil and gas industry. It trades at about $1.20, a discount to its book value, and at a single-digit price-to-earnings multiple. Stanley has also bought into Dimethaid Research Inc. (DMX.TO), a pharmaceutical company based in Markham, Ont. Dimethaid’s two technology platforms focus on transcellular drug delivery and immune system regulation, with applications in such areas as relieving osteoarthritic pain and combating opportunistic infections associated with AIDS.  Stanley had previously owned shares in the company, but sold out of it in 2000. Even though he knew that Dimethaid, which had no earnings yet, had wonderful products in development, the stock (which had climbed to the mid teens) had “gotten way ahead of itself. Dimethaid, which now trades about $2.20, came down to levels that made it attractive again, says Stanley, who started buying it in the $2 range. “It’s a company I liked for its growth prospects, at a price I could feel comfortable with.”



2005-07-09 – Five simple commandments for smart investors

Tom tracks physical supply and demand meticulously. And although he prefers to invest in Canadian companies, where his access to information is best, he tracks supply and demand globally, then makes a few big bets and stays with them, disregarding quarterly -- and even yearly -- declines.

For example, in the second quarter of 2000 he made a big bet on oil, based on long-term demand/supply imbalance, even though public sentiment was very negative.

(On March 6, 1999, the Economist trumpeted: "The world is drowning in oil." In general, says Tom, you can make a lot of money betting against commonly held beliefs -- provided you do your homework.)

In 2004, when oil stocks became recognized, Tom concluded the best value was rather in oil sands; he bought UTS Energy Corp. (UTS.TO) in a big way, and is still a holder even though it has since tripled.

Finally, in 2003, he zeroed in on uranium -- again, same reasoning: Demand is rising (more reactors being built) while supply is depleting. Even Russia, having run out of bombs to dismantle, is prospecting for uranium. Yellowcake prices have risen more than 40 per cent annually over the last few years, and in next five years there is a possibility of a buying panic, says Tom; so uranium producer Cameco Corp. (CCO.TO) is a favourite holding.