Driving Smart Money: No. 1 in Stock Picking

June 2, 2005
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Canaccord Capital’s Sara Elford has been named Canada’s best analyst when it comes to picking stocks in the third annual StarMine/Financial Post analyst rankings.

Ms. Elford, an industrial products analyst who specializes in small-cap companies, helped her clients reap big rewards in 2004 with such picks as Badger Income Fund (up 109%), Carmanah Technologies Corp. (up 90%), Newalta Income Fund (up 49%) and Bennett Environment Inc. (down 84% with a quot;sellquot; recommendation).

Ms. Elford was followed by John Clarke, a former oil and gas and industrial products analyst with Octagon Capital. He recently left the analyst profession to join a startup international oil and gas company called Candex Energy Inc. His top pick last year was Centurion Energy International Inc., which rose 539%.

Third place went to Doug Cooper, an industrial products, food and retail analyst from Paradigm Capital. His best pick last year was Ceramic Protection Corp., which returned 398%.

Ms. Elford topped the roughly 400 Canadian analysts who cover at least five stocks as surveyed by StarMine Corp., a U.S.-based service that ranks analysts based on stock picking returns and accuracy of earnings estimates. It is used by such global brokerages at UBS, Merrill Lynch and Deutsche Bank and, in Canada, by BMO Nesbitt Burns, Canaccord Capital, RBC Capital Markets and Scotia Capital.

Rounding out the top five in this year’s rankings were Randy Cousins, an industrial products analyst from BMO Nesbitt Burns, and Brian Kristjansen, an oil and gas analyst with Dundee Securities (now with McFarlane Gordon).

StarMine also ranks analysts based on how their earnings estimates compare with actual results. David Gagliano, a metals and mining analyst with Credit Suisse First Boston, was tops overall in this category, followed by Philippa Flint, a health care analyst with RBC Capital Markets, and Prakash Gowd, a health care analyst with Canaccord Capital.

Mr. Gagliano credits the strength of his team, good communication and quot;a bit of luckquot; with his earnings estimates success in 2004. The key to picking earnings in the metals and mining sector is quot;closely monitoring the underlying metal price and adjusting the estimates accordingly,quot; Mr. Gagliano said.

In terms of rankings by firm, BMO Nesbitt Burns led with 15 finalists, compared with eight in last year’s rankings. RBC Capital Markets, the first place finisher in 2003, was a close second with 14 finalists in 2004.

Scotia Capital had 11 finalists in 2004 and CIBC World Markets had nine. There was a three-way tie for fifth place between National Bank Financial, Dundee Securities and Desjardins Securities.

The firm rankings are based on one point for each top 10 finisher in stock picking and earnings estimate, as well as one point for each of the top three finishers in industry stock picking and industry earnings estimates accuracy.

Several analysts also distinguished themselves this year and deserve mention. Jason Konzuk, a former analyst with FirstEnergy Capital, won the energy equipment & services sector and finished 10th overall in stock picking.

He was seventh overall in stocking picking in 2003 and sixth overall in 2002. No other analyst has placed in the top 10 more than once in the past three years. He also finished second in energy equipment stock picking in 2003 and first in 2002.

Mr. Konzuk’s top pick last year was Trican Well Services Inc., a well service company, up 152%.

Mr. Konzuk, who is now setting up a hedge fund in Calgary under the name Ironwood Assets, said that as an analyst he looked for stocks that were growth stories rather than value stories. He would quot;beat up on the find” — that is, get to know the company inside and out by doing a heavy fundamental analysis.

Scotia Capital’s Kevin Choquette also had an outstanding year in 2004, taking five awards. In stock picking, he finished first in banks and second in diversified financials, while for earnings estimates accuracy, he placed ninth overall, third in banks and first in diversified financials. He accounted for five of third-placed Scotia’s 11 awards.

Other notables include Dvai Ghose at CIBC, who placed tops in stock picking and earnings estimates for telecom services, and John Reucassel at BMO, who placed tops in stock picking and earnings estimate accuracy in insurance.