Digging for Deep Value
11/10/2009 12:01 am EST
Franco-Nevada, Migao, and Daylight Resources were among the more speculative picks aired at the recent Toronto MoneyShow, writes Gordon Pape in Internet Wealth Builder.
One of the highlights of the World Money Show held in Toronto last week was a "Power Lunch" session at which four stock pickers were each asked to provide five recommendations chosen on the theme: "Which Stocks Will Be the Next Ten-Baggers?"
Since attendees paid $59 to attend the session, it would be inappropriate for me to reveal all 20 stock picks here (and we don't have the space in any event). However, I'll pull back the curtain a little. Perhaps that will whet your appetite enough to attend the Power Lunch at the Vancouver World Money Show to be held April 6-8, 2010 or next year's Toronto show which will be held in October 2010.
We'll begin with Gavin Graham, Director of Investments for BMO Asset Management and a contributing editor to our companion Income Investor newsletter. One of his recommendations was Franco-Nevada Corp. (TSX: FNV), which owns royalty interests in gold mines and other mining ventures in Canada, the US, and Australia.
If the name sounds familiar, that should be no surprise. The old Franco-Nevada made a lot of money for investors before being taken over in 2002 by Newmont Mining. In 2007, a group that included some employees from the old company acquired several mineral royalties and other assets from Newmont and formed a new Franco-Nevada based in Toronto.
The company is thriving. Second-quarter earnings came in at 25 cents a share, up from 10 cents a share in the same period last year. Free cash flow was 27 cents a share. (Franco Nevada reports in US dollars.) The stock pays a semi-annual dividend of 14 Canadian cents a share, up 17% from last year.
Our next selection comes from Ryan Irvine, CEO of Vancouver-based KeyStone Financial Publishing Corp., which searches out high-quality small and mid-cap stocks. One of his picks that caught my attention was Migao (TSX: MGO). It's actually a Chinese fertilizer company but it is publicly listed on the Toronto Stock Exchange.
Although you've probably never heard of Migao, it's a large company, with $59 million in sales during the quarter ending June 30 and earnings per share of 20 cents (fully diluted), up from 16 cents in the same period a year ago. The stock fell to a 52-week low of $2.71 last December but has since recovered. Mr. Irvine believes there is a lot of upside potential from here.
And what stocks did I select? My number one choice was Daylight Resources Trust (TSX: DAY.UN) which Irwin Michael recommended in this newsletter on Oct. 5 at C$8.28 and I previously picked for The Income Investor in September at C$7.96. [See the recent MoneyShow excerpt here.] Theoretically, it could be a ten-bagger if the prices of oil and natural gas went crazy but a 12-month target of $15-$20 looks much more realistic. [Shares closed at C$9.43 in Toronto Tuesday—Editor.]