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One year after selecting five Canadian stocks for BLACK ENTERPRISE readers, Ken Kammal, chief investment officer of BASE Investment Management Co. in Cleveland, is still bullish on our neighbor to the north. He maintains that Canadian companies offer tremendous growth opportunities that will pay off for investors in the long run. From Sept. 26, 2005, to Sept. 26, 2006, his portfolio of five stocks increased an impressive 36.64%, far outpacing the S&P 500, which posted an 9.93% increase over the same period.
Investing in international companies requires investors to keep up with global trends and economic indicators specific to the country in question. In the case of Canada, the country has significant economic advantages. “Canada’s gross domestic product was more than $1 trillion in 2005 and grew at an annualized rate of 3.6% and 2.0% for the first and second quarters of 2006 respectively,” says Kammal. “I like to call Canada’s economy an emerging developed market with almost limitless potential.”
Two companies benefiting from Canada’s robust economy as well as the rise in gold prices are Bema Gold Corp. (NYSE: BGO) and Rio Narcea Gold Mines Ltd. (AMEX: RNO). Both companies mine gold and other precious metals and both produced lustrous stock performances. Bema’s shares rose from $2.86 to $4.41, a 54.20% jump, and Rio Narcea’s stock price increased from $1.35 to $2.14, up 58.52 %.”Gold will keep rising because in an international climate of war and global economic uncertainty, people are attracted to gold as a safe investment,” Kammal says.
Another clear winner was Clearly Canadian Beverage Corp. (OTC BB: CCBEF.OB), which markets premium alternative beverages and flavored water products. The stock jumped from $1.20 to $2.85, a 137.5% gain. Clearly Canadian is growing market share and expanding its international distribution of bottled water.
But not all of Kammal’s picks proved palatable. Canadian Superior Energy Inc. (AMEX: SNG), a crude oil and natural gas exploration company, saw its stock fall 18.5%, from $2.33 a share to $1.90. “Canadian Superior Energy’s greatest downfall was inadequate financing, which delayed expansion and hindered growth. Financing is scheduled to increase in 2007,” he says.
Resin Systems Inc. (OTC BB: RSSYF.OB), which develops composite products for large-scale global markets, also experienced difficulty. The stock fell from $2.12 to $1.09, a 48.6% loss. Kammal, however, remains confident in the company’s growth prospects. “Resin fell short of their production targets but has turned around in the last quarter of 2006,” he says. “This should increase their production, sales, and revenues in the coming year. I still like the stock.”