Manager Picks: Paul Mesburis

Manager: Paul Mesburis, Mavrix Fund Management
Style: Growth and value
Fund: Mavrix Sierra Equity
Strategy: All capitalization, bottom up focus. Integrating environmental, social and governance factors with fundamental investment analysis.

“Equity markets in Canada and the U.S. in 2008 have significantly underperformed as the worries over the U.S. economy have had global repercussions. We believe that the U.S. subprime mortgage issue is largely behind us and now that the Fed has  started to aggressively cut interest rates, we believe that equity markets are well positioned for the remainder of the year.”

“Sierra Wireless’ stock price has been unduly punished from $24 to as low as $12 over the past three months primarily on competitive threat concerns. The stock is extremely cheap, trading at a P/E of less than 10x (excluding cash of about 25% of the share price). SW in 2006 and 2007 reported revenue growth of 107% and 94%, respectively, while operating margins scaled from being negative to 10%. In 2008, the growth is expected to continue with revenues up over 20%. When Trading Desk spoke to Mr. Mesburis last week, he predicted both strong fourth quarter results and share price performance from Sierra before it reported earnings on Friday. He was right and the stock rose 8.5% on Friday.

Canadian biotech company ProMetic Life Sciences is developing a drug (PBI-1402) for the treatment of anemia. “The company recently presented positive Phase 2 results at a conference by the American Society of Hematology and is in partnership  discussions with pharmaceutical companies. Pharmaceutical companies face an empty drug pipeline at a time when their financial position has never been so strong to shop for new drugs. Big pharma generated $50-billion of free cash flows last year and with patent expirations coming closer, more drug acquisitions should be expected and further support the case for biotech  investing in 2008. The market for all anemia treatment drugs is valued at US$8-billion and is forecast to increase to $15-billion by  2015.”

“Timminco is a low-cost producer of solar grade silicon and is benefiting by the strong global demand for solar energy. It commissioned its first furnace at the end of December 2007 and has signed contracts that will allow it to triple its production over the next 3 years. By early April, we expect the company to announce its capex plans that will allow it to ramp up production to meet its contractual requirements. The stock’s valuation is very cheap trading at a 2009 estimated P/E of less than 10x.”

“Skye Resources has a significant financing commitment for construction to start  n its nickel project in Guatamela. Given the current difficult credit and equity market conditions, the company may not be able to raise the necessary financing and may have to consider other alternatives. As well, if it is not able to raise funds by the spring, the project schedule may have to be revised and orders for critical long lead capital items may have to  be renegotiated.”

Originally published on FP-Trading desk