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Mutual Fund News

Fund pro looks to energy sector to lead recovery

WHAT ARE WE LOOKING FOR?

It's worth looking at the top holdings of mutual funds to find out what the pros are up to in this market. You may gain comfort that they have bet on a stock that you may be considering. Or, you may figure it's just better to buy their fund. Today, we check out Mavrix Explorer, a small fund that has been gaining plenty of momentum lately.

MORE ABOUT THE FUND

The $2.5-million natural resource fund, which has been run by Paul MacDonald since the spring of 2007, surged 64 per cent so far this year until Tuesday.

Mavrix Explorer is an all-capitalization fund with a bias towards mid-cap stocks, and will also hold some private companies expected to go public down the road.

The fund has rebounded sharply after a dismal 2008 when it lost 67 per cent as the sector got creamed amid a global economic slowdown and credit crisis.

While economic data coming out these days is still negative, one glimmer of hope for the start of global recovery is the fact that purchasing managers' index of China's manufacturing sector rose 52.5 per cent in March, Mr. MacDonald said. "China is a major consumer of resources."

SO WHAT DID WE TURN UP?

The fund has gone through major makeover since last year with a bigger concentration now in the energy sector, which currently represents about 32 per cent of the fund. The energy sector will likely lead in a economic recovery, he said.

He likes TriStar Oil & Gas Ltd., a junior energy producer known for low-cost production. "It's got a great balanced sheet, great management and has been unduly punished," he said, adding it is also potential takeover target.

Within the base metals sector, copper prices have surged on demand from China. He now expects the next leg up should come from zinc and also nickel, largely due to reduced supply from mines closures.

Copper and zinc producer Teck Cominco Ltd. is "really a refinancing story" because it took on lots of debt to buy Fording Canadian Coal Trust, but it is now selling assets and poised for a revaluation once they get their balanced sheet shored up, Mr. MacDonald suggested.

Earlier this month, he sold his shares in U.S. aluminum giant Alcoa Inc. - which was in the portfolio at the end of March - in order to buy shares of Breakwater Resources Ltd. through a refinancing. This stock now represents 4 per cent of the fund.

"Breakwater is one of the few pure play zinc producers," he said. "The company has huge leverage in the movement in the price of zinc."

swon@globeandmail.com

***

Top holdings for Mavrix Explorer Fund as of March 31, 2009
$ Price52-wk52-wkYTD %P/E%% of net assets
Company nameSymbolApril 14high $low $price chgratioyield (Mar. 31)
Teck Cominco Ltd.TCK.B-T10.7452.903.3578.46.80.05.5
TriStar Oil and GasTOG-T10.0221.506.90-12.210.70.03.2
EnCana Corp.ECA-T54.4797.8141.36-4.45.63.63.2
AlcoaAA-N8.8344.774.97-21.60.01.42.9
Royal Nickel Corp. *2.7
Progress Energy ResourcesPRQ-T9.7724.207.60-12.814.64.12.4
Agnico-Eagle MinesAEM-T59.9780.7426.60-4.596.70.42.3
Terrane MetalsTRX-X0.230.620.1070.40.00.02.3
Petrobank Energy and ResourcesPBG-T25.7961.7216.2627.08.70.02.2
Phoscan ChemicalFOS-T0.322.480.195.00.00.02.1
*Private company
SOURCE: GLOBE INVESTOR; MAVRIX

© 2007 The Globe and Mail. All rights reserved.

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