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Mutual Fund News

Seeking ideas the market doesn't appreciate

swon@globeandmail.com

What are we looking for?

This is our final look this week at what the pros are buying.

By perusing the top holdings of mutual funds, you might be able to discover a gem that is not yet on your stock radar screen. Today, we look at Trimark North American Endeavour Class (http://www.invescotrimark.com).

More about the fund

The $12-million North American equity fund has been run by Jason Whiting of Invesco Trimark Ltd. since 2007. The fund gained 14.6 per cent for the year ended Sept. 30, versus 5.7 per cent for the MSCI North American Index in Canadian dollars. Over three years, the fund has posted an average annual return of 3.2 per cent, compared with a loss of 5.6 per cent for that benchmark.

Mr. Whiting, who runs a concentrated portfolio of around 20 companies, looks for attractively priced stocks of quality companies run by strong management teams. He also likes to unearth "a big idea that the market is not appreciating."

The manager, a self-described contrarian by nature, is finding more opportunity in the U.S. market than in its Canadian counterpart because the U.S. economy is going through a rough patch, he said. "That means [U.S.] stocks are priced cheaply."

What did we find?

An eclectic mix of stocks invested in sectors ranging from agriculture and machinery to the investment fund industry.

BioExx Specialty Proteins Ltd., which extracts oil and proteins from oilseeds for global food markets, is "probably the best idea that I have looking over the next five years," Mr. Whiting said.

The $15-billion protein market for human consumption is largely met by animal-based products or soy, he said. "Canola has a high protein content, but it has been difficult to access that. BioExx has cracked that secret, and it has a new technology to get protein out of canola."

BioExx expects to begin selling canola protein next year from its first plant in Saskatoon, he said.

Rocky Mountain Dealerships Inc., an operator of agriculture and construction equipment dealerships, which is 30 per cent owned by management, also has potential, he said. "There is a large margin-improvement story here" because the firm has been buying up other dealerships in western Canada, he said.

Mr. Whiting also likes U.S.-based global asset manager Legg Mason Inc., despite its struggle with net redemptions over the last couple of years because of fund performance problems. Performance has been improving, while the firm has been cutting costs and its stock will be "more highly valued in the future" because it trades at a significant discount to its peers, he said.

***

TOP EQUITY HOLDINGS IN TRIMARK NORTH AMERICAN ENDEAVOUR CLASS AT SEPT. 30

Company Symbol $ Price Oct. 20 52-wk high $ 52-wk low $ YTD % price chg P/E % Yield Market cap ($-mil) Volume
BioExx Specialty Proteins Ltd.BXI-T2.732.871.2830.0N/A0431.7485,614
Newalta CorpNAL-T9.3310.247.3416.325.92.8452.450,991
Rocky Mountain DealershipsRME-T7.9010.836.00-13.78.32.3144.211,053
Corporate Executive Board*EXBD-N30.5533.5019.5833.920.91.41,046.61,455,080
Rovi Corp.*ROVI-Q49.4753.0027.0055.248.505,048.9672,945
Cadence Design Systems*CDNS-Q7.738.315.3629.177.302,089.32,371,562
Celanese Corp.*CE-N33.9535.8323.475.89.40.65,318.91,195,316
Arbitron*ARB-N29.3933.5220.9625.519.71.4782.4260,422
Legg Mason*LM-N31.4634.8324.004.3N/A0.55,145.01,697,275
*In U.S. dollars. Source: Globe Investor

© 2007 The Globe and Mail. All rights reserved.

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