Plutonic Power Corp. Inc. Industry: Hydro power. The upstart electricity developer is run by Donald McInnes, a former mining financier. Partnered with General Electric, Plutonic is building a $660-million project north of Vancouver to power 75,000 homes and has proposed a much larger $4-billion development in the same region of the Coast Mountains.
WHAT ARE WE LOOKING FOR?
This is our final look this week at what the pros are buying.
It's a good idea to check out the top holdings of these investments to get stock tips, or gain insight into a fund. The names of these securities are usually available monthly or quarterly on the firm's website. Today, we examine Dynamic Power Small Cap Fund at www.dynamic.ca.
ABOUT THE FUND
The $270-million Canadian focused small-mid cap equity fund has been managed since 2003 by Alex Lane of Dynamic Funds Ltd. The growth-oriented fund gained 41.5 per cent in 2009. Over five years, it has posted an average return of 6.4 per cent compared with 5.8 per cent for the S&P/TSX Completion Total Return.
There's evidence of the early stages of an economic recovery. "Historically, small cap stocks have been the best place to be in the first few years after a recession and this time is no different," he said. "I believe that growth will outperform value [stocks] as this year companies will have to deliver on earnings versus expectations, and those that grow the fastest will be rewarded."
Commodity stocks are still interesting, but "as the year progresses, the industrial and technology sectors are going to become the leadership areas of the market," he suggested.
WHAT DID WE FIND?
An eclectic mix of income trusts and stocks, ranging from an energy driller and construction contractor to a power company.
Phoenix Technology Income Fund, an energy driller, is "a leader in providing differentiated technology and services that unlock the potential of unconventional oil and gas resources," said Mr. Lane.
Using advanced directional-drilling techniques, Phoenix is well positioned for growth beyond North America as drilling activity increases, he added. "Directional drilling now accounts for 70 per cent of wells drilled in North America." His two-year target on Phoenix is $15 a share.
Bird Construction Income Fund, a leading Canadian contractor, is "one of our favourite long-term holdings," he said. "Chronic underspending on national infrastructure has created a multi-year opportunity to rebuild or replace aging buildings and facilities. With a strong balance sheet, leading margins and a growing backlog, Bird is well positioned to win contracts across the country." His 24-month target is $50.
Another top holding is Plutonic Power Corp., a British-Columbia-based independent power company with run-of-river and wind power projects. Its East Toba-Montrose project will be running by June, while the Dokie project - western Canada's largest wind farm - will be onstream by early 2011, Mr. Lane said.
"With the B.C. government's commitment to green power, GE Energy as a strong financial partner and an impressive pipeline of additional projects … I think this is one of the most exciting growth names in Canada if you have patience," he said. Plutonic stock could reach $20 over five years, he suggested.