Peter Hodson senior portfolio manager Sprott
Follow the experts across the Street
Profit by buying companies led by former analysts
Peter Hodson, Financial Post
Published: Thursday, April 05, 2007
https://www.canada.com/nationalpost/financialpost/story.html?id=bea1fe5e-64f7-41f1-aa18-a60dbfde8fde&k=64302
One of the best ways to make money in the market, in my opinion, is to follow successful management teams to new ventures.
I fondly remember making money in Strike Energy Inc. in 1996, when Ed Sampson and his team sold the company to Tarragon Oil and Gas after building Strike into a successful small cap oil and gas producer.
So, when Mr. Sampson founded and developed Niko Resources, it was easier for me to invest in the then-unheard-of Niko because of my knowledge of the team.
Font: ****Niko now has a value of more than $3-billion, and the stock has gone from below $1 per share (split-adjusted) in 1996, to more than $84 per share today.
More recently, investors have followed James Douglas Skippen to Wi-Lan Inc., after his successful stint winning patent disputes for Mosaid Inc. Mr. Skippen was named CEO of Wi-Lan on May 16, 2006, with Wi-Lan stock at 80?. Since then, he has already signed a patent deal with Nokia and executed a merger with Tri-Vision Inc. With Wi-Lan now at $6, investors who followed Mr. Skippen have clearly been rewarded for their loyalty.
I got to thinking, however, whether this "follower" strategy might work on the analyst community. Every so often, a sell-side analyst jumps to the corporate world, and takes a senior position at an operating company, leaving their analytical world behind to jump into the real world, so to speak. Since these individuals, as analysts, spend their whole career typically becoming experts in one industry, for them to suddenly leave and join a company in that industry should make you stand up and take notice. So I rounded up a list of analysts and senior executives at brokerage firms who have changed careers to become executives at operating companies. There are no recommendations here -- but surely the individual leaving saw something they liked at their respective companies to entice them to bail out of the sell side.
Doug Janzen is now president and chief business officer at Cardiome Pharma Corp., a cardiovascular drug development company. Mr. Janzen joined Cardiome in January, 2003. Prior to that, Mr. Janzen was an analyst and managing director, health sciences, at Sprott Securities (now called Cormark Securities). Mr. Janzen was a biotech analyst for six years.
Of his move, Mr. Janzen says, "I love the sense of accomplishment you get when you put together a team and a company and have the type of success we have (at Cardiome). I was fortunate to make good money on the Street, which allowed me to invest 100% of my first-year's salary at Cardiome into buying shares in the market."
That was a good move for Mr. Janzen. In January 2003 Cardiome stock was $2.50 per share--it's $11.50 now.
In the gold sector, analyst Christopher Bradbrook was an analyst for six years in the gold sector before leaving Laurentian Bank and moving first to Goldcorp Inc. and then New Gold Inc. in October, 2004. He is now president and CEO of New Gold. New Gold has a market capitalization of more than $200-million, and, once again, it looks like a good move for an analyst. New Gold shares were $4.60 per share at the start of October, 2004 -- they are above $8 now. Mr. Bradbrook says his sell-side experience has certainly helped him, especially in dealing with financings and knowing what investors expect.
Next up, John Clarke of Candax Energy Inc., where Mr. Clarke is now executive vice-president, corporate, where he has been since September, 2004. For 20 years he worked at international oil and gas companies before becoming an analyst at Deutsche Bank in 1996 and Octagon Capital in 2001.
At Octagon, Mr. Clarke was a senior oil and gas analyst, with a strong focus on international names. Mr. Clarke was one of the earliest analysts who picked up coverage on the aforementioned Niko Resources. Candax, a $100-million company, has had mixed drilling results in its international operations, and the stock is down 9% so far this year. It was a private company when Mr. Clarke joined it.
Another biotech analyst who joined a company is Andre Uddin, formerly National Bank's senior pharmaceuticals & biotech analyst. Mr. Uddin is now VP of strategic development at Transition Therapeutics Inc., a company developing Alzheimer's and diabetes therapies (market cap $300-million). So far, it has been a very successful move for Mr. Uddin. He started last Sept. 12, with the stock at 58? per share. It is now $1.80, more than a triple. We can't, of course, give all the credit to Mr. Uddin, but I am sure his sell-side experience was helpful early on as Transition completed a $25-million private placement just two months after he joined the company.
As mentioned earlier, I am not drawing any conclusions here. But if an analyst believes a company is good enough to change careers for, that's probably a good starting point to do some of your own due diligence.
peter@sprott.com
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- Peter Hodson is a senior portfolio manager at Sprott Asset Management. He, his firm or its clients may hold positions in the securities mentioned.
© National Post 2007