Written up in Financial Post...............................
2010-12-01 09:47 ET - In the News
The Financial Post reports in its Wednesday, Dec. 1, edition that AlphaNorth Asset Management president and chief executive officer Steven Palmer recommends buying Functional Technologies.
The Post's Jonathan Ratner writes in the Trading Desk column that Mr. Palmer has owned this company for about a year, but thinks its risk-reward is very favourable at current prices. Functional Technologies has developed a proprietary yeast that has been shown to reduce acrylamide (a carcinogen) in baked goods.
It has been in talks with potential partners who could substitute the yeast they use traditionally, which Mr. Palmer notes is a multibillion dollar market.
The company also has a yeast that can reduce the ethyl carbamate in wine and spirits, as well as lower the level of hydrogen sulphide, which creates a rotten egg smell and ruins an estimated 20 per cent of wine batches.
"It's something that could roll out very quickly and could be quite lucrative," Mr. Palmer says. "There have been several class-action lawsuits in the United States and Europe on the baking side with regard to acrylamide, so companies are very conscious of this issue."
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Jonathan Ratner, Financial Post · Wednesday, Dec. 1, 2010
https://www.financialpost.com/small+rally+December/3908752/story.html
Get set for small-cap rally in December
If history is any guide, the Canadian small-cap market will be fairly strong in the next few months. In the past 25 years, the BMO Small Cap Total Return Index has seen average returns of 13.5% for the December to May period, compared to a decline of 3.1% during the rest of the year.
Since December has been the best-performing month by a wide margin, AlphaNorth Asset Management president and CEO Steven Palmer is telling investors to take advantage of this seasonal trend. His long weighting for the portfolio is higher than average as a result.
While the AlphaNorth Partners Fund is not a resource fund and it has a more diversified approach than many of its peers in order to reduce volatility, the portfolio has nonetheless averaged about 55% exposure to resources since launch. That number is a bit higher these days due to the strong performance of several resource names in recent months.
However, Palmer is looking to reduce that resource exposure and focus more on special situations and technology.
"Resource names have been driving the performance over the last few months due to the strength in China," he says.
"I like to have a more balanced portfolio because if there is a hiccup in China, all these resource names are going to get pounded. I think we're probably due for a correction in the resource sector shortly."
Palmer has been bullish on the rare-earth space for quite a while and took advantage of weaker markets this summer to increase the fund's position in a couple of key names.
However, the portfolio manager has been taking some profits on the sector's recent strength as more obscure names continue to pop up.
"It's getting a little mainstream and overheated at this point," Palmer says. "The Street has also been highly focused on gold and precious metals recently, and I think that is even more overheated than the rare-earth space."
Instead, he is focusing on oil and uranium. The spot price for uranium rebounded from a low of US$40 a pound to roughly US$60 recently.
"The price seems to have turned, there are some fundamentals supporting the longterm demand for uranium, and if you look at some of the stocks that were forgotten over the past couple of years, they've started to perform much better too," the manager says.
jratner@nationalpost.com---------
BUYS
PRIMARY PETROLEUM CORP. ( PIE/TSXVEN).
Palmer began buying this land play aggressively at 8¢ per share and continued all the way up to 60¢.
"Evidence is building that the Bakken Fairway may extend into Montana and into their property," the manager says.
He notes that U.S.-listed Rosetta Resources Inc. and Newfield Exploration Co. have been acquiring land and drilling in Montana, but have been fairly quiet about the results. Newfield recently announced that they've put a horizontal well into production on their property about 30 miles south of the Alberta border and roughly 20 miles north of Primary's land.
"So it's getting closer and closer to Primary's property," Palmer says, adding that the company has huge land position of approximately 160,000 acres. "If the Bakken is on their property, it would be worth several dollars per share."
FUNCTIONAL TECHNOLOGIES CORP. (FEB/TSX-VEN).
Palmer has owned this company for about a year, but thinks its risk-reward is very favourable at these levels.
Functional Technologies has developed a proprietary yeast that has been shown to reduce acrylamide (a carcinogen) in baked goods. It has been in talks with potential partners who could substitute the yeast they use traditionally, which Palmer notes is a multi-billion dollar market.
The company also has a yeast that can reduce the ethyl carbamate in wine and spirits, as well as lower the level of hydrogen sulphide, which creates a rotten egg smell and ruins an estimated 20% of wine batches.
"It's something that could roll out very quickly and could be quite lucrative," Palmer says. "There have been several class-action lawsuits in the United States and Europe on the baking side with regard to acrylamide, so companies are very conscious of this issue."
EXPLORATION ORBITE V.S.P.A. INC. (ORT. A/TSXVEN).
This recent addition to the portfolio owns 100% of the mining rights on the Grande-Vallee property in Quebec, a proven resource of alumina in clay.
Exploration Orbite has developed a new technology that allows the company to extract the alumina from this clay at half the cost of typical aluminum refineries.
Palmer points out that there are nine such refineries in Quebec, which are located there because of the cheap power. However, the alumina is being imported from South America.
"Exploration Orbite can theoretically be supplying them right in their backyard for half the cost," Palmer says.
The company recently raised some money so it is fully capitalized. It its well into construction of its first plant and hopes to be producing commercially by the second half of 2011.
SELL
HORIZONS BETAPRO COMEX GOLD BULLION BULL PLUS ETF (HBU/TSX).
Palmer's only short position these days is gold, specifically the Horizons BetaPro double bull exchange-traded fund.
The manager does a lot of technical analysis and says the charts don't look good for bullion.
"Investors seem to be unanimously bullish on gold," he says.
"So it's clearly a contrarian call. I just think there are more attractive risk-reward opportunities in the resource sector than gold."
Palmer points to the fact that gold has made a strong move over the past several months and it is highly tied to the U.S. dollar.
With the greenback having been quite weak since the beginning of the summer, he thinks it is due for a period of strength, especially given the issues that have recently surfaced in Europe.
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THE MANAGER