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Strong European Appetite for Canada’s Clean Energy & Resources Sectors
European fund managers today clearly have an appetite for Canada’s clean energy and resource sectors.

That is the pretty obvious conclusion I drew after spending a week visiting institutional investors in Paris, Monaco, Geneva and Milan/Turin in the third week in January with the CEOs of three Canadian companies who wanted to expand their contacts with fund managers on the continent.

We went over to Europe expecting to meet about 50 managers that I’ve worked with for the past 20 years over a series of luncheon presentations, and ended up with more than 80 qualified fund managers, many of them new faces, and family wealth advisors who were visibly interested in these three stories:

LGC Skyrota - LGS-TSX Venture www.lgcskyrota.com has a state-of-the art facility in Northern Ireland from which the company offers wind turbine gearbox maintenance and refurbishment services to some of the world’s largest companies in the sector, including Vestas, Viridian and Hibernian Energy. The company also is developing residential scale, vertical access wind turbines for the growing small wind turbine market in homes, small business, light factories and school in Europe. Thomas Braun, the company’s CEO, highlighted how Vancouver-based LGC is the only publicly traded wind energy service company, which is possibly one of the reasons European investors on this tour were very eager to hear his story.

Keep in mind that Canada’s wind power capacity produces about one per cent of the power in this country, and all non-hydro renewables (wind, solar, biomass and tidal) account for less than two per cent; in Europe, wind power alone is more than nine per cent of that continents’ total power output. Little wonder, then, that European investors are significantly more interested in this sector than seems to be the case in Canada. You can be sure that I’ll be bringing more green energy stories back to Europe again soon – see side bar for details.

Columbia Yukon Explorations CYU – TSX Venture www.columbiayukon.com is one of the public companies inside Ron Coombes’ Waterfront Mining Group www.waterfrontgroup.com CYU has a very advanced molybdenum project near Cassiar in north-central British Columbia. Molybdenum is an anti-corrosive agent used in stainless steel manufacturing, and JP Morgan of New York two days ago released a report calling for molybdenum prices to rise more than 50% in the next two years.

Ron has worked diligently over the past two years in keeping his network of European contacts updated on CYU and other Waterfront Group stories. This is key in developing relationships with any fund manager, but nowhere moreso than in Europe. One fund manager in Monaco told me he was impressed to see that Ron was the last Canadian presentation to come to Monaco before the resource market meltdown, and he is the first one to come back since then. This will pay huge dividends for the Waterfront Group and its team in the very near future.

Faircourt Gold Income Corp. (FGX-TSX) has outperformed the S&P/TSX gold index in Canada as well as most other gold fund managers Canada since inception in November 2007 by employing a covered call writing strategy on a portfolio of large cap gold producers. Asset Management www.faircourtassetmgt.com CEO Charles Taerk told his European audience that believes that the current weakness in the US dollar as well as debt-to-GDP ratios in several leading western economies all point to a scenario where a gold strategy like this should continue to do well.

The Faircourt presentation was exceptionally well received across the board in Europe, since the covered call writing strategy that FGX employs is not something Europeans have seen in the past. The combination of receiving income from writing covered calls on a portion of the portfolio and still enjoying the upside in gold was clearly appealing. Europeans – especially French and Swiss – are gold bugs, and follow developments in this sector at all levels with great interest. The Faircourt team is now in a great position to expand their base of support in Europe as a result of this trip.

At the end of the day, a road-show to investors in any country is only as good as the follow-up and consistent delivery of a message with milestones and highlights that are delivered in the months after everyone has come home – something these three companies above will be doing with the 80 new European institutional investors they met.

Mark Mullins:
Getting the Market Direction Right

Mark Mullins is the former Chief Economist of Midland Walwyn Capital and contributes economic and market commentary to CBC’s The National. As CEO of the financial consulting firm Veras Inc. Mark offers market views and commentary to Peterson Capital clients. In addition, I’m helping Mark take the first steps towards launching an asset allocation investment vehicle that we both feel would be of tremendous benefit to both institutional and retail investors alike.

Here’s a short letter from Mark outlining the reasons why an approach like this would be worthwhile:
The buy and hold approach to investing seems to be falling short. Equity markets are flat over the past decade and fixed income returns have dropped to low single digits.
Equally, there is a public backlash against short-term trading and the use of synthetic securities, even though these approaches add to market liquidity and choice.
Given the public mood and the hangover from the financial crisis, it seems that investors want to take less risk but still achieve reasonably high returns.

How can we as financial professionals square this circle?

The answer that I would put forward is superior asset allocation.
Calling on twenty-five years of market experience, and the development of proprietary valuation models, I can offer a view on the financial markets that is accurate and unique. My years as a financial economist, with a doctorate studying financial crises, and work as a bond and equity strategist, provide the insight that is needed to correctly assess market conditions.

This is the purpose of the Veras Tactical Global Asset Allocation approach – getting the market direction right.
We look at the relative value of twenty macro financial assets – equity indices, government bonds, currencies, and commodities – and decide whether to over- or under-weight the portfolio. We use a three to six month horizon to capture the twists and turns in the markets, without leverage or synthetic securities. The strategy is simple to understand and the goal is absolute total return.

If you’re interested in this approach and would like to learn more, please give me a call, and visit the Veras Inc. website at www.veras.ca