Steal These Ideas From One of Canada’s Top Fund Managers

Donville Kent has made its investors a lot of money. What are the company’s favourite stocks today?

| More on:
The Motley Fool

One of the top-performing fund managers in Canada is Donville Kent Asset Management – its flagship hedge fund, the Capital Ideas Fund has almost quadrupled in value since 2008, even after deducting all fees. On Monday, President and CEO Jason Donville was on BNN to discuss his top stock picks.

1. Constellation Software

Coming in at number one, software conglomerate Constellation Software (TSX: CSU) has been a favourite of Mr. Donville’s for some time now. And for good reason – both the company and its share price have done extraordinarily well since its IPO since 2006. In the last five years alone, the stock has returned about 50% per year.

Mr. Donville thinks it can go higher; he has a one year price target of $350 on the stock, nearly 50% higher than the current share price. Time will tell if this prediction pans out, but he has been right about the company so far.

Constellation is also a favourite here at The Motley Fool. It has been highlighted as having one of Canada’s best management teams and also as a holding in an ideal 3-stock portfolio.

2. Delphi Energy

Like practically every gas-weighted producer in Canada, Delphi Energy (TSX: DEE) has been on a tear. The shares are up nearly 80% so far in 2014 and an impressive 150% over the past 12 months. But like Constellation, Mr. Donville thinks the shares have room to run.

Delphi produces gas using a process known as Slickwater, which breaks up the rock more effectively than traditional fracking techniques. Although costly – a single well can cost up to $10 million – it can dramatically increase recovery rates, allowing returns on investment of up to 150%.

There have been concerns about the balance sheet, but the company has managed to grow production enough to make its debt level much more manageable. To illustrate, net debt is currently three times annualized funds from operations, but Delphi expects that number to drop to 2.1 by the end of this year.

3. Pulse Seismic

Pulse Seismic (TSX: PSD) makes money from an extensive seismic data library “that’s integral to oil and gas exploration” in Alberta. The company is always expanding its library, but big revenue deals can be a lot more lumpy. And recent results have not been strong. As a result, the shares are down by more than 20% so far in 2014.

Mr. Donville thinks that this has created the perfect opportunity. At $3.59 per share, the company trades at about 11 times free cash flow.

Donville Kent has done very well for its clients over the past five and a half years. Its fund is not for everybody – there’s a $150,000 minimum for non-accredited investors if you want to have them invest for you. But anyone can copy Donville Kent’s top ideas, and as a bonus, you won’t owe the company any fees.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

More on Investing

Payday ringed on a calendar
Dividend Stocks

Boost Your Passive Income With 3 Stocks That Pay You Monthly

Given their stable cash flows and high dividend yields, these three monthly-paying dividend stocks could boost your passive income.

Read more »

Dice engraved with the words buy and sell

goeasy Stock: Buy, Sell, or Hold?

goeasy is a compelling stock for investors seeking value, growth, and income.

Read more »

Businessperson's Hand Putting Coin In Piggybank
Dividend Stocks

My 3 Favourite TSX Blue-Chip Stocks for October 2023

These blue chips are some of the top-performing companies on the TSX this year! So let's look at why.

Read more »

oil and natural gas
Energy Stocks

CNQ Stock Is up 25% in 2023! Is the Stock a Buy Now?

Canadian Natural Resources stock is quite cheap, despite surging 25% in 2023. Here's why CNQ stock is a good buy…

Read more »

Money growing in soil , Business success concept.
Dividend Stocks

Dividend Stocks vs. GICs: Making the Right Choice for Canadians

Whether to put your capital in GICs or dividend stocks depends on your risk tolerance, investment horizon, and income and…

Read more »

A airplane sits on a runway.
Stocks for Beginners

Why Now Is the Time to Buy Air Canada Stock in Bulk

Here are key reasons that make AC stock really attractive to buy in bulk in October 2023.

Read more »

Dividend Stocks

This Real Estate Stock Pays a 15.78% Dividend!

A real estate stock’s dividend yield is nearly 16%, but investors should take note of the risks and unspecified payout…

Read more »

warning or alert
Dividend Stocks

Buy Alert: Why I’m Stacking Brookfield Stock Now

Despite the falling stock price, I have been buying Brookfield (TSX:BN) stock.

Read more »