Dateline: 02/24/00
The first thing that strikes you when you meet Ryan Irvine and Brent Larsen, editors of The FutureStock Review, is their youthfulness. Both are under 25 - youngsters fresh out of university. Perhaps it is the vigor of youth that has brought them such success in only two short years. Consider their track record. Their 1999 stock picks show an average increase to Feb. 22, 2000 of 157.02%. Their 1998 picks are up an average of 232.20%. Then again, it just might be their focus on fundamentals - growing revenues and earnings.
I had the pleasure of meeting this duo at the Vancouver Investment Conference in January where I immediately did what I should have done when I first ran across them at the conference the year before - subscribe to their newsletter. At their scheduled talk they went over some of their previous picks that they believed still had tremendous potential. I went and bought one of them, Tecsys Corporation, which had already more than doubled from their recommended price of $5.20 in December to $13.15 when I bought it on Jan. 28. The stock has climbed as high as $31.45 since. It closed yesterday at $24.65.
Not all their picks climb so quickly. But all of their picks are chosen with the expectation that they will double within six to eighteen months. In their December issue they review their picks of the previous year with their peak and current levels. Of the 37 stocks profiled between December 1998 and November 1999, all had shown some gain at some time during the year, from a low of 2% to a high of 633%. If held, 16 were on the downside with 21 posting gains up to 483%. Since then the losing stocks have been whittled down to 10 and their top stock, 01 Communique, has grown to where it is now almost a 20 bagger (2000% gain).
Ryan and Brent met while students studying towards their BBAs at Simon Fraser University. They put their studies to good use even then and had a coterie of fans amongst fellow students constantly asking for stock tips. This led them to put their analyses on paper and voila - The FutureStock Review was born. Circulation has grown in two years to over 1500.
Why are they so successful? When I asked them directly if they are influenced by William O'Neil's CANSLIM approach to investment (see my review of O'Neil's How to Make Money in Stocks), Brent wrote that their approach is fundamentally based with an emphasis on growth and they do not follow O'Neil. Nevertheless, there are strong similarities.
Both O'Neil and the FutureStock Review place a strong emphasis on earnings. FutureStock, in fact, will not consider stocks that do not show a 30% sustained growth in revenues and earnings. Brent tells me that they look for growth in both quarterly earnings per share and year over year, but they also look at the previous four quarters year over year and in some high growth cases, quarter to quarter. They interview managment and make sure earnings are not one shot affairs and that there is a continuing revenue stream.
While Ryan and Brent will consider any stock meeting their criteria, they tend to focus on innovative, leading edge technology companies. Similarly, one of O'Neil's principles is to look for companies with something new - new product, new managment, new highs.
Another O'Neil principle is to pick industry leaders, not laggards - also a FutureStock Review consideration. And O'Neil stresses the law of supply and demand - pick companies with a small number of shares outstanding. FutureStock focuses on small to mid cap companies with a market cap of less than $150 million (though they will consider larger companies if they see growth potential. Focus is on Canadian stocks though they occasionally review some American ones as well.).
But there the similarity ends. O'Neil places some emphasis on timing with specific suggestions for getting into and out of a stock. FutureStock Review takes a longer term view, anticipating holding the stock up to year and a half and perhaps longer.
Indeed, 01 Communique, their number one performer so far, jumped modestly from $0.30 when they recommended it in March 1999 to $0.50 in mid-April. But the stock stuck at that level for the next three months and then fluctuated between $0.50 and $0.75 until mid-November. Impatient investors who sold out before then may have made a 150% return on their money. But look at what they missed. By December 1 the stock had climbed to $1.50. By December 31 it had soared as high as $3.00 before settling back to $2.00.
Good place to sell? Think again. The stock really took off in January peaking at $8.00 before settling back to the current $6.00 level. And FutureStock Review believes it still has solid long term potential though they advise early investors to take profits on half their shares.
With their emphasis on earnings and revenue growth, I asked the youthful duo what their thoughts were on the Internet sector, particularly some dot-coms that, while showing revenue growth, are suffering accelerating losses.
Brent replied that the dot-coms' focus on gaining market share and worrying about the bottom line later may prove tenable in a bull market, "however, we like companies that would prosper in an up or down market by producing positive cash flow and earnings".
He goes on to say, "Our research allows us to discover the dot.com related companies that do have a focus on net income and also with expanding operations through extensive research and development programs. By identifying companies with earnings growth which are backed by solid assets, we not only provide our subscribers with great upside potential but we limit the downside as well. When the shine leaves the internet sector, it will be the speculative unproven startup dot.coms paying the heaviest price".
"We feel it is necessary to be very selective with the Internet Sector," he adds. "We tend to select companies which help run the internet or software which is applicable to business on the internet. As for the pure start up Internet companies, we tend to find many of these issues to be extremely speculative and risky. You may find a few top gainers but the downside with many is just too great. We do feel the market may correct over the next year, but we still have a positive midterm to longterm outlook on the new economy".
In less than a month as a subscriber, I've invested in three of their recommendations. At closing prices of Feb. 23, all three stocks are up, though one just marginally, with an average 70% return. That may be exceptional and exceptionally good luck. Not all of the stocks they have recommended since I started subscribing have gone up. Nevertheless, it's not a bad return on the $135 invested in their newsletter!
Ryan Irvine and Brent Larsen are bright energetic young men with a solid and profitable approach to stock picking. For a detailed profile of their newsletter with subscription and contact information, check out the following profile:
Comments? Suggestions? Why not post them on our Bulletin Board or email me.
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