Ceradyne (CRDN)

[buhg1b]

Professional investor sticks with what he knows

LARRY MACDONALD

Special to The Globe and Mail

May 3, 2008

IAN ST. MARTIN

AGE: 43

OCCUPATION: Software engineer turned professional investor.

PORTFOLIO: Astea International Inc., WPCS International Inc., Optelecom-NKF Inc., Ceradyne Inc., Excel Maritime Carriers Ltd., Span-America Medical Systems Inc. and lots of cash. Mr. St. Martin's portfolio is very fluid and may be different from when he described it as of March 31.

The Globe and Mail

INVESTMENT RESULTS

Mr. St. Martin, who resides in Vancouver, has a virtual portfolio on Marketocracy.com that has long been in the top 100 of more than 50,000 portfolios tracked on the U.S. website. Although growth has tapered off in the past year, the portfolio has an annualized return of 32.2 per cent since inception in May of 2001, compared with 2.6 per cent in the S&P 500 over the same period.

HOW HE STARTED

"I started dabbling in stocks in the 1990s, when I started to have some extra income from my job," Mr. St. Martin says. "However, I never took it seriously until after the crash of March, 2000. That event led me to a much deeper investigation of the market. I wanted to see if I could find any rhyme or reason to the seemingly wild gyrations of the market."

HOW HE INVESTS

"My search took me to William O'Neil [the founder of Investor's Business Daily] and his CAN SLIM system. From there, I developed my own style," he adds. The new approach proved to be enough of a winner to help him land a position as chief research analyst with Vancouver-based Asset Logics U.S. Long-Short Equity Fund (until February of this year).

He screens the earnings reports of public U.S. companies daily, looking for strong revenue and earnings growth, increasing margins, robust balance sheets, and modest valuations when compared to peers. For companies meeting his criteria, he looks at their press releases and filings to see if growth is sustainable.

That leaves a smaller number of prospects, all of which go on to a watch list. He'll pounce if he sees a spike in trading volume and an upside price move - especially if valuation is still reasonable.

The decision to buy or sell is also informed by the current state of the market. "I don't try to predict changes in the market trend, but I want to understand where it is right now so that I don't fight the trend," Mr. St. Martin said.

BEST MOVE

"I do not really have a list of best moves per se, since my success has come from a large number of very modest winners."

WORST MOVE

" "Being on margin through March and April of 2000!" The experience did provide the impetus for the investment performance that followed.

ADVICE

The most important thing is to stick with what you know. Mr. St. Martin believes there are ways to find an edge that can provide steady returns, but once "you find it, stick with it." Don't go running off in too many different directions.

He also recommends joining Marketocracy.com: "It's a fantastic platform for tracking your virtual trading, and it is free." There are also some quite useful analytic tools, such as historical data and stock screens.

http://www.theglobeandmail.com/servlet/story/LAC.20080503.MKMYMO03/TPStory/Business