The Internet day-trading by the many unseasoned speculators has created a whole new meaning to the terms "trading" and "speculation". In the old days, people would talk about the "day-trader" - an individual who bought or sold a position in the morning and closed out the position before the end of the day. Now I am hearing about "minute trades" - a sixty second transaction of buys and sells. Obviously, the Internet has spawned a stock market trading mania which is producing split second haphazard investment decisions with no analysis. Ultimately this is fueling even more stock market volatility.

This whole phenomenon has encouraged a huge sense of instant gratification. Individuals full of hope and eternal optimism have pushed up internet and other related stocks to incomprehensible price levels. Honestly, I am bewildered for a few reasons:

I am astounded also because I am noticing companies with little or no sales, let alone earnings, which are trading at millions or billions of dollars of market capitalization. There is also a dichotomy in the market between Internet, high-tech, large liquid companies versus small/mid capitalization out-of-favour value plays.

As a fundamental analyst one must refrain from joining the frenzied mania and instead hunt for cheap stocks. Sticking to one's discipline is key. Strangely enough, there are still a number of cheap value stocks which haven't been discovered. In some cases we have scratched our heads and wondered why they haven't already traded substantially higher. These value shares are the exact opposite or flip side of the vastly overvalued Internet stocks. Needless to say, we hold a number of these shares such as AT Plastics, First Marathon, Primex Forest, Scott's Restaurants, Strongco Inc., etc. which have not yet participated in this market rally. The question is when and what catalyst will precipitate buying in these stocks. An interesting value anomaly in our ABC portfolio is Harrowston Inc. Harrowston's hidden value has not yet been discovered. Let me explain.

Harrowston Inc., a diversified industrial holding company involved in the chemical, food and environment industries recently completed the sale of non-core real estate property located in downtown Vancouver. The net proceeds of $17.4 million when added to the company's treasury gives Harrowston over $185 million of cash or $6.70 per share. Its book and net asset value are about $8.50. With the stock trading at about $5.50 Harrowston is interesting because a purchase of its shares is a proxy for buying cash at a discount! The company has recognized this fact and has been repurchasing shares in the market.

As a parting comment, regardless of the Internet stock mania and their accompanying big price gains, we will stick to our fundamental analysis of tedious stock picking. When all is said and done, we believe these out of favour value stocks represent solid investments with excellent longer-term prospects.