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Stuart Isherwood
Stuart Isherwood


Former Bay St. analyst finds better bargains in small-cap stocks Add to ...

Stuart Isherwood, 44


Full-time investor

The portfolio

Includes shares in WesternOne Inc., Richards Packaging Income Fund, Cogeco Cable Inc., InnVest Real Estate Investment Trust, debentures of CanWel Building Materials Group Ltd., and Pollard Banknote.

The investor

Stuart Isherwood has been investing in the stock market for about 25 years. He is a chartered accountant, chartered financial analyst and previously worked as an analyst on Bay St.

How he invests

Mr. Isherwood looks for value. “For valuation, I usually focus on free cash flow, preferably stocks trading less than 10 times free cash flow – but each situation is different.”

“While I research many companies, I typically find better value in smaller, underfollowed stocks, and so my portfolio is mainly in small caps,” says Mr. Isherwood. To minimize risk, he avoids companies that “are not generating free cash flow, have excessive debt levels or are particularly susceptible to commodity price fluctuations.”

He spends a lot of time “reading financial reports, listening to conference calls, talking to management, and reading broker research.” Often, he will build his own financial models to ensure he understands the cash flows of the company.

More shares in infrastructure investor WesternOne were recently purchased. “The company has won a number of contracts, but the shares presented an opportunity to buy when they traded down following an equity issue.” Overall, however, it’s been hard to find “good value” in the market these days. The cash position in his portfolio has risen to more than 20 per cent.

Best move

“Over the past year or so, my best performing stock was Pollard Banknote, a printer of instant lottery tickets, up about 70 per cent.”

Worst move

“A couple of years ago, I had a significant loss on Yellow Pages preferred shares. I mistakenly believed the preferred shares would, unlike the common stock, weather the storm.”


“It probably sounds cliché, but I recommend investors do their homework and minimize risks through diversification and quality stock selection. If you do not have the expertise or time, then let a professional manage your money, or stick to low-cost index ETFs.”

Want to share your strategies? E-mail mccolumn@yahoo.com

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