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Laurent Cadotte likes companies that are in the doghouse. He sifts through this downtrodden group for businesses that have the capacity to ride out the storm and the ability to turn things around.

Laurent Cadotte

Occupation

Graduate student at the École Polytechnique de Montréal.

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Portfolio

Major holdings include Bankers Petroleum Ltd., TransGlobe Energy Corp., SNC-Lavalin Group Inc., Photon Control Inc. and Intact Financial Corp.

The investor

Laurent Cadotte first invested in companies recommended by friends. That didn't go well. Then he read a lot of investment books, including Peter Lynch's One Up on Wall Street and Benjamin Graham's The Intelligent Investor.

How he invests

Mr. Cadotte likes companies that are in the doghouse. He sifts through this downtrodden group for businesses that have the capacity to ride out the storm (with debt less than 25 per cent of their equity) and the ability to turn things around (strong management, as indicated by a high return on equity).

The recent fall in energy prices has provided a chance to go prospecting within the oil and gas sector. One buy was Bankers Petroleum. "With its strong and conservative management, low debt, high performance metrics and hedged production, it will greatly benefit from the oil market's recovery," Mr. Cadotte believes.

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Another energy play that could benefit from a recovery in the oil market is TransGlobe Energy. It has interests in Egypt, where political and economic turmoil has made the collection of accounts receivable troublesome. However, the company has "strong and conservative management, low debt … and great reserves of cash."

Scandal-plagued engineering firm SNC-Lavalin owns some great infrastructure assets, notably the toll road Highway 407 in Ontario. Its shares are trading near the value of these assets, so the market is not attaching any value to the corporation's other assets. Spins offs could unlock value.

Best move

"Buying Bankers Petroleum in early 2013 and selling in mid-2014, then buying it back again very recently."

Worst move

It was buying specialty-metals maker 5N Plus Inc. in early 2011, now down more than 50 per cent since (he no longer owns the shares).

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Advice to other investors

"If you don't see yourself owning a stock for a couple of years, don't buy it."

Want to be in Me and My Money? Contact Larry MacDonald at mccolumn@yahoo.com or his Website.

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