Bottles of Absolut vodka on the production line at Corby's plant in Ahus, Sweden in October, 2012. Corby markets and imports spirits, wines and ready-to-drink cocktails.Linus Hook/Bloomberg
I recently wrote an article suggesting that individual investors should focus on stocks with little or no research coverage by the brokerage community in the current volatile market environment. Their relative obscurity means that the individual investor is not at an information disadvantage versus professional investors and these low-expectation stocks are less likely to hit an air pocket if quarterly earnings stumble.
As a small cap investor by preference, I chose to illustrate the existence of neglect in Canada by listing five stocks from the S&P/TSX Small Cap index with zero analyst coverage. These were not low-expectation stocks – they were zero-expectation stocks.
They were; ADF Group Inc. DRX-T, Amerigo Resources Ltd. ARG-T, Corby Spirit and Wine Ltd. CSW-A-T, Frontera Energy Corp. FEC-T and RFA Financial Inc. RFA-T. I don’t own any of these stocks, but I couldn’t resist the temptation to do a little digging to see if they were undiscovered gems.
The time may be right to focus on neglected stocks
The two resource stocks I passed on quite quickly. Amerigo operates a copper mine in Chile and trades at six times book value and 20 times earnings. There may still be upside potential, but this very much depends on your view of the copper price going forward. Frontera is currently involved in a deal to sell off its Colombian asset portfolio to Parex Resources Inc. (PXT) for a $525-million equity consideration. There may be scope for arbitrage between these two stock prices, but this is not an arena for the individual investor.
Turning to the remaining three candidates and relying on the statistics from the Globe Investing website, I found evidence of moderate but not compelling value.
ADF Group is engaged in the fabrication and installation of complex steel structures and architectural metalwork services both in Canada and the United States. Revenues for the year ended January, 2026, were $260-million, down from the prior year, but the backlog is at a record high of $560-million. With a market capitalization of $275-million, the stock trades at 1.5 times book and 5.5 times cash flow. The U.S. tariffs on steel created margin pressure last year and may persist for a while, but these modest valuation ratios create a cushion in the current stock price.
Lessons from the past on when portfolio diversification can really pay off
Corby markets and imports spirits, wines and ready-to-drink cocktails. Familiar names include: Lamb’s rum, Absolut vodka, Chivas Regal, Beefeater gin and Jacob’s Creek. The controlling shareholder is Pernod Ricard SA of France. The company has a market capitalization of $416-million, trades at 2.2 times book value and nine times cash flow per share. Not deep-bargain ratios, but management insiders are small but persistent buyers of the stock, perhaps encouraged by the 6.5-per-cent dividend yield. I may be tempted to join them.
RFA Financial is the epitome of neglect as the company is in the midst of a transformation such that the historical numbers offer only an approximation of the underlying value. The company was created on Feb. 1 as a result of the combination of RFA Capital and Artis REIT. Artis had faced significant challenges as a standalone REIT and traded at a discount to its underlying net asset value. As part of the new combination, the strategy apparently is to liquidate many of these assets closer to book value and redeploy the proceeds into higher-yielding loans under a Schedule 1 bank umbrella. The current market capitalization is a little over $1-billion and the dividend yield is 5.4 per cent. Other valuation ratios are tough to nail down until the combined entity reports first-quarter results on May 12. I will be prompt to calculate the ratios on that date as this stock may have significant hidden assets.
The author does not own any of the securities mentioned in this article
Robert Tattersall, CFA, is co-founder of the Saxon family of mutual funds and the retired chief investment officer of Mackenzie Investments.