Five years ago, a company went public and paid good yield.

Many top firms were underwriting it, and James Meltzer got swept up by the euphoria.

But before the Montreal-based senior vice president with Macquarie Private Wealth placed an order, he went to a presentation by the company’s executives. Rather than clinch the deal, the face-to-face turned him off.

Read: How to evaluate corporate equities

“Their entire energy seemed focused on how much money they’d pocket from selling part of their holdings in this IPO deal,” Meltzer says. He sided with his instinct and opted out.

Sure enough, the company did poorly. The IPO was priced at $10; the stock opened at $9.73 and never went beyond that; and within a year the company went bankrupt.

Richard Hart, on the other hand, was certain he didn’t want any part of Toronto-based technology company Absolute Software. Its stock—issued at $5 at the height of the dot-com boom—was trading at 50 cents eight years ago. Still, he attended its company presentation, and the CEO and CFO were brutally frank about their financial struggles.

Hart, an investment advisor at MacDougall, MacDougall & MacTier Inc. in Montreal, found that honesty endearing and bought more than 25,000 shares at 50 cents each for both his clients and himself. He chose wisely—the stock is now back above $5.


These experiences show why gauging the aptitude, character and values of people at the helm is pivotal to assessing companies. No matter the sector or product, you shouldn’t tie your fortunes to executives who are glib or overly optimistic.

Small companies, big talk

While most advisors can only speak to management teams of large companies through quarterly conference calls, they should meet executives of smaller firms.

“A small company doesn’t have as many chances to make mistakes,” Meltzer says. “So get to know the top executives and their business philosophies. It’s similar to [what happens to] people who apply for jobs. You have their résumés, but you want to meet them and get a feel for what they’re all about.”

Read: All-cap approach reveals hidden gems

Meltzer once met with an oil and gas CEO who said he only hired people who invested in the company—from senior engineers to receptionists. Why? To ensure a firm-wide sense of responsibility. “That’s something I’d never have known without meeting the CEO, because it isn’t mentioned anywhere in the company’s written policies.”

Tom Burke, senior investment advisor at Canaccord Wealth Management in Montreal, also endorses personal meet-and-greets. “I like to be able to explain a company concisely to my clients. A phone conversation or face-to-face meeting with management helps me do that.”

Burke’s first step is to sift through successful firms—particularly if they’re TSX-listed and non-resource stocks—for those trading at new 52-week highs. If a company has decent volume and it’s reasonably valued, Burke picks up the phone to learn how the business works. Then he asks if the CFO or CEO is willing to meet for a chat, so he can get a sense for who’s running the company. He likes to be able to assess their attitude and body language (see “Body language clues,” right).

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