By The Globe and Mail
OCCUPATION: Forestry sector consultant
PORTFOLIO: Manulife Financial Corp., Royal Bank of Canada, CIBC, Talisman Energy Inc., EnCana Corp., Air Canada, Groupe Aeroplan Inc., JPMorgan, Sino-Forest Corp.
The investor
If a tree falls in the forest, there's a good chance Mr. Butler will hear it. The 58-year old has spent his working life in the forestry sector, and since 1999 has run an industry consulting practice with his son.
Why he's an active investor
Managing his business interests have led to Mr. Butler becoming a more involved investor. He says he has to follow the market and the economy for his work, because "everything is so interrelated."
Where he sees opportunities
"A lot of the blue-chip stocks have been driven down further by the overall perception people get from reading the headlines every day, and that just helps to prolong the agony," he says. "But if investors can hang on, coming out of the correction, there will be better days ahead."
What he looks for
Going over financial statements, Mr. Butler likes to see lots of cash, and a healthy debt-to-equity ratio. "In today's environment, if someone has good liquidity, you know they're poised for the future." He also likes to be able to identify long-term strategy.
What he doesn't like to find
"When I see companies paying their president or CEO big bonuses when they lose big money, that really turns me off, and that becomes a mental block," he says. "You see some guy refinance a company and pay himself a big bonus, but to me that's his job, because if he doesn't refinance, the business goes belly-up."
What he likes to see
"I like companies that reinvest in their facilities, and that maintain the technology in the facilities, because you know they'll be competitive in the long term," he says. "When I see companies cutting back on capital [spending] to save cash, to me that's short term."
Best move
On the recommendation of an analyst, Mr. Butler bought shares of Sino-Forest Corp. for around $1 several years ago. A Canadian company with its head office in Hong Kong, Sino-Forest operates commercial tree farms in China. He sold half his shares at $6, and held onto the other half. "I think they'll come out of the recession well because they invest in facilities, they're marketing all over, and they have an enormous amount of plantations."
Worst move
A few years back, Mr. Butler put some money into TechCana Inc., a small flooring company in St. Felicien, Que. Unfortunately, the joint venture it had planned with Domtar Corp. never got off the ground, and today the shares are worthless.
Advice
"Do a proper analysis. With the Internet you can check up on senior management, the company's strategy and their assets," he says. "There's enough information available on most companies [that] you can get a good idea of what they're doing."