(Every week, Business Edge columnist Gyle Konotopetz profiles the top three stock picks of one of Canada’s most accomplished investment pros.)

FEATURED PRO: Ian Nakamoto of Toronto-based Bonham & Co. Asset Management is portfolio manager of the Bonham Canadian Equity Fund, which focuses on medium and large corporations. The fund has a return of 1.9 per cent in the past year (through April 30) opposed to an industry average of -2.2 per cent.

Nakamoto’s perspective: “This is a market where you just have to do more work to find the good companies. It’s very easy to look at the top companies that everyone follows like the banks, the Ciscos and the WalMarts, but I think there’s still a lot of value in the smaller companies that have been ignored for five years at least.”

FIRST STAR

* Dofasco Inc. (DFS-TSX)



* Recent Price: $32 (the stock was one of Nakamoto’s top picks here Feb. 29 at $28).

* 12-Month Range: $20.11-32.85.

* Snapshot: When it comes to producing steel, Dofasco is Canada’s household name and one of North America’s major players, specializing in flat-rolled and tubular steels.

* CEO: John Mayberry.

* Head Office: Hamilton, Ont. (7,360 employees).

* Vital Stats: Price/Earnings Ratio, 40.6; Revenue (last 12 mos), $3 billion; 5-Yr Revenue Growth, 0.3%; Profit (last 12 mos), $59.4 million; 5-Yr Profit Growth, -22%; Market Cap, $2.4 billion; Shares Outstanding, 75 million; Dividend Yield, 1.08%.

* Nakamoto’s Comment: “Dofasco is a North American leader in the steel-making business and I have a (12-month) target in the low $40s. They actually made a profit in 2001, when a lot of other integrated steel makers in the U.S. went into bankruptcy.”

* Risk Rating: Low.

SECOND STAR



* Tembec (TBC-TSX)

* Recent Price: $13.90.

* 12-Month Range: $9.40-$13.05.

* Snapshot: This is no pulp fiction. Tembec produces real market pulp, wood products and papers and other Canadian forest products at 50 manufacturing plants in Alberta, B.C., Manitoba, Ontario, Quebec, New Brunswick, the U.S. and France.

* CEO: Frank Dottori.

* Head Office: Montreal (10,000 employees).

* Vital Stats: Revenue (last 12 mos), $3.2 billion; Profit/Loss (last 12 mos), $126.3 million loss; Market Cap, $1.2 billion; Shares Outstanding, 86.7 million.

* Nakamoto’s Comment: “The price-to-book value is 0.8 per cent, so it’s selling at 80 per cent of the book value and that’s cheap. It’s very well leveraged to a pulp price increase, it’s very well managed and I’d say it’s a consolidator in the forest products industry. It has a reputation of buying assets dirt cheap and turning them around. One may look at the balance sheet and get a little nervous. It’s not a pristine balance sheet, but it’s not a junk bond status.”

* Risk Rating: Low.

THIRD STAR

* CCL Industries (CCL.B-TSX)



* Recent Price: $18.70.

* 12-Month Range: $8.50-$19.40.

* Snapshot: CCL has connections in high places. The unheralded Toronto-based company manufactures, packages and labels consumer products for global heavyweights such as Procter & Gamble, Unilever, Gillette, Nabisco and Johnson & Johnson. It has 33 production facilities in North America, Central America and Europe.

* CEO: Donald Lang.

* Head Office: Toronto (7,000 employees).

* Vital Stats: Price/Earnings Ratio, 20.5; Revenue (last 12 mos), $1.6 billion; Profit (last 12 mos), $31.9 million; Market Cap, $593.7 million; Shares Outstanding, 31.7 million; Dividend Yield, 0.32%.

* Nakamoto’s Comment: “One may have to be a little bit patient with this one, because it has a little bit of a checkered record. It sells at book value and they have been buying back their own stock. That’s a very good sign. The reason I like it is because it’s a business that is very, very easy to understand. The management is now really focused on getting good return on capital.” * Risk Rating: Low.

* Nakamoto’s Record (with Nov. 29/Feb. 28 picks): +24% (Fairmont Hotels +33%, Domtar +26%, Sobeys +26%, Magna International +19%, Dofasco +26%). Nakamoto continues to recommend all previous picks.

* Disclosure: Nakamoto says he does not personally own any of the individual stocks, although he may own them through his fund. The featured stocks are held in the Bonham Canadian Equity Fund.