What to Buy: WesternOne Inc (TSX: WEQ)

Why to Buy Now: WesternOne is a Vancouver, Canada-based buyout firm that specializes in acquiring predominantly privately owned small and mid-market businesses that operate in the construction and infrastructure industries.

Since the high-yield equity space is dominated by master limited partnerships (MLP), mortgage REITs and other specialty financials, this name gives us a rare opportunity to diversify the portfolio into other areas.

And with a market capitalization of just CAD251.0 million, this micro-cap company has ample room for long-term growth. In fact, the incoming CEO, who takes the helm in September, led his previous company from a similar size roughly 10 years ago to a market cap of CAD2.5 billion today.

Meanwhile, the company’s stable, well-supported payout of CAD0.05 per month, or CAD0.60 annualized, is nice compensation while we wait for the firm to enter its next stage of growth.

Although WesternOne does trade on the US over-the-counter (OTC) market, because it’s a Canadian micro-cap, trading volume on the OTC is virtually non-existent, hence the reason we’re not listing that ticker symbol.

Investors should only purchase the TSX-listed shares, for which daily trading volume has averaged around 74,000 shares over the past three months–reasonable liquidity for a stock of this size.

Even so, investors should still use limits both when purchasing a new position or selling an existing position, to avoid moving the market while mitigating the cost of the bid/ask spread.

With a current yield of 7.6 percent, WesternOne is a buy below CAD8.50. Set your limit order slightly below the market price to ensure you don’t overpay for your position.