Canadian Equity Expertise
In our view, some of the best investment opportunities in the Canadian equity market may be found in small and mid-capitalization equities. This is the area in which we feel we have significant expertise and a competitive advantage by virtue of our relatively small size. We also believe that this is the least efficient part of the Canadian equity market and represents the greatest opportunity to uncover undervalued companies.
We do not attempt to time the market and believe investment returns may be maximized over the long term by following a buy-and-hold strategy.
Growth at a Reasonable Price (GARP) Investment Style
Our investment style is best described as Growth at a Reasonable Price (GARP), which means we seek to identify companies with strong growth profiles that trade at reasonable valuations. We look for well-managed companies with solid financial positions and sustainable competitive advantages in the industries in which they operate. Our due diligence includes a detailed analysis of a company’s management, business model and competitive positioning. We conduct hundreds of meetings with management teams and equity analysts each year.
We employ fundamental analysis and a bottom-up approach to individual security selection. This implies that client portfolios may at times have very different compositions to that of the S&P/TSX Composite Index, against which many investment managers benchmark returns. We caution that most Canadian equity indices, including the S&P/TSX Composite Index, are heavily weighted toward resource investments. We believe that over the long term, superior risk-adjusted returns may be achieved with lower volatility by investing in diversified portfolios of 20 to 35 securities with moderate commodity exposure.
Diversification helps reduce investment risk and volatility. Investment portfolios are constructed with the objective of achieving diversification across industry sectors and avoiding geographic concentration. Individual security weightings are typically limited to a maximum of 8% of portfolio value. To manage liquidity risk, we regularly monitor our investment holdings to ensure that we do not own more than 10% of a company’s outstanding shares.