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INVEST LIKE A LEGEND
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By DAVID BERMAN, JOHN DALY, NIALL MCGEE, BRIAN MILNER, TIM SHUFELT, SEAN SILCOFF, DOUG STEINER, SHIRLEY WON
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Friday, January 29, 2016 – Print Edition, Page P25


Welcome to our sixth annual guide to making money. This year, we turned to the hedge fund manager who inspired a blockbuster and one whose hobbies are as extreme as his investing style; a surrealist aficionado and stalker of distressed assets; Canada's answer to Buffett (and owner of Sinatra's Palm Springs pad); and the man in charge of your retirement fund. PLUS Michael Bloomberg on how to save the world, and more.

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/THE OPTIMIST

Jean-Guy Desjardins

Desjardins, 71, is chairman and CEO of Montreal-based Fiera Capital, which oversees $100 billion in assets. He also co-founded TAL Global Asset Management, which was sold to CIBC in 2001.

What's your outlook for 2016?

This economic cycle has at least four years to go before we consider the possibility of another recession. We think global growth will be stronger than expected--at least 3.5%. U.S. growth should be above 3%. Europe will be picking up, and so will Japan. China will manage to hang in there with 6.5% to 7% growth. As a result, commodity prices will go up. I would put a target on the price of oil by year-end at about $65 (U.S.) a barrel. With a rising oil price and stimulative monetary and fiscal policy coming from the federal government, it's like having three boosters to the Canadian economy. The place to put your money this year is the Canadian stock market. We expect it could gain 15% or more. The U.S. market could be up 10% in U.S. dollars, but flat or negative in Canadian dollars. We also favour buying European and Japanese equities. We are very negative on the traditional bond market.

Fiera's stock-pickers focus on "best-of-breed"companies. What are some of those names in the firm's portfolios?

We own stocks like Nestlé, Nike and MSCI, an index provider--firms that can sustain a high return on invested capital, are leaders in their industry and have a competitive edge that provides pricing power. They also tend to have a strong brand and unique distribution, while there are often barriers to entry in their space. We generally hold such companies for 10 to 15 years.

What have been your personal best and worst investments?

My best is Fiera, in which I still own a 12% stake. The value of Fiera, after 12 years, is the same as TAL was worth after 29 years. The worst was TAL, because selling it to CIBC was not by choice. It was a good transaction financially, but we were not excited. We had great ambitions for the business.

You continue to lead Fiera's asset-allocation team. What advice would you give investors today?

Underweight fixed-income securities and overweight traditional equities. For someone with a balanced portfolio of 60% stocks and 40% bonds, I would suggest bringing the equity position up to 80% and bonds down to 20%, or as low as possible. We favour not only Canadian equities, but also European and Japanese stocks. I would also rather own cash than bonds. That's because bonds are expected to have negative returns over the next three years as interest rates normalize, and quantitative easing comes to an end in Europe and Japan.

Do you have any hobbies?

I am a serious cyclist--I bike about 4,000 kilometres a year. I train weekdays in a gym. I ski on weekends. It's all work, family and exercise. That's my life. /Shirley Won

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LEAGUE OF EXTRAORDINARY GENTLEMEN

In 2015, he received the CFA Institute's Award for Professional Excellence, bestowed on just 14 investment professionals, including:

Sir John Templeton (1991)

Warren Buffett (1993)

John Bogle (1998)

Keith Ambachtsheer (2011)

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/THE SKEPTIC

Steve Eisman

Eisman is one of the few money managers who predicted the U.S. subprime blow-up--and had the nerve to make gargantuan bets against it. His hedge fund was up more than 70% in 2008. Eisman is a key character in Michael Lewis's The Big Short and is played by Steve Carell in the movie.

What's it like being portrayed by a Hollywood star?

I think it's a very good movie. And as far as his portrayal of me, it's not 100%. What I would say is: Eliminate my sense of humour and make me angry all the time, and that's the portrayal. It's accurate enough, but it's not really me.

We're calling you an "investing legend." What makes you a legend?

I'm flattered anybody would call me a legend. In some ways, my "fame" is an accident, due to the fact that my area of expertise became ground zero. I did the homework on my own sector, and it turned out that was the most important homework you could have done.

Post-crisis, is the financial system safer than before? Are the systemic risks gone?

If you read the newspapers, sometimes it feels like it could happen again, and from where I sit, that's just not true. The regulators learned the hard way they were wrong, and they've done a lot to correct a lot of the problems. In 2001, Citigroup was levered 22 to 1. In mid-2007, it was levered 33 to 1. Today, it's levered 10 to 1. The banking system probably hasn't been this safe in my lifetime.

Is it hard to have a second act when you go through a once-in-a-lifetime event?

It's not hard to have a second act. It's just that the second act's not going to be as exciting. Thank God--I don't think I could take it again. Running my fund in 2008 felt a little like being Noah. Noah builds his ark and he puts his family on the ark and off they go. So he and his family are safe, and everybody else is dying.

Is there any wisdom you can impart to average investors?

Do your own homework. I can't overstate the importance of this. When things start to go bad, speaking to the management of the company may be the worst thing you can do. You can walk away thinking things are okay when in fact they're not, because seeing outside your own paradigm is sometimes the hardest thing to do. In the big-bank industry from 1995 up until the crisis, every year was basically a good year. Every year, people got paid more, and every year the leverage got bigger. What happened is that the people who ran these firms mistook leverage for genius. If you had gone to one of the senior people in one of these firms in 2006 or 2007 or 2008 and said, "Dude, the entire assumptions by which you have governed your career are wrong," they would have said, "Are you crazy? I made $50 million last year. How could I be wrong?"

Are there people in your life whom you look up to?

That would be my mother and father, with whom I work today [at Eisman Group, now part of Neuberger Berman]. My mother started the business in the early '60s. Then my father decided he didn't want to be a lawyer any more and joined my mom. The most important lesson I learned from them is that investing other people's money is a holy trust. This is money they are counting on for retirement. Treat their money like it's your own.

What do you do at the firm now?

We create broadly diversified portfolios for people--long only.

What are your views on Canada, in light of this long real estate bull run?

Canada has ridden the commodity supercycle probably better than anyone else, and the only thing I'm convinced about Canada right now is that credit losses are going to go up. And not just in terms of housing--universally. The only question, and it's way too early to know, is how high? /Niall McGee

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"I think he sees himself as a defender of justice and righteousness, while at the same time being conflicted--as I think they all were about benefiting from the downfall of an economy" --STEVE CARELL on portraying Eisman in The Big Short

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/THE SALESMAN

Jim Pattison

At 87, Pattison still runs Vancouver-based Jim Pattison Group, which has $9 billion in sales from car dealerships, grocery chains, radio stations, fishing and more. Pattison also owns stakes in forestry and port-service companies.

Many entrepreneurs take their companies public to fund growth. Why haven't you done so?

I prefer to stay private. You have more freedom. You can plan for the longer term, and you don't have to worry about each quarter. When you make a mistake, it's also not nearly as visible. While our key company is private, we do invest in public companies from time to time.

Your firm is an eclectic mix of companies. Is there a thread that connects them?

No, it's a collection of random opportunities. We have a number of consumer-focused businesses, as well as those involved in manufacturing and the service industry. But my background is basically in retail. I started selling used cars. Then I sold new ones. I also sold products door to door--from pots and pans to adhesive tape.

What are the key attributes when looking at potential acquisitions?

We look for businesses we can enjoy being in and where we can get a reasonable return. Hopefully we can grow it. Cheap is not necessarily important. You may be better off to pay more and get a good company than wind up with a headache.

What's the appeal of two of your most unusual acquisitions--Ripley's and the Guinness Book of Records?

Ripley's is in the entertainment business. Their business is selling fun. But we find it fun to deal with all the businesses we're in. If you don't find it fun, sell it. We consider ourselves operators of businesses, not investors.

You own a stake in Canfor and recently increased your interest in Westshore Terminals, which operates coal-export facilities. What is your outlook for these resource sectors?

We haven't invested a lot in commodities. There are a lot of things you can't control in that business.

What advice would you give to would-be entrepreneurs?

Anybody who is trying to do new things will make mistakes and feel discouraged from time to time. Just be honest, work hard and, when failure comes, don't give up.

Do you have any thoughts of retiring?

No, but we've had a succession plan in place since 1979. We have an outside board of directors, and it will decide who my successor will be. We have been grooming people who can take over, including president Glen Clark, a former premier of B.C.

Do you have any hobbies?

I don't have a lot of time. I play the trumpet, but not often. We have a few vintage cars. I did buy John Lennon's psychedelic Rolls-Royce, but I gave it away to the British Columbia government to help promote tourism. /Shirley Won

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OTHER THINGS JIM PATTISON OWNS

Guinness World Records

-- 130 million copies sold in 100 countries

Ripley's Entertainment

-- 90+ attractions in 10 countries

Great Wolf Lodge in Niagara Falls

-- Canada's largest indoor waterpark resort

Nova Spirit

-- a 45-metre luxury yacht

Frank Sinatra's former home in Palm Springs

-- complete with the Sultan of Swoon's model train collection

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/THE VENTURE CAPITALIST

Boris Wertz

Wertz is one of Canada's most respected early-stage venture capitalists. He's the founder of Vancouver-based Version One Ventures and serves as a board partner for Silicon Valley VC firm Andreessen Horowitz.

What's your favourite metric as a venture capitalist?

Ultimately, what counts is customer satisfaction, so a metric like net promoter score. With brute-force sales and marketing, you can always generate revenue. But you can only build a large, sustainable company if customers love and recommend a product, and come back and use it.

What has been your best investment?

GoInstant is still unrivalled--a Halifax company that got sold to Salesforce with a 10-times return within a year. That is rare. When you invest in a company, you always assume you will be in it for 10 years.

What's your biggest investing mistake?

Passing on [Canadian start-ups] Hootsuite and Shopify. In Shopify's case, I just didn't see how much potential there still was. On Hootsuite, I completely underestimated the traction they already had and how quickly they had grown. One of the lessons of Shopify is that only a few billion-dollar companies are created each year, and if you have a relatively high conviction you're looking at one of them, it doesn't matter if the valuation is a bit high--go for it.

What subsectors in tech offer the best opportunities now?

I think we're at the tail end of the mobile platform. The next-generation platforms are all still early, but we're looking at drones, the Internet of Things, Bitcoin, Blockchain, artificial intelligence and machine learning. We think a lot about virtual and augmented reality. As a VC, you don't want to be at the bleeding edge, and mass adoption is probably a few years away. So we probably want to wait it out for another couple of years.

What areas are you cautious about?

This whole on-demand category has created large companies like Uber, which truly are marketplace platforms and tech companies. But you also have a whole slate of "Uber for X" companies that are service companies that use tech to be more efficient. Ultimately, we want to invest in tech companies, not tech-enabled service companies.

Other than venture, where do you invest your money?

Low-fee index funds and a few private equity funds where I know the manager.

What advice do you have for retail investors?

There have never been more opportunities to get involved with tech start-ups, but it's very risky. There are about 10,000 start-ups created every year, and only 10 become multibillion-dollar companies that create all the returns.

What's your investing motto?

Only invest in what you understand. /Sean Silcoff

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/THE WORRYWART

Jim Hall

The chairman of Calgary-based Mawer Investment Management sticks closely to the firm's value investing playbook. It may be boring, to use Hall's own description, but it works.

What's your assessment of the equity markets?

Our team doesn't see a lot of mispricings in either Canada or the U.S. Valuations seem relatively efficient, which should translate into returns in the mid-single-digit range. However, stock prices are very sensitive to interest rates right now, because rates are so low. Which means the impact of any surprises--positive or negative--will likely be magnified. As a result, it's best to stay balanced, by companies, sectors and geography.

As a value investor, what asset classes, markets or sectors look the most promising in 2016?

Domestically focused European companies have struggled for several years, but countries like Spain and Italy are reforming and recovering faster than investors may appreciate. In terms of sectors, competition has been tough on telecoms, but they're likely to find ways to sell more valuable services over their networks for many years to come.

Which sectors are the most overrated?

Real estate continues to be one we wonder about. Prices in many markets may have been held aloft by unusually low interest rates, and that era may be coming to an end. Supply also appears to be growing.

Should investors pay attention to economic news, quarterly earnings or day-to-day market gyrations--or just ignore it all?

Being informed is part of being an investor, so, yes, investors should pay attention. That doesn't mean they should act on the noise. My advice: Don't act without at least 24 hours' reflection and an honest attempt to see things from multiple angles.

What's the biggest mistake investors make?

Acting too quickly, on emotion, often within a very short time frame, and on the basis of limited information.

What has been your worst investment?

At the top of my personal Wall of shame is Bracknell Corp. It was a construction company that had its heyday building telecom networks during the Internet bubble. I recommended purchasing it at just under $9. I got out less than a year later at 70 cents, just before it defaulted. It taught me a lot about bubbles and the destructive power of leverage.

What keeps you awake at night?

Worrying is an occupational hazard, so I'm constantly running through different scenarios. On the other hand, the evidence would suggest our firm is following a resilient process, so maybe I should worry a little less. /Brian Milner

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READ THIS BOOK

Investing: The Last Liberal Art

by Robert Hagstrom

"Hagstrom picks up on Charlie Munger's idea that we should use multiple 'mental models' when examining problems--a critical mindset for successful investing"

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/THE ORACLE OF THE EAST

Tim Dattels

Dattels started at Wood Gundy in Toronto, then moved to Goldman Sachs in the '90s, where he became a partner and adviser to world leaders. He's now based in Hong Kong, where he leads the Asian operation for TPG, which has $70 billion (U.S.) in capital. For fun, he sits on BlackBerry's board.

What's really happening in China?

The domestic stock market in China has never been a good gauge of the economy. When the economy was on fire between 1999 and 2005, the stock market did nothing. Then, as the market slowed and issues crept in to the economy, it took off. The economy is also split into "Good China" and "Bad China." The Bad is the state-owned enterprises, which are inefficient, and have excess capacity issues and unnecessary leverage. The Good is personified by the BAT trio, Baidu, Alibaba and Tencent--well-run companies by world standards, modern management and extreme innovation. There are hundreds of these companies.

How can us little guys benefit from your wisdom?

China's growth is more modest today, but you have to remember they are adding a Canada a year in terms of GDP growth. I wouldn't stay away. Honestly, though, it is a lot easier for private equity to invest into these markets. I'm really not a fan of the Chinese equity market, because the compliance you would expect when investing just isn't there yet. For lower-risk China exposure, there are plenty of non-Chinese firms that are being very successful there. Apple and Nike are two that come to mind. If you want to get into the country directly, do it through Hong Kong.

You invest in other countries as well. Which ones?

For investors, India is more accessible. It imports almost all its energy, and lower fuel prices combined with reducing fuel subsidies will help the economy enormously. Also, its export coefficient--the percentage of its economy relying on exports--is a fraction of China's, so growth helps leverage exporting companies.

We know mega-investors think in themes that persist for long enough to extract maximum value out of their investments. What are yours?

I'd say the largest theme to emerge recently is around financial services and enabling technology. Roughly one-third of our investments in Asia have been in financial services. The "fintech" area is exploding. Alibaba is the fastest-growing deposit-taking institution in the world, and it doesn't have any branches. In 2015, more than one-third of Asians still didn't have bank accounts. Our investments in Bank BPTN in Indonesia and Janalakshmi in India, where customers borrow small amounts--usually under $3,000--have been two of our best investments. Bricks-and-mortar financial services are headed for the battle of their lives, including in Canada.

The second theme, and it's happening faster in Asia, is the move from physical shopping to e-commerce. This is having a profound impact on landlords, logistics and infrastructure.

Medical tourism and wealthier Asians paying for additional health care is another area we are heavily invested in. You hit three trends: aging demographics, increased wealth and better awareness of healthy living.

The last theme, and it ties a lot of this together, is the rapid deployment of infrastructure in Asia. This is mostly led by Chinese firms, but there are beneficiaries in Canada: Bombardier and SNC Lavalin.

Give me your 2016 outlook.

Be prepared for volatility. It's a different game now that rates in the U.S. are rising. If it persists, that will pull capital into dollar-based markets. Everywhere else where money is still almost free, it can be a dangerous world. /Doug Steiner

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35%

Chinese market in 2015. Dattel's Asian unit, meanwhile, has posted double-digit returns for each of the past five years

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/THE PHILANTHROPIST

Michael Bloomberg

In 2014, after three terms as New York's mayor, Bloomberg resumed control of the eponymous company he founded in 1981. He has pledged to donate most of his $40.6-billion fortune.

What factors do you take into account when making a philanthropic investment?

The overall goal of Bloomberg philanthropies is to make the biggest possible difference in the largest number of lives. To reach it, we look to invest in issues that aren't getting the attention they should. Road safety is a good example. Traffic crashes claim around 1.25 million lives every year, and that number will increase if we don't do anything, because the number of cars on the road is growing quickly. We also focus on cities, because what works in one city often holds valuable lessons for others. We try to bring together partners wherever and whenever possible. The private sector has resources and expertise that can benefit the public sector, and the public sector has the authority to scale up successful experiments.

How do you determine the return on investment in obesity prevention or green energy?

I've always believed, "If you can't measure it, you can't manage it." And if the data doesn't exist, we help gather it. To give you one example: Almost two-thirds of the world's deaths go unrecorded, and millions more lack a documented cause. So governments and other funders often don't have enough information to focus their resources, and they can't measure whether their efforts are working. Last year, along with the Australian government, we launched a project that will begin to address these problems by helping some of the countries with the most severe lack of health data gather more of it.

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141

Including Bloomberg, the number of billionaires who've signed the Giving Pledge to donate the majority of their money

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/THE LONG-GAMER

Mark Wiseman

Wiseman became CEO of the Canada Pension Plan Investment Board in 2012, leading a team that now manages $273 billion in assets, and generated investment income of more than $4 billion in the second quarter of fiscal 2016.

Do people ask you if they're going to have a pension when they retire?

All the time. The reality is that the CPP is an extremely reliable portion of most Canadians' savings--and I go to great lengths to explain that.

What is your investing style?

Our approach is very much taking a long-term view. In many respects, the reserve fund of the CPP has some of the characteristics of a portfolio that's optimal for somebody in their late 20s or early 30s. And as most financial planners will tell you, that is a portfolio dominated by equities, with a higher degree of risk than one would have in their 60s.

Alternative assets make up about 50% of your portfolio. What's the attraction?

We have comparative advantages individuals don't have, and that's one of the great benefits of having a large pool of assets. First, we have scale. Second, we have certainty of assets--you can't redeem your money under the CPP. And third, we have a long time horizon.

Can an individual investor mimic your style?

You can try, but you couldn't do it at the same cost. And it wouldn't be the right decision for most investors because they're not diversifying the risk across many people.

If you had to name one investment that typifies CPPIB, what would it be?

Wilton Re, a life reinsurance company, which plays to all of our comparative advantages. But more to the point, life insurance is a perfect hedge for one of the major demographic risks facing the CPP--that we've underestimated longevity. What is the risk of holding life insurance policies? It's that you've underestimated mortality.

Any big regrets?

There are two types of errors you can make. The first is easy to spot: errors of commission. You have to make mistakes. You have to lose money. If you're not doing that, you're not taking enough risks. But you don't want to make the same mistake twice. The other errors are harder to analyze: errors of omission. What is the investment you passed up on?

Do you have an example?

During the financial crisis, there were several investments we did not have the intestinal fortitude to make. We were plagued by the same psychological fear that plagues all investors. One of the ways you can fight against human nature--which is to be overenthusiastic when markets are bullish and overly pessimistic when markets are bearish--is to ensure you have certain systematic aspects in how you manage the portfolio. In other words, rebalance to the debt and equity levels you believe are appropriate for the fund. It's a mechanism as markets are falling to be buying equities, and the exact opposite happens as markets come back up. You never have to figure out where the bottom or the top is.

Do you have to be an optimist to be a long-term investor?

I'm not sure, but it would be a pretty miserable existence if you weren't. That may be one of my flaws: I would describe myself as a glass-half-full type of person.

What keeps you awake at night?

I don't sleep much, but I sleep really, really well. There's not much that keeps me up at night, except maybe jet lag. /David Berman

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WORLD'S TOP SOVEREIGN PENSION FUNDS BY 2014 ASSETS (U.S.$ MILLIONS)

1 | Government Pension Investment, Japan | $1,143,838

2 | Government Pension Fund, Norway | $884,031

3 | National Pension, South Korea | $429,794

4 | National Social Security, China | $247,361

5 | Canada Pension Plan, Canada | $228,431

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/THE BIG-PICTURE GUY

Mohamed El-Erian

El-Erian was CEO of PIMCO, the $1.5-trillion (U.S.) bond-investing behemoth, from 2007 to 2014, and authored the 2008 bestseller When Markets Collide. He's now chief economic adviser at Allianz and chairman of Barack Obama's Global Development Council.

Growth seems sluggish in just about every major economy. What does this mean for investors?

The quest for higher and more inclusive growth means the fundamental drivers of sustainable returns are being challenged, increasing investors' dependence on exceptional liquidity injections from central banks and cash-rich companies. Markets are coming from a period in which such repeated liquidity injections have delivered three gifts to investors: high returns, low volatility and favourable correlations. As the Fed starts its interest-rate hiking cycle--albeit a very gradual one that I call the "loosest tightening" in its modern history--this source of liquidity support and volatility repression will become less uniform. This is likely to place an even heavier burden on corporate cash injections, be they stock buybacks, dividends and/or M&As. It will also intensify the tug of war between liquidity support and sluggish fundamentals, leading to more frequent bouts of greater volatility. Investors will need to focus more on fundamentally driven investment.

Now that the Fed has started to raise rates, what should Canadian investors keep in mind?

Absent adjustments in other policies, the divergence in the monetary policy of the world's most systemically important central bank will lead to greater currency and interest rate volatility. The impact will be felt in other market segments, including commodities and equities.

How can individual investors protect themselves?

Investors need to be able to stomach greater volatility in their holdings of risk assets, and they need to have a larger cash cushion--both to enhance portfolio resilience and to provide opportunities for new investments in the likely event of adverse price overshoots. Also, be careful when it comes to liquidity give-ups and insist on sufficient remuneration up front.

Are continued low prices for oil and other commodities a good thing for investors or not?

It depends on where they're invested. On one hand, lower commodity prices have helped contribute to the unhinging of three market segments already: oil, high-yield bonds and foreign exchange in emerging markets. The consequences have included sharp losses and harrowing volatility. On the other hand, these lower prices have delivered windfalls to consumers and input-heavy companies, thereby providing opportunities for investment outperformance for certain segments. /John Daly

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/THE BANKRUPTCY KING

Wilbur Ross

Ross is chairman and chief strategy officer for New York-based WL Ross & Co., an affiliate of Invesco. The 78-year-old contrarian has made a fortune betting on troubled banks and distressed assets in industries such as steel, coal and textiles.

Where are the opportunities now?

We have purchased quite a few distressed bonds of exploration and production companies in the oil patch, mainly in the U.S. shale industry. Near-term, we do not see a major upward movement in the price of oil, but by 2017 or later, the price may stabilize closer to $60 (U.S.) a barrel. We have put about $1 billion to work in marine transport--mostly crude oil and petroleum tankers--including stakes in Diamond S Shipping Group and Navigator Holdings. We have also made a small commitment to the building materials sector. The theory is that home and apartment buildings are very much on the rise, and sooner or later the United States and other countries have to deal with the need for more infrastructure. We are now looking at the base metals and mining space, including Canadian companies. My guess is the commodity sector will hit bottom in 2016.

What is your outlook for China?

We don't think the economy is going to grow at anything like 7%, which is a very aggressive target--more like 4% to 5% next year. The mix of the economy is changing. It used to be driven by capital investment. Now, it is being driven by growth in service industries, and those industries don't use a lot of raw materials. That is why you have the slump in commodities. It is, however, a big market with rapidly growing income. Chinese products, transportation and gaming companies would be good places to invest. So far, we have not been much of an investor in open-market securities in China. Our two main activities have been running a clean-energy fund with China's largest electric utility, and investments in 17 factories.

What do you consider to be your best investment?

I created my business within Rothschild in 1997 and then bought it from them on April 1, 2000. For someone becoming an entrepreneur, I thought maybe April Fool's Day would be a good start. It has turned out to be the best rate of return I have ever had.

What about your worst investment?

Anybody who invests in risky things is bound to make mistakes, but it's a fairly small percentage. We try to make returns on the order of 20% a year, so you can't afford too many.

What advice would you give investors today?

Find companies you believe in and think are attractive. Then, put in buy orders at 5% or 10% below market. We are in a very volatile period, so you may get lucky.

You're an avid art collector. Does your approach to art differ from investing?

You buy a painting or a sculpture because you love it, and want to own and cherish it. I don't view art as something in which we are speculating. Art is very illiquid and volatile, particularly the contemporary side. Our main collection is surrealism, and particularly René Magritte, a Belgian surrealist. If you deal a lot with distressed companies, surrealism is a natural thing for you to collect, because distressed companies are in their own surrealistic world. There is usually something a little bit strange, a little bit skewed or out of order. It is art that is both visually attractive and intellectually engaging.

Do you have any investing mentors?

That would be Benjamin Graham and David Dodd, who wrote Security Analysis. They laid the foundation for value investing--that is, buying stocks that are fundamentally cheap and taking a long-term view. /Shirley Won

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/THE CONTRARIAN

Greg Boland

Boland finished 2015 by leading a group of shareholders in a deal to sell Wind Mobile to Shaw Communications for $1.6 billion. That's hardly his first windfall--as head of West Face Capital, he has become one of Bay Street's shrewdest hedge fund managers.

What do your best investments have in common?

Our most successful ones have been large, concentrated investments in companies that have fallen on hard times for reasons that are maybe misunderstood by the broad market and where there is a reasonable amount of complexity. Maple Leaf Foods, Hudson's Bay, Stelco, UTS Energy--these were great companies that had very valuable assets but a great amount of investor pessimism.

How has your investment process evolved?

Being a contrarian and buying at the nadir of investor confidence has always appealed to me psychologically, I don't know why. The result is you often get some bumpy rides at the beginning. If you're trying to catch a falling knife, you can get a few nicks on the way down.

For the retail investor with a contrarian streak, where might you direct them?

If the energy sector generates a lot of restructured companies, post-restructuring equities are often pretty interesting--they've already cleansed their balance sheets, they've solved their problems, their enterprise values are compressed. But what generally happens with individual investors is that when you get through a period of distress, you're so beaten up that you're less likely to play offence.

Are investors too easily sold on trendy investments?

The types of investments that can be turned into narratives are very appealing. And when that narrative breaks down, and it becomes a complicated investment, it tends to get orphaned by the marginal investor. That can be when it gets most interesting--when the story can't be explained in an elevator pitch. We can spend hundreds of hours going through all the scenarios, but that's extremely labour-intensive. Unless you're doing an incredible amount of your own work, trying to pick stocks is really tough and probably prone to random results.

Are you influenced by any famous investing figures?

Most of the famous deep-value investors--the Warren Buffetts and Seth Klarmans. But you have to find your own way. You have to do something others aren't doing. One of the few ways you can get an edge is to get involved in a contrarian situation, do a lot of work and really understand the outcomes.

What was one of your worst investments?

With Connacher Oil and Gas, we invested at the tail end of an M&A cycle. We didn't have a large investment in it, but we lost 100% of our capital. We didn't anticipate the world changing as quickly as it did. It's a lesson you learn over and over again--how to quantify the worst-case scenario. In that case, we misquantified it. /Tim Shufelt

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EXTREME CEOS

For kicks, Boland heli-skis, climbs mountains, and wind-surfs swells in Hawaii. A few other daredevil execs:

ANDREW WILSON

Electronic Arts

(surfing and triathlon)

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RICHARD BRANSON

Virgin

(hot air ballooning)

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ELON MUSK

Tesla/SpaceX

(kiteboarding)

* * * * *

NICHOLAS WOODMAN

GoPro

(car racing)

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Associated Graphic

Desjardins at Fiera's Montreal Office. He bought the painting in Italy--it's by Massimo Giannoni, who often paints the NYSE trading floor

Steve Eisman at the Midtown Manhattan office of the Eisman Group, where he works with his parents, Lillian and Elliott Eisman

From his headquarters overlooking Vancouver's Coal Harbour, Jim Pattison scours the globe for bright investment ideas

Vancouverbased Boris Wertz has invested in dozens of startups, including Frank & Oak, Indiegogo, Wattpad and Upverter

An expert skier (who's also blind in one eye), TimDattels skis all over the world, but most often at Whistler, where he hits the slopes early, then heads to his cabin at the bottom of the mountain to work

Mark Wiseman, the man Canadians are counting on to support them in retirement

Monday, February 01, 2016


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