Stephen Groff's blog

Do you know the (duration) risk you're taking?

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With the recent interest rate volatility, it could be timely to revisit the idea of duration and the risks that exist in what are perceived to be "safe" investments. Below is a chart provided by Bank of America Merrill Lynch. While there is no magic here, the math is powerful and insightful.

 

 

Trucking along to find fresh ideas

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A sector I have been spending some time on is the trucking industry in the U.S. While it may seem like an odd place to be looking for ideas, there are a number of factors at play, which could create an attractive environment for well positioned businesses. This would fall under the category of an opportunistic trade vs. a long-term holding.

Tim Hortons should not be a target for activist investors

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The most recent development at Tim Hortons exemplifies a problem in the finance industry today. An activist investment firm decided that after making a 1.5% investment in Tim Hortons (owned for less than a year), it should be able to tell the company what to do.

Is management working for or against you?

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One of the factors we consider when looking at a company is how key decision makers are paid. It's no secret, people will tend to do what is in their best interest. This is no different for mutual fund managers. Nothing aligns a portfolio manager better with mutual fund unitholders than being a mutal fund unitholder.

Not all "yield" stocks are created equal

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It has become increasingly difficult to find interesting income ideas as investors have bid up many yield names. This has resulted in a number of sectors becoming overvalued and creates risk when some companies engage in aggressive practices to take advantage of the market’s desire for yield. One example is paying out more in distributions than the company earns in cash flow – this can be sustained in the short term, but is hardly a way to create shareholder value over time.

Canadian Housing: A Very Different Story than the USA

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We are U.S. housing bulls, however, we are increasingly concerned with what we see across parts of Canada. Attached are some charts and anecdotal points you may find interesting. We continue to seek out best ideas in Canada and abroad, while ensuring we avoid areas where we see potential risks.

What we look for in a stock

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When we talk to our fundholders a common question is, “What do you look for in a stock?” I don’t want to lay out another high-level investment philosophy, since most investment philosophies all seem to sound the same. (When was the last time you heard an investment manager say they are looking to invest in companies with poor management teams and weak balance sheets?)

Instead, I would rather talk about one of our top holdings in Cambridge Pure Canadian Equity Fund and why we like it so much. Hopefully, this gives you a flavour of how we pick stocks and think about investing.

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