Who?
Michael Smedley, executive vice-president and chief executive officer, Morgan Meighen & Associates
My Best Investment
In my job, in the main, I’m a stock picker in Canadian and international markets, and the philosophy of our biggest fund, Canadian General Investments, is long-term investments for growth and income.
As such, it’s really quite easy for me to single out a particularly spectacular investment, due to its presence in our portfolio over the past 10 to 15 years, and yet one that’s little known by people in the stock market in Canada: BMTC Group Inc.
The company’s the No. 1 furniture and furnishings supplier retail chain in Quebec. It’s listed on the Toronto Stock Exchange.
It’s not particularly visible because there are not a lot of shares in the market. The number of shares, in fact, prior to a 2-for-1 stock split in April, was only 15.8 million.
It is, like Leon’s, which is the No. 2 in Quebec, a company controlled by a family, or families; unlike Leon’s, it tends to be extremely quiet in its contact with the investment world, issuing information in the orderly, regulated way, but not tending to communicate beyond that. You don’t see it presenting at conferences, and you don’t see it quoted in the press.
The management is a very strong, long-term family management, which we understand the merits of, as we have that ourselves in our own group. It has, in this particular case, very hands-on management. In other words, one presumes inefficiencies do not escape attention.
Because of its extremely conservative nature, it is very little followed by analysts. Because it does not raise capital, it does not get coverage by the mergers, acquisitions and corporate finance departments of investment banks.
Overall, it’s the textbook representation of a stock which is mostly highly illiquid, which is not known by a lot of investors.
The Return
If you were to look at BMTC’s performance in Canadian General Investments, you would see that the actual cost of the position held totals $3.8-million, bought over the years, and the market value, as of March 31, was $22.7-million.
It’s a solid payer of growing dividends, but bear in mind that as the stock appreciation is high, the yield is only about 1.1 per cent.
It has a low current yield, but as it is so often with high-quality companies, the actual dividend payment grows.
Shares have been sold over time, but very few, whereas the company itself does have a clear tendency to buy in the shares. We are, after the family and the giant Fidelity Group, the No. 3 shareholder, and have been for many years.
It is our No. 1 stock in the portfolio, because of the high quality of returns, and that is despite having sold down 100,000 shares only a few months ago. The holding went down from the top position, but has now gone back up because of appreciation of about 50 per cent over a couple of months because buyers have emerged – probably associated with the relative stability of the Quebec housing market, and therefore the presumed stability or improvement of furniture and furnishing sales.
I have to admit that the stock woke up again, as it has done in past years, after I disposed of that 100,000 share block.
I have no discomfort with that, and in fact for another of our funds, Third Canadian General Investment Trust, at about the same time, I bought nearly 97,000 shares which were offered into the market by someone else, and I placed it in that fund, and it is now the No. 4 holding in that fund.
Which is amazing, isn’t it?
