Alex Rasmussen, 21
Occupation
Student in his final year at the University of Western Ontario
The portfolio
Difference Capital Financial Inc. and cash
The investor
Alex Rasmussen has extensively studied the value-investing approaches of Warren Buffett and Ben Graham. His 2012 and 2013 stock picks published on seekingalpha.com outperformed the market.
How he invests
Mr. Rasmussen prefers to invest in companies with a durable competitive edge and pricing power, as "demonstrated by persistently high returns on capital and expanding margins." They tend to be non-commodity businesses that have a dominant market share because of a strong brand name or the lowest production costs in their industry. "I try to buy them when investors freak out over a poor quarterly result or something in the macro environment."
When such opportunities are absent, he buys companies whose shares are selling below liquidation value (what they would fetch if the whole or parts were sold off in a bankruptcy). They include Mr. Graham's "net-nets," companies valued below their net working capital.
When these companies are hard to find, he'll "look to play relative value opportunities." For example, if Canadian stocks become noticeably undervalued vis-à-vis U.S. stocks, he may bet on Canadian stocks reverting to a higher relative valuation if "near-term catalysts" are present.
Within the past year, Mr. Rasmussen has taken profits on several stocks, including GM and AIG. Except for a bit of cash, his portfolio now consists of an all-in bet made in early 2014 on Difference Capital – a merchant bank that invests in private and public Canadian technology companies. It is run by Michael Wekerle, the well-connected Bay Street trader who helped build up GMP Securities LP.
Best move
"Went long Goldman Sachs at $115 [U.S.] in 2008 the day before Warren Buffett announced he had $5-billion of warrants at the same price."
Worst move
"Bought Hewlett-Packard in 2011 on the idea [the CEO] was going to make it a software business … but took a 28-per-cent loss over seven months after the farcical acquisition of Autonomy."
Advice
Invest the same way you shop – buy when you see a sale.
Want to share your strategies? E-mail mccolumn@yahoo.com