Bill Harris is a partner and portfolio manager for equities and fixed income at Avenue Investment Management in Toronto. His funds have seen an average annual return of 6.8 per cent since October, 2003
If you had a $100,000 windfall, where would you invest it right now?
Any day that I have $100,000, I invest it. Avenue's portfolio is designed for that, because it's not biotech and it's not emerging markets. It's an all-encompassing universal equity strategy. We look for an 8 per cent to 10 per cent return with as little risk as possible. So whenever anybody says, "How can I maximize my return?" we always say, "How can I minimize my risk and still get a reasonable return?"
Where do you see the best opportunities now?
Enbridge is probably one of the most bulletproof business models in Canada, but it is now expensive. So we have gone back to deep-cyclical stocks. But we just bought PHX Energy Services, a drilling company. The drilling industry has collapsed – there's too much oil, there's too much natural gas – but PHX is still making money, and it yields about 8 per cent, so I can wait for the industry to come out the other side.
Do you tend to take a contrarian, deep-value approach?
I hate that term! I'm supposed to buy things when they are low and sell things when they are high. The first thing is, can I buy a good business? Next, I wait and I wait and I wait until I can buy it at a good price. Most days, businesses trade at an okay price.
Tell me about your best investment.
Keyera Corp. It's a very niche business: One big pipe of natural gas comes into the plant at one end, and they split it into components – ethane, butane, sulphur, that kind of stuff. The shares traded in the teens in 2009, with a big honking yield. But we believed that with low interest rates, the multiple on an industrial company's earnings before interest, taxes, depreciation and amortization should be around 12, not eight. So you're looking at a stock that's at $17 and saying: I think this thing can go to $43. And it hit $50 in three years.
Your worst move?
This time last year, I went to Calgary and came to the conclusion that there was too much oil. We got conservative on the oil price, but not enough. We took our exposure from 12 per cent down to 6 per cent, but it should have been less. That makes me sick to my stomach.
David Berman