Was 2009 the best year to invest ever? Tye Bousada thought so. In the middle of the worst market in 75 years, he launched EdgePoint Investment Management Inc. with fellow Trimark veterans Patrick Farmer and Geoff MacDonald. Their funds cooked in their first calendar year, with the $338-million EdgePoint Global Portfolio soaring 28% in 2009 versus 18% for the average global equity fund. The $189-million EdgePoint Canadian Portfolio gained 50%, easily beating the 35% achieved by the S&P/TSX total return index. The 38-year-old Bousada, who runs the funds with MacDonald, shared his recipe with Andrew Bell.
We aren't trying to be everything to everyone. We have high minimum investments in our portfolios-$15,000. Higher minimums result in lower fees.
We look for companies that can double in size over five years. Calfrac Well Services Ltd. is one. It's one of the largest Canadian players in hydraulic fracturing-technology used to extract gas and oil from what were once uneconomic areas.
When everyone starts having the same idea, the danger is permanent loss of capital. Early last year, the consensus was to own defensive stocks-pharmaceuticals, utilities, grocery, packaged goods. In reality it was anything but safe because as the markets rebounded, companies from those four sectors materially underperformed.
Tim Hortons Inc. is a big holding. The quick-serve restaurant business is tough, but the facts demonstrate that Hortons is winning. Just to match the number of stores per capita in Ontario, Tim's has to grow their store base in the rest of Canada by about 85%. The opportunity for U.S. growth is real. There were 556 stores in the States at the end of September, up 31% in a year.
Research In Motion's valuation is about 12 times earnings. Given the growth ahead of them, we believe this valuation is very atttractive.
My biggest investing mistake was starting late. I was 24 before I began studying investment management.
One obvious trick that corporate managers sometimes pull is lack of disclosure. Some companies prefer to meet the bare minimum requirements. When you are looking for 30 or so great businesses to invest in, you can quickly exclude the ones that don't give current or prospective shareholders enough information to assess what the business is worth.
The trick is finding a stock where you have a view that is not commonly shared by others. If you can develop a proprietary view about how much more valuable a business is going to be in the future, and your opinion is not reflected in today's share price, it's a good sign.
A classic mistake that investors make is looking at a stock as a stock and not as a business. At the end of the day, you're buying a piece of the business.
The best investors live in a very narrow emotional band. When times are tough, they stay calm and don't lose sight of what they set out to do. When times are good, they don't feel too confident. The instant you think you are winning in this business is the instant you start losing. There is no finish line.