This accounting professor uses a classic investment approach

Camillo Lento

Occupation

Associate professor of accounting

The portfolio

Mostly Canadian dividend-paying stocks, real estate investment trust (REITs) and income funds, including BCE Inc., Smart REIT, Cineplex Inc. and A&W Royalties Income Fund.

The investor

As a holder of both the chartered professional accountant and chartered business valuator designations, Camillo Lento relies on his "many years of training in financial statements analysis and security valuation" to manage his own portfolio.

How he invests

Mr. Lento follows a classical investment approach, one that can be found in the training manuals of the Canadian Securities Course. This is the "fundamental" approach, supplemented with "technical analysis."

Fundamental analysis focuses on "understanding the company's business model, key value propositions and the industry as a whole." A big part involves examining company financial statements and key metrics such as "earnings growth, solvency, dividend yield, price-earnings ratio and operating cash flow." Within this framework, Mr. Lento places weight on "a company's ability to pay a sustainable, growing dividend."

"Once I have identified a stock to purchase, I rely on technical analysis to determine an appropriate entry point," he says. "I review the historical stock chart to see where the stock is relative to its 52-week price range, assess its volatility and evaluate the stock's momentum or trend."

"I tend to buy-and-watch," Mr. Lento adds. "I continue to monitor my investments to ensure their business model and financial health has not changed significantly from my original investment thesis. Significant changes may lead me to sell my position."

"Overall, I tend to invest mostly in Canadian stocks and achieve broad global diversification via exchange-traded funds and holding a little bit of gold."

Best move

It was purchasing BCE Inc. shares in 2008 when they plunged after the Ontario Teachers' Pension Plan withdrew its takeover bid.

Worst move

It was selling many stocks in a panic at the bottom of the credit crisis in 2009. "I learned a great lesson, which has impacted my current investment philosophy," he discloses. That is, the best time to buy is usually when you feel most like selling.

Advice

"Focus on the long term while avoiding investment decisions that are based mostly on your emotions or short-term news," he recommends.

Want to be in Me and My Money? Contact Larry MacDonald at mccolumn@yahoo.com.