President and portfolio manager | Timelo Investment Management Inc.
Jean-François Tardif is laser-focused on making money when equity markets go nowhere. He buys compelling stocks cheaply when they tank and sells on periodic rallies. This active strategy, along with shorting securities, helped his $339-million Timelo Strategic Opportunities Fund gain 7.2% in 2022 when North American markets sank into the red. The hedge fund has also outpaced the S&P/TSX Composite Total Return since inception in 2013. His $188-million JFT Strategies Fund, a closed-end offering that he oversees for CI Global Asset Management, is run similarly. We asked Tardif, 54, why a buy-and-hold investing approach is a losing game now and why he’s bet on Profound Medical, a medical device play.
What is your outlook for North American markets?
I expect the market to go sideways for a few years. So, when stocks are overbought and have had a nice rally, it’s time to take profits. When the market gets scared and stocks are oversold, it’s time to selectively buy. We need to work through the excesses of the past 13 years after the 2008 financial crisis, when there were zero interest rates and massive money printing. Those created bubbles that are being unwound in sectors such as technology and real estate because of higher interest rates. The collapse of Silicon Valley Bank is just one example.
You’re upbeat on the energy sector. Why?
Long term, I am bullish on oil because of tighter supply due to underinvestment in new production by energy firms, and growing demand by China and other non-Western countries. Oil could easily hit US$100 per barrel, but I wouldn’t rule out US$200 within 10 years. There is a potential risk of the oil price falling in the shorter term because of a recession. However, that may not be the case if OPEC Plus cuts production to keep oil around US$70 per barrel.
What’s an oil play that you favour?
We own Total Energy Services, which supplies products and services to the oil and gas industry in Canada, the U.S. and Australia. It generated lots of free cash flow during the pandemic, when many companies were burning cash, and was able to pay down debt. The stock is still very cheap. That’s because it’s a smaller-cap name not well covered by analysts, and some investors avoid energy names because it doesn’t fit their environmental, social and governance (ESG) mandate.
What is your view on natural gas?
Oil has more upside than natural gas because oil is harder to find, but I also expect growing demand for gas. Its commodity price depends on local markets and is sharply higher in Europe than it is in Canada. We like Vermillion Energy for a potential replay of Europe’s 2022 energy crisis. Gas prices went through the roof after Europe cut off supply from Russia following its invasion of Ukraine. Europe was lucky to have a mild winter, but it is a question of timing when it has a normal, or worse, a very cold winter. Vermillion will benefit because it produces gas in Europe, too.
Why do you own Interfor when lumber prices have plunged from pandemic highs and the housing market is weak?
Interfor is a pure-play lumber producer whose stock price, I believe, has hit the bottom of the cycle. North American housing construction is down because of higher interest rates, but there will be a shortage of homes as the population grows because of immigration. The supply of lumber is tight, partly due to British Columbia reducing timber cutting. If interest rates drop because of a recession or an economic slowdown, we could see an upswing in housing construction and rising lumber prices.
Profound Medical is a top holding. What’s the attraction?
This Canadian company has approval from the U.S. Food and Drug Administration for its laser-type procedure to treat prostate cancer. It can reduce the risk of infection compared with surgery, which can have side effects. I believe that Profound’s procedure has the potential to become the new standard of care. Its equipment is now used in many hospitals, but it’s still at the beginning of awareness among doctors and patients. Hopefully, its revenues will have a hockey-stick curve over time. I believe that its stock has multibagger potential. /Shirley Won
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