John Fisher believes in putting his money where his client is. Called "eating your own cooking" in industry parlance, it is intended to inspire investor confidence that he will be sure to act in their best interest.
It's a practice that helped Mr. Fisher launch his boutique investment firm, Toronto's Bridgeport Asset Management Inc.
Before that he worked at Clairvest Group Inc., the private equity firm founded by Joseph Rotman. Mr. Fisher, who is also an accountant and chartered financial analyst, was given an equity participation in Clairvest's portfolio, and he watched his net worth grow.
In 2007, wanting more independence, he left the firm to manage his own capital, creating Bridgeport, of which he is the chief executive officer. "By that time I was very comfortable with my research skills and ability to analyze investments," he says.
Bridgeport has grown steadily. It now serves about 100 families both inside and outside Canada, has eight people on staff and more than $250-million under management. Mr. Fisher continues to invest his own money in the same stocks he recommends for clients.
The company has a value-oriented investment philosophy and takes a private-equity approach to investing. "We view every stock investment as if we were acquiring full ownership of the business or strategic ownership in the business, not as if we're just acquiring a piece of paper that trades on a stock exchange," Mr. Fisher says.
"The first question we ask when we're investing is, 'Do we really want to own a business in a given industry? Because very often the answer is 'no' … and our analysis stops there."
Somewhat unusual for an investment manager in Canada, Bridgeport has stayed out of direct investment in mining and oil and gas. That's because companies in these sectors don't have control over the underlying price at which they sell their products, which makes their earnings profiles volatile and unpredictable, Mr. Fisher explains.
"If you don't know the selling price of a company's product next year with any reasonable degree of accuracy, you're really guessing about what its future profits will be. And if you don't know what the profits are going to be, it's very hard to figure out what the stock is worth today."
Bridgeport also passes on companies that are at the mercy of rapidly evolving technology where it believes management could be unable to stay ahead of the curve. So no BlackBerry. No Apple.
"We want to make calls on businesses where the entire product set or service offering is not going to be completely different five or 10 years from now," Mr. Fisher says. "We stick with companies whose business model evolves on a much slower timetable with less threat along the way."
So which industries fit the bill?
Mr. Fisher likes for-profit Canadian casinos, waste management, health care (mainly in the United States), beverages and industrials, with a bit of media in the mix. He has also invested in publicly traded investment management firms.
Within those sectors he's always on the lookout for "steady-eddie" companies with predictable earnings and sticky customer relationships that provide plenty of recurring revenue, healthy profit margins, a high return on invested capital and a low stock price relative to earnings. Among his picks are Great Canadian Gaming Corp., Progressive Waste Solutions, AmerisourceBergen Corp., Becton Dickinson and Co., Johnson & Johnson Inc., PepsiCo. Inc., 3M Co. and Walt Disney Co.
Disney has turned out to be a good long-term call. Bridgeport started buying the stock in 2007 and soon watched it suffer the financial meltdown of 2008 and subsequent recession. Since then, the stock price has quadrupled.
While Mr. Fisher likes to talk about his successes, he doesn't blink when asked about his less profitable calls. One was JCDecaux Group, a French company specializing in outdoor advertising. "We didn't foresee the depth of the [post-2008] recession and the extent to which it would affect advertising revenue," he says. Bridgeport didn't end up losing money, he says, but it was a call that "didn't turn out well."
A few stocks he likes now:
- Ten Peaks Coffee Co. Inc., a TSX-listed company based in Burnaby, B.C., specializing in chemical-free decaffeination. It’s poised to ride the trend toward gourmet and specialty coffees, Mr. Fisher says.
- 1-800-Flowers, a U.S. company trading on Nasdaq that was one of the first to use a 24/7 toll-free number and the Internet to sell directly to customers. Bridgeport likes the capital-light business model, in which the company sells mainly through third-party flower shops.
- United Technologies Corp., a U.S. multinational trading on the New York Stock Exchange. While the company is facing headwinds from the slowdown in China and strong U.S. currency, Mr. Fisher trusts in the continuing need for such products as elevators, aircraft engines and security-monitoring equipment.
In general, Mr. Fisher says he doesn't like to make large macroeconomic bets.
"While we always have our eyes on the larger macroeconomic picture, we are bottom-up investors," he says. "Predicting where things are going is difficult, and often stock markets don't rise and fall in tandem with the economy.
"We look for businesses that will perform relatively well through all macroeconomic situations and we try to buy them inexpensively, so that if the economy does take a downturn and earnings do go down, we have a margin of error."
He points out that Bridgeport started investing heavily in the United States in 2009, when many people were shying away, while those who waited for the recession to ease missed out on some pretty attractive pricing.