Skip to main content

This Canadian fund manager doesn’t believe in Buffett and is buying ‘everything’ crypto

A Bay Street sign is pictured in Toronto’s financial district.

Mark Blinch/The Globe and Mail

Mark Schmehl flouts Warren Buffett, thinks valuation is overrated and says most other rules of investing are "total baloney."

The portfolio manager, who just completed Fidelity Investments' most successful Canadian fund launch ever, eschews investing obsessions such as earnings, cash flow and price-earnings ratios and invests at the extremes of the market instead, including Canadian cryptocurrency stocks.

"I focus on the stuff in the tails: really cheap, broken, horrible stories that nobody wants to buy again, and stocks that everybody is excited about but their valuation is so high they can't bring themselves to buy them," Mr. Schmehl, 46, said in an interview at Fidelity's Toronto offices.

Story continues below advertisement

His approach seems to be working. Fidelity's $1.86-billion Special Situations Fund returned 21 per cent in the first 11 months of the year and its $3.73-billion Canadian Growth Company Fund returned 17 per cent. That compares with a total return of 7.8 percent for the benchmark S&P/TSX Composite Index over the same time frame. His new Global Innovators Class, launched on Nov. 1, raised $400-million in four weeks in Fidelity's fastest launch north of the border.

It's all about finding industries where rapid change is occurring. This can include beaten-down sectors that are suddenly showing glimmers of hope -- Mr. Schmehl owns The New York Times Co. -- or stocks that are permanently disrupting their industries, like PayPal Holdings Inc. and video-game company Take-Two Interactive Software Inc.

Valuation Immaterial

"I don't believe in Warren Buffett," he said. "I care about new things, things that are innovative, that are growing, that are changing the world."

He's unfazed if those stocks look expensive. "Valuation is an immaterial part of the process for me," he said. "It's the least useful piece of information you will ever get because everybody knows what the valuation is."

In the current long-in-the-tooth bull market, Mr. Schmehl is finding fewer of the horrible stocks and more of the expensive change-makers. He's been adding to positions in copper and energy stocks, but otherwise is mostly focused on disruptors.

Among Canadian stocks, he's the largest investor in toymaker Spin Master Corp., and he also owns Shopify Inc., Canada Goose Holdings Inc., and "everything" in the emerging cryptocurrency space. Stocks that have sprung up in the Canadian sector include Hive Blockchain Technologies Ltd. and NetCents Technology Inc.

Story continues below advertisement

Over Top

Mr. Schmehl also invests more than 3 per cent of his Canadian Growth and Special Situation funds' holdings into private Canadian companies, including DeepLearni.ng, a Toronto-based artificial intelligence company, and Thalmic Labs, a maker of wearable technology based in Waterloo, Ontario.

He plans to hang onto those companies right to the end of the bull-market cycle, and maybe even beyond. "I always tell people I will ride this thing right over the top. I will own the best stocks right to the end."

This may mean losing 20 percent when the market turns, but that kind of double-digit loss doesn't frighten Mr. Schmehl. He'll be ready to pounce on the next wave. "That's when I get all the money back," he said.

Report an error
Comments

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • All comments will be reviewed by one or more moderators before being posted to the site. This should only take a few moments.
  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

Comments that violate our community guidelines will be removed. Commenters who repeatedly violate community guidelines may be suspended, causing them to temporarily lose their ability to engage with comments.

Read our community guidelines here

Discussion loading ...

Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.
Cannabis pro newsletter