In September, 2008, as the pillars of Western finance began to crack, portfolio manager Nadim Rizk was on vacation on Penang Island, off the coast of Malaysia.
"I was there, both feet in the sand, sipping a cocktail when Lehman Brothers went bust," he said.
He contemplated returning to his Montreal office, but after reviewing his holdings one by one with one of the firm's analysts, he concluded his best course of action was to do nothing.
"I decided I had more value being away from my screen."
Then with Montrusco Bolton Investments, the equity fund under Mr. Rizk's management did subsequently decline in value in excess of 40 per cent amid the global sell-off, but he had conviction in his holdings and was in a position to scoop up cheap assets by early 2009.
Then, as now, Mr. Rizk remained fully invested in the market, making sure he did not miss out on that rare, monumental upside move the market occasionally affords.
"Historically, if you miss periods when the markets did well, you made no returns," said Mr. Rizk, now a portfolio manager at Fiera Capital. "The market might give you 8 per cent a year over 50 years, but it's highly concentrated in very short periods."
While he does not invest based on sectoral or geographical forecasting, his process has him betting primarily on consumer, industrials and health care stocks in the United States, the United Kingdom and Switzerland.
He has almost no exposure to natural resource stocks in Fiera's global equity fund, which he manages, and doesn't count a single Canadian stock among his holdings.
"We buy best of breed globally," Mr. Rizk said. "There are not a lot of companies in Canada that on a global basis we can say they're best in class."
Canada's big banks are high-quality businesses, but face pressure from the domestic economy, he said. And Canadian companies such as Dollarama Inc. generally meet his criteria, but the crowding of domestic investors into a small pool of consumer stocks has elevated valuations.
As a bottom-up portfolio manager, Mr. Rizk runs a concentrated portfolio with little turnover focusing on world-class companies he is willing to own for up to 10 years.
His stock selection process is rigorous, identifying businesses with sustained profitability, clarity and good management. "If we like it, we trust it and the governance is great, we're going to own it," he said.
A long list of potential warning signs steers him from some of the market's most-hyped names, including Valeant Pharmaceuticals International Inc., which held great sway over the fortunes of Canadian investors over the past year.
Valeant met several of his corporate red flags: "speed of deal making, complicated structure, excessive tax avoidance, complicated accounting, key-person risk, too many insiders on the board…," he said.
He has made just a single trade this year in the global equity fund, adding shares of AutoZone Inc., the aftermarket auto parts retailer.
"It's not a fast-growing business, but it's extremely profitable," he said. "And it's extremely stable."
Tim Shufelt