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Vito Maida at his office in Toronto, "digging through," as he puts it, company annual reports.Peter Power/The Globe and Mail

When it comes to fund managers, few are as conservative as Vito Maida. When the founder of Toronto-based Patient Capital Management Inc. thinks valuations are high, he sits on his clients' money and waits. And waits.

Over the 14 years he's run Patient, Mr. Maida estimates he's been about 50 to 55 per cent invested. His clients don't mind – Mr. Maida has never had a down year at Patient, and has outperformed both the TSX and S&P 500 since Patient's inception (with a compound annual return of 7.2 per cent, versus 5.7 per cent for the TSX and 2 per cent for the S&P as of Sept. 30).

"Our clients have had a positive experience and come to trust us," says Mr. Maida, who manages $850-million in assets. "The buzzword should be caution and preservation of capital."

Mr. Maida may not be a bellwether for the market, but he's a good yardstick. When he's more interested in hoarding than deploying cash, it means he thinks asset valuations are too high (Mr. Maida lost his job at Trimark Financial Corp in the late 1990s when he refused to buy popular but overpriced tech stocks, and stuck to unloved commodity stocks and gold). When he's ready to invest, there's generally no better time. Witness his move into Toronto Dominion Bank and Bank of Montreal stocks in the depths of the Great Recession in early 2009; he's now earning more than 10 per cent income from his invested capital in the two banks.

So what does Mr. Maida think of the markets now? They're too rich for him. For every $1,000 new clients invest today, he's putting just $150 into the markets – and sitting on the other 85 per cent. "We are really having trouble finding anything to buy," either among equities or fixed income, he says. "The markets, we think are pretty expensive. We simply can't find any value. We see excessive valuation and excessive risk."

Stocks and indexes as a whole are too expensive, and interest rates "have nowhere to go but up. Our view is it's better to sit on our cash and suffer the opportunity cost of low returns than chase risky capital gains or risky yield…. The potential for loss of capital is quite high at these valuations."

However, there is one set of stocks that Maida likes – U.S. and international oil and gas companies. Producers like Royal Dutch Shell PLC, Devon Energy Corp. and Total SA are trading at "substantial" discounts of between 20 to 30 per cent to their net asset values, by his calculation – compared to where they usually trade, at a premium. By contrast, Canadian oil and gas stocks are trading at their net asset value or at a slight premium, in general. "If we invested in oil and gas, we'd invest internationally," he says.