AGF vice-president and portfolio manager Peter ImhofThe Globe and Mail
Peter Imhof's household should be jolly this holiday season.
After all, his young kids will probably be getting some of this year's hottest toys, including Hatchimal colleggtibles, while Mr. Imhof enjoys the gains for the fund he manages by owning stock in Spin Master, the company behind the hit brand.
Mr. Imhof, vice-president and portfolio manager at AGF Investments, oversees about $780-million in assets under management across various funds, mainly the AGF Canadian Growth Equity Class fund, which falls into Morningstar's small-to-mid cap category. The fund is up 0.1 per cent over the past 12 months as of the end of November, compared with a 4-per-cent increase in the S&P/TSX small-cap index over the past year. The fund has increased by an average of 6.6 per cent annually over the past three years, as of Dec. 13, compared with average annual growth of 5.6-per-cent for the S&P/TSX small-cap index over the same period. The underperformance in the past year was due in large part to a bad bet on some gold producers that experienced operational issues.
The Globe and Mail recently spoke with Mr. Imhof about what he's buying, selling and a high-flying stock he sold too soon.
What concerns are you hearing from investors today?
The worry is the U.S. market has run so far, so fast. Valuations are relatively high versus historical multiples. For the Canadian market, there are worries about the rising costs of doing business … as well as the potential impact with NAFTA [the North American free-trade agreement].
What's your take on where the markets are heading in the short term?
I think the markets will be strong into the early part of 2018. I would expect a pullback at some point, especially in the U.S., just because it has run up so quickly. I don't think there will be as much of a pullback in Canada because valuations here are so much cheaper and because of the way the market is built: It's a lot of energy and financials. Financials are strong and the oil price has been quite strong over the past few months and [energy] stocks need to play catch-up.
What stock(s) have you been buying lately?
Parkland Fuel Corp. is one stock we've been buying over the past couple of months. It's a new purchase. I like to call it a mini Alimentation Couche-Tard, with convenience stores and gas stations. We think Parkland has a very good runway in terms of earnings growth over the next three years. It has made a number of acquisitions. The stock trades at a reasonable valuation relative to its earnings growth and has a 4.3-per-cent yield. I think over the next few years it will do well and that we picked a good point to get into this name.
Another one is Spin Master, the children's toy company. We had owned it before and then got back into the stock in August and have been buying through October and November. In the summer, the company came out with a very strong quarter and raised its guidance. It also believed it would have some of the hottest toys for the Christmas season, with Hatchimals and the Luvabella dolls. I have two young children. They know the toys, so I go to them. I think the Christmas season will bode well for the company and they have new launches coming in the next year or two that I think will probably do well.
What stock(s) have you been selling?
Diversified Royalty [behind franchise brands such as Sutton real estate and Mr. Lube]. We haven't sold it outright, we've just been trimming it. The stock had a huge run. We were one of the largest holders. It has gone from $2.30 in August to around $3.50 today. We've been trimming over the past few months. We decided to take some money off the table.
We've also been trimming holdings in some small-to-mid cap gold companies in the past six weeks or so. It's not because we're negative on the gold price, but more [because] the operations of some companies weren't doing as well as expected. This year has been a bit of a disaster in terms of gold companies. Despite the fact that the gold price has been all right, operationally there have been some disappointments. That has hurt me quite a bit this year, the gold names. That's a majority of the reason for the fund's underperformance. We've taken a little money off the table, but moved to other names in the gold sector that have performed better.
What's the one stock you wish you bought?
I wish we had held on to our position in Air Canada. We bought at $7 and sold at $8.50. We made 20 per cent, but now the stock is at $25. I've been in the market long enough to know that it's difficult to make money on the airlines. That's kind of changed in the past few years.
This interview has been edited and condensed.