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What this fund manager is buying, selling, and hearing from investors about Trump

Michael Decter, president and CEO of LDIC Inc.

Michael Decter understands why some investors are so obsessed with the actions of U.S. President Donald Trump, especially when a single tweet threatens to start a war, trade or otherwise. While Mr. Trump may be unpredictable, Mr. Decter, the chief executive officer and chief investment officer at LDIC Inc., isn't overly worried about the markets right now. Even if there is a correction, stocks usually bounce back, in time. Mr. Decter, whose firm oversees about $540-million in assets under management in four funds, is more focused on finding opportunities in the market. The Globe recently spoke to Mr. Decter about what he's buying and selling and one opportunity in particular that went up in smoke.

What are investors concerned about today?

I spend most of my time with clients discussing Trump. Sometimes it's Trump lowering taxes, so that's a positive. But more often it's "will Trump break trade agreements or will Trump start World War Three?" There's a fear of the unpredictability. A lot of my clients see him as a pro-business president but wish he were more effective on getting things done. There is also some concern on the Canadian government front, including the size of the deficit and the recent circus around small-business taxation.

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What's your outlook on the markets?

I am positive to year end. I see a lot of things that are lining up. There's an implied stimulus in the rebuilding after the recent hurricanes in the U.S. and the fires in California. We think earnings will be strong for the [most recent] quarter. When we look to 2018, we are encouraged to see job growth continuing in both countries [Canada and the U.S.] and economic growth.

What about the correction everyone's talking about?

We get one every few years that's usually about 10 per cent. It usually lasts a quarter or so. We wouldn't be surprised to see that. We usually sit it out and it all comes back. What could be a triggering event? Something going boom in North Korea would be the most jarring, followed by something abrupt in the trade discussions, the tearing up of NAFTA. Beyond that, it isn't easy to see. There isn't much inflation. There doesn't seem to be a crisis coming on the recessionary front.

What's your geographical mix?

We are largely in Canadian equities. It varies depending on the mandate. We are generally about 70 per cent Canadian and 30 per cent in the U.S. We feel we know Canada best. We also have the vast number of our clients living and working in Canadian dollars, they don't necessarily want to take the currency risk. There are unique situations in both countries. Some of our choices are contained by industry. For example, in the entertainment world, we own Cineplex in Canada. We see it as a unique company that isn't replicated on the U.S. side. On the other hand, we own Disney in the U.S. There is no Canadian Disney. In banking, we own TD on the Canadian side and JPMorgan on the American side.

What stocks have you been buying lately?

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There are three that we've been buying over the second quarter and they're still on our list to buy for very different reasons. TFI International Inc. is one. We like their operations in the U.S. and Canada. We like the fundamentals in pricing in trucking and believe there are some near-term catalysts. We've been buying Hydro One through acquisition financing. Johnson Controls International is another one. They make a lot of products that are useful in an economy that is trying to become more energy efficient. They also will benefit from spending in infrastructure. It has lagged the peer group, so we think we're getting it at a great value.

What have you been selling?

One stock we've sold recently is Western Forest Products. We didn't own it for very long. We bought it in early May, as soon as there was talk of duties, because there is always an overreaction. It ran up 25 per cent. We said, "Let's not be greedy." We owned it for a little more than a quarter. We had a good run on it. We also sold Inter Pipeline Ltd. We owned it for a very long time, for about a decade and a half. We really liked it, but we began to see some struggles. The growth prospects dimmed. We also sold Macquarie Infrastructure. We owned it for a few years. There has been a failure to deliver on some of the earnings guidance and increased capex [capital expenditures]. The combination of those two things made us feel that we should be elsewhere.

What stock do you wish you owned?

Canopy Growth. We had a chance to buy it at 65 cents. From 65 cents to around $13 today would've been a nice run. Clearly, that wasn't the best decision I've ever made.

This interview has been edited and condensed.

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About the Author
Contributor

Brenda Bouw is a freelance writer and editor based in Vancouver. She has more than 20 years of experience as a business reporter, including at The Globe and Mail, The Canadian Press, the Financial Post and was executive producer at BNN (formerly ROBTv). Brenda was also part of the Globe and Mail reporting team that won the 2010 National Newspaper Award for business journalism. More

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