Donald Trump has stirred up a lot of emotion in the markets during his election campaign and since he became U.S. President. While Mr. Trump has been taking credit for the recent rally, some investors say economics should get the top bill. "We've always said that economics drives politics and not the other way around," says Murray Leith, executive vice-president and director of investment research at Vancouver-based Odlum Brown Ltd. The Globe spoke with Mr. Leith recently about his take on the so-called "Trump bump," as well as what stocks his firm has been buying and selling lately and why investing is a lot like playing Monopoly.
What's your investing style?
Earlier in my career, I was a deeper-value guy but, like Warren Buffett, I came to appreciate that there was value in paying up for quality. Our style is more quality value. We want to own great businesses that are managed by people that are good capital allocators. Preferably they have skin in the game. They own equity in the business and they think like owners. We also want to own businesses with long growth runways. It's one thing to own a great business with above-average profitability and that has great managers, but what really drives superior investment returns is when that business has reinvestment opportunities and can expand. We believe in the long-term focus and holding great businesses for the long term.
What's your current outlook for the markets?
Much been made about the so-called Trump rally. There's actually economic fundamentals that explain the behaviour of the stock market. A year ago, economic data was soft and the stock market was depressed. Towards year-end and into this year, the economic data has been strong and the stock markets picked up. People seem to point to Trump, politics and policies. Some of his agenda has the potential to benefit the economy over the medium term, but really, the stock market has more to do with the strengthening of the economy. More recently, interest rates have gone up and commodities prices have gone up – that may take some wind out of the economy's sail – but consumer and business confidence have strengthened following the Trump rally. Optimism can be self-fulfilling. We don't have a strong conviction one way or another. We expect slow, muddle-through growth, which has been the norm in our expectations since the financial crisis. You can still make good money in a slow-growth world.
What stocks have you been buying lately?
We don't trade a lot. We bought Amazon in November. They are the leader by far in [e-commerce] and are offering more and more products. They also have a fulfilment business, delivering packages for other retailers, and more retailers are finding they can't afford not to use Amazon because they are better and more cost effective. Amazon is also the leader in cloud computing and that's not to mention other irons in the fire they have. It's an incredible, dynamic, fast-growing company. We think it has many more years of high growth in front of it. We also added a new stock in January, Coty, which is in the beauty business. The company is out of fashion with Wall Street, but they have a great long-term story.
What have you sold?
To raise money to buy Amazon, we sold UPS. It was a play on global growth in online retail. As digital online commerce increased, UPS benefited. It's still a great company and it will still benefit, but we felt Amazon was a more direct way to play that. We also trimmed our position in JP Morgan, a long-term holding. It's still a very big holding. U.S. banks have been one of the biggest beneficiaries of Trump's agenda. We took some profits, but we still very much like it for the long term.
What stock do you wish you bought?
Stella-Jones, a forest-products company. [Shares rose about 300 per cent over the past five years]. It's a stock that we're looking at getting into.
What's your advice for other investors today? There's no reason to be super excited, or fearful … The key to successful investing is staying in the game. It's like playing Monopoly. You go around the board, you collect properties, you put houses or hotels on them and you collect your rent – and hang on to them. That is what successful investing is about – collecting shares in great businesses and hanging on to them.
This interview has been edited and condensed