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Buy good assets and management, the rest will take care of itself

Matt Badger, 28

Occupation

Corporate development and investor relations

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The portfolio

Includes Legacy Oil + Gas Inc., Crescent Point Energy Corp., Suncor Energy Inc., Potash Corp. of Saskatchewan Inc., Input Capital Corp. and Toronto-Dominion Bank.

The investor

Besides working in corporate development and investor relations for a firm listed on the TSX Venture Exchange, Matt Badger owns a real estate company in Regina and is in the final stages of completing the Chartered Business Valuator designation. This background and his finance major provide the basis for analyzing additions to his $250,000-plus portfolio.

How he invests

Mr. Badger first identifies sectors to invest in. Two important attributes for sectors to have are high barriers to entry (hard for new firms to enter the industry and compete for sales) and inelastic demand (there is room for prices to go up without reducing demand too much because the product is essential or few substitutes exist).

Once sectors are chosen, he looks for "the best companies" in them. An important criterion is that the company has "best-in-class assets that are able to generate better rates of return."

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"For example, Legacy Oil and Crescent Point have industry-leading netbacks [earn more revenue per barrel taken out of the ground]. And TD Bank has, in my opinion, a superior asset in the TD franchise, while Potash Corp. has low-cost assets in regions with negligible sovereign risk."

Another important criterion is top-tier management. "For example, Legacy Oil management has been through several iterations of building successful companies, and is regarded by many to be a leading management team in the industry."

When attractive companies are identified, Mr. Badger waits for "attractive entry points" to buy their shares. Once bought, he rarely sells.

Best move

"Having confidence in Legacy Oil and building my position as it got beat up by the market."

Worst move

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"Southern Pacific Resource Co. [sold] has experienced issues in getting their initial projects operational. … It was a good lesson and got me refocused on my fundamental valuation analysis."

Advice

"Buy good assets and good management teams – the rest will take care of itself."

Want to share your strategies? E-mail mccolumn@yahoo.com

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