A diversified portfolio of 25 stocks from North America, Europe and Japan; holdings from Canada include Reko International Group Inc., Hammond Power Solutions Inc. and Melcor Developments Ltd.
In 2013, after investing in mutual funds for 10 years, Johan Wigert came across several blogs on deep-value investing. He liked what he saw.
He also embraced the view that individual investors can attain an advantage over professional investors if they focus on micro- and small-cap stocks. Supporting this view is the empirical work of academics such as Yale University finance professor Roger Ibbotson.
How he invests
When it comes to value investing, Mr. Wigert's guides are "traditional value and contrarian investors like Benjamin Graham, Walter Schloss and David Dreman." When analyzing a company, he "always starts with the balance sheet" to see if it is "rich in current assets with low levels of debt."
"I focus on paying a low price in relation to net tangible assets," he declares. "This provides me with a margin of safety if my investment thesis doesn't work out." He also likes "companies where management has skin in the game."
Furthermore, Mr. Wigert prefers "tiny companies." Most are "underanalyzed and underfollowed," so this segment of the market tends to be "less efficient." The individual investor has more of a chance to spot real value stocks.
One of his positions, Reko International, is a 40-year-old Canadian machining company focused on the automotive sector. "The company has strong earnings and cash flows but is still trading … at a significant discount to net tangible value," Mr. Wigert notes. With vehicle sales projected to remain strong in 2017, the company should continue to enjoy strong profitability.
"In early 2013, I invested in a small Swedish brewery, Kopparbergs Bryggeri, which was trading at a low price-earnings multiple at the time. The company has been really successful in selling its cider products internationally, and today trades at almost 10 times the price I paid back in 2013."
In the beginning of his deep-value investing career, Weight Watchers International Inc. stock was featured on several investing blogs by people he highly respected. "I should have done my own research and put more emphasis on the highly leveraged balance sheet," he reports. "My mistake led to a loss of about 53 per cent in less than a year."
"Always do your own analysis before investing and focus on protecting the downside. The rest will take care of itself."
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