Livio Filice, 29
Mostly Canadian banks, including Toronto-Dominion Bank, CIBC and National Bank of Canada.
Livio Filice works in the clean technology industry. He also invests in junior clean-tech companies that have innovative technologies in the sustainable energy field, such as Eguana Technologies Inc. But the majority of his portfolio is in Canadian bank stocks.
How he invests
Mr. Filice likes companies with the kind of enduring market power that allows them to sustainably finance high and steadily growing dividends, along with consistent corporate growth. Canadian banks fit the bill. An oligopolistic industry structure, barriers to entry (such as ownership restrictions) and implicit government backing (deposit insurance, for example) deliver a high level of financial strength and profitability.
TD Bank stands out. It has "separated itself from other Canadian banks by becoming one of the 10 largest banks in the U.S. through acquisitions and the application of its customer-convenience strategy [such as being open longer hours]," Mr. Livio says. This growth strategy "is going to pay off handsomely for long-term investors over the next decade."
Mr. Livio likes CIBC's 4-per-cent dividend. Also, CIBC's foreign expansion has trailed other banks and will likely be stepped up under CEO Gerry McCaughey's yet-to-be-named successor.
Will a downturn in Canadian housing hit the banks? "Dramatic change will be related to interest rates and I don't expect them to increase until around 2016 because the economy still has room to grow," replies Mr. Livio. "Even if rates remain below 5 per cent, it should not impact most homeowners." The banks' diversification into foreign markets is also reducing dependence on the Canadian market.
"Shifting from [clean-tech] companies on the TSX Venture Exchange [TSX-V] into banks over the past three years – had I not done so, my investments would have been decimated in parallel with the TSX-V."
"The first shares I ever bought were in a TSX-V listed company that had innovative technology to reduce fuel consumption for trucks. One day the company ceased trading and never resumed."
"For a young investor it is extremely important to buy and accumulate … a solid portfolio of dividend-paying stocks."
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