Jason Del Vicario
Five stocks only: Constellation Software Inc., Ceapro Inc., BioSyent Inc., Data Communications Management Corp. and Lingo Media Corp.
Jason Del Vicario began investing at the age of 15 after his uncle gave him the book The Wealthy Barber, by David Chilton. He later started a number of investment clubs in university, read every investing book that could be found and designed a software program for screening stocks.
Now 40 years old, Mr. Del Vicario eats, breathes and sleeps stocks. "I've been in love with stock picking so much that I've become a portfolio manager and manage funds for a living," he says.
How he invests
"I run my own money differently from my clients in that my personal holdings are quite concentrated," he says. He also uses leverage, which means he borrows money on margin to buy shares.
This is an aggressive portfolio that aims to beat the market big. But it could also lose big. Mr. Del Vicario accepts this risk because he has the time and background to do in-depth analysis, plus the risk tolerance to go with it. Moreover, he is young enough to recover from setbacks.
A key stock-selection criterion is return on equity (ROE). "I'm looking for companies that have produced greater than 20-per-cent ROE for at least three years running." he declares.
ROE is often calculated as the ratio of net earnings to shareholders' equity (company assets minus liabilities). Mr. Del Vicario uses another variant of ROE: the ratio of cash flow to shareholder's equity.
A high ROE indicates that management is good at allocating capital or has gained a durable competitive advantage. It also indicates that a lot of capital is being generated for reinvesting in the company or paying dividends.
Management at Constellation Software "is one of the best allocators of capital in Canada," he believes. They are a software firm that is growing through acquisitions of industry-specific software businesses.
BioSyent is a small pharmaceutical company. It is growing by acquiring and licensing pharmaceutical products for sale.
Data Communications Management provides business-communications solutions. This bargain-priced turnaround story is restructuring operations and paying down debt.
It was "incorporating leverage" into his investment process. It has helped boost his returns.
"I rode a Chinese firm down to zero and lost $30,000, which at the time was around 10 per cent of my portfolio. That hurt."
"Don't be afraid to take calculated risks when you are convinced the risk/reward relationship is favourable."