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Ryan Bushell is holding more cash in his client portfolios than he ever has in his almost 20-year career – at around 10 per cent right now – owing to a combination of high interest rates and economic uncertainty.
“We aren’t running from the equity market; we’re just taking our time investing any new capital,” says Mr. Bushell, president and portfolio manager at Newhaven Asset Management Inc. in Toronto, who oversees about $120-million of his firm’s $270-million in assets.
The cash is earning around 5 per cent in high-interest savings funds while Mr. Bushell waits for better opportunities to invest in select stocks at cheaper prices, which he believes could be coming.
“When the ingredients are there for a good-sized correction, it’s an exciting process,” Mr. Bushell says.
His portfolios are down 1.6 per cent over the past year and have seen an annualized return of 12.5 per cent over the past three years. The performance is based on total returns and is net of fees as of Aug. 31.
The Globe spoke with Mr. Bushell recently about what he has been buying and selling and the insurance stock he wishes he owned.
Describe your investing style.
Most of our clients have modest wealth; they’ve earned and saved their money and plan to use most or all of it for retirement. They’re not ultra-high-net-worth. There’s no generational wealth. As a result, our focus is on capital preservation and income production. We rely heavily on Canadian dividend-paying companies in sectors such as utilities, infrastructure, telecommunications, energy and financial services.
What’s your take on the current market environment?
We believe the current market environment is very unstable. The risk of a major reset in risky or overvalued asset prices such as stocks, private equity and real estate is high and driven by the state of the economy, geopolitics, government finances, inflation and interest rates, which are all linked. Bonds have already seen a major reset, with long bonds down more than 40 per cent in the past three years. We avoided a lost decade of low bond returns [from 2013 to 2023] for our clients and anticipate that there could be a similar lost decade in technology equities like 2002 to 2012 given the combination of high valuations, equity concentrations and macro risks. It’s why we’re focused on owning essential businesses that can withstand these risks. We believe strongly that the effects of the rise in interest rates over the past 18 months have yet to fully permeate the economy.
What have you been buying lately?
We’ve been adding to select dividend holdings for clients that were underweight including BCE Inc. BCE-T, Fortis Inc. FTS-T and Emera Inc. EMA-T. We also purchased some five-year reset preferred shares with yields between 8 and 9 per cent on issues that have recently reset for a new five-year term. Most of these issues also have floors in the 6 to 6.5 per cent range, which protects our clients in case of a sudden drop in rates brought on by an adverse macro event.
What have you been selling?
We recently trimmed some of our energy holdings that we did well on including Arc Resources Ltd. ARX-T and Canadian Natural Resources Ltd. CNQ-T. The dividend yields are now less than we earn on cash, so we took a little off the table. It’s not a commentary on the oil price – we still like the companies and the sector – it’s more portfolio rebalancing and discipline.
What’s a stock you wish you bought or didn’t sell?
Intact Financial Corp. IFC-T is a company I met with six years ago and I was very impressed with its growth plans. I didn’t buy it because I was worried about the escalation of catastrophic loss events for property and casualty insurers. Even though I was somewhat correct in my assessment, I should have trusted the management team to navigate those issues and focused on the opportunity for a good operator and consolidator to succeed despite the risks involved. My conservative and careful nature causes me to weigh uncertain future risks too heavily at times, and this was a good lesson for me that I will use going forward. I won’t chase it at these levels, but I will continue to watch it.
What advice do you have for new investors?
You need to be invested and stay invested. To be invested, you need to trust and understand what you’re buying. Don’t just buy what other people are buying. Some investors spend more time researching a car they plan to buy than a stock they own. Also, be invested in the process. There will be a time when markets are irrational and you need to trust what you own to avoid making mistakes, like panic selling. We feel that an active interest and understanding of a stable portfolio is the key to successful investing.
This interview has been edited and condensed.
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