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Paul Harris of Harris Douglas Asset Management.The Globe and Mail

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While some investors are hiding from the ongoing market volatility, portfolio manager Paul Harris is embracing it.

“Volatility is your friend. There are so many opportunities out there to buy securities that you really like when markets are like this,” says Mr. Harris, partner at Harris Douglas Asset Management Inc. in Toronto, who oversees about $138-million in assets.

He believes the ups and downs will continue for months given the potential for further interest-rate increases, growing economic uncertainty and ongoing forecasts for a near-term recession.

“Whether there’s a recession or not, we’re going to see slower growth over the next few months,” Mr. Harris says.

His firm is currently holding about 12- to 14-per-cent cash in its Harris Douglas Equity Portfolio, higher than the normal weighting of about 8 to 10 per cent, waiting for a chance to buy its favourite stocks at lower valuations.

The remainder of the equity portfolio includes about 25 to 30 global securities, 48 per cent of which are U.S. equities, 30 per cent Canadian and 8 per cent international. Its top three holdings are Apple Inc. AAPL-Q, Microsoft Corp. MSFT-Q and Novo Nordisk A/S NVO-N.

The portfolio is up 7.8 per cent so far this year and returned 7 per cent during the past 12 months, as of June 23, net of fees.

The Globe spoke with Mr. Harris recently about his investing style and some of the stocks he’s been buying:

Describe your investing style:

Investing to us isn’t about owning a stock, but a business, and we want the businesses we own to have certain aspects and perform in a certain way. For instance, we want them to have strong and growing free cash flow and be able to reinvest it in the business. They don’t have to pay a dividend, but they should reinvest the capital at higher rates of return. We also want a strong balance sheet; it doesn’t mean they don’t take on debt, but they should be able to manage it. And while I care about valuation, I don’t necessarily shy away from companies that trade at higher valuations if it’s warranted. I also don’t worry about the stock price on a day-to-day basis. We’re more focused on the longer term.

What have you been buying or adding?

We’ve owned Novo Nordisk since 2019 and have been adding to our position recently. It’s the pharmaceutical company behind popular drugs such as Ozempic, a medication used for treating type 2 diabetes and an anti-obesity medication used for long-term weight management. It’s a huge market. There will be more competition, but it’s a market leader. It’s also a great business that’s well-run and has a lot of free cash flow.

We’ve also been adding to our position in Check Point Software Technologies Ltd. CHKP-Q, a cybersecurity company we first bought in the summer of 2021. It’s an important company and a huge growth market. Cybersecurity is a large concern for companies and governments, and we see continued investments in this area.

What have you been selling?

We haven’t sold anything so far this year. We’re looking more at opportunities to buy stocks.

Name a stock you wished you bought:

I like semiconductors and did a lot of work on Nvidia Corp. NVDA-Q last summer. I never got around to buying it because I thought the market would have a lot of trouble going into 2023, given all of the layoffs in the technology industry. The stock has exploded recently, as many investors know. It has a lot of great products compared to its competitors. I wish I had gotten around to buying it, especially since I did the work on it.

What advice do you have for new investors?

New investors need to have a financial plan before they start investing. One advantage to having a financial plan is it can be more comforting during periods of volatility. When there’s volatility, people make a lot of mistakes, such as panic selling. A plan also helps you understand your wealth, especially as you generate more of it. When you put all those numbers down, a light bulb goes off about how much you need to save and invest.

This interview has been edited and condensed.

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Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 22/04/24 6:40pm EDT.

SymbolName% changeLast
Apple Inc
Microsoft Corp
Novo Nordisk A/S ADR
Check Point Software
Nvidia Corp

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