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Leanne Scott of Leith Wheeler Investment Counsel.The Globe and Mail

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Money manager Leanne Scott sees many opportunities for both stocks and bonds in the current market environment – but urges investors to be choosey.

“The decade of ‘easy money’ is subsiding, and we’re entering more of a stock-picker’s market,” says Ms. Scott, principal and portfolio manager at Vancouver-based Leith Wheeler Investment Counsel Ltd., whose private clients and foundations group manages about $5-billion of the firm’s $23-billion in assets under management.

“There are going to be some inevitable losers, and it’s a time to buckle down, do your homework and focus on company fundamentals,” she says.

Buying stocks and bonds selectively has helped Ms. Scott and her team outperform the markets in 2022. The firm’s diversified fund, which includes about 60 per cent Canadian and global equities and 40 per cent bonds, was down about 4.4 per cent in 2022.

By comparison, iShares Core Balanced ETF Portfolio XBAL-T, which includes a mix of roughly 60 per cent equities and 40 per cent fixed income, was down about 11 per cent in 2022, according to Morningstar Inc.

Ms. Scott’s portfolio has seen a compound annualized return of 7.8 per cent over the past 10 years. All data are based on total returns. The performance is gross of fees.

The Globe spoke recently to Ms. Scott about what she’s buying and selling and one retail stock she wished she snagged when it went public in 2016.

Describe your investing style:

We are long-term value investors, which means we don’t have a lot of turnover in our portfolios. One of the key questions we ask ourselves before we buy a stock is, ‘Would we be happy to hold this company for the long term?’ We look for companies with strong balance sheets and proven management teams. When you own companies that are financially sound, they’re better able to survive and thrive through various economic conditions.

What have you been buying or adding recently?

One stock we’ve owned for a long time and have been adding to is Constellation Software Inc. CSU-T. It’s been a great company for us for many years. It has a great business model, which includes reinvesting a lot of its cash flow into acquisitions. Last year, its stock price was not immune to the decline that affected the entire technology sector, so we took advantage of that and added to our position in the fourth quarter. It’s still a very strong business, and we felt the stock price didn’t reflect its performance.

We also added to our position in the Royal Bank of Canada RY-T when it was on sale last year, late in the second quarter. We believe investors have been overly negative about the banks lately. Investors are understandably concerned about the possibility of a recession, a decline in borrowing, and an increase in loan defaults. However, we think the banks remain attractive long term, and we own most of the big banks in our client portfolios.

What have you been selling or trimming?

We recently sold all of our holdings in Canadian Western Bank CWB-T late in the fourth quarter. Its loan growth hasn’t been good as we’d hoped recently and it hasn’t been keeping up with its larger peers. We felt there were probably better opportunities elsewhere as we head into what is expected to be a more challenging economic environment.

We also sold all of our holdings in Great-West Lifeco Inc. GWO-T late in the fourth quarter. The company’s acquisitions haven’t performed quite as well as we hoped, and felt there were better opportunities in that sector.

Name one stock you wished you bought or didn’t sell.

Aritzia Inc. ATZ-T is a stock we wished we bought going back to when it went public in 2016. It’s an excellent company with a great management team, and anyone who has a daughter, as I do, knows how popular it is. It’s also really making inroads in the U.S. The problem with it being such a great company is that everyone knows it, and that has driven up the stock price. So, the valuation has never been cheap.

What investing advice do you give friends and family when they ask?

The first thing I tell people is the importance of having a plan for your investments. All successful investors, from individuals to large pension funds, have a plan for what they want to do with their assets. A plan helps to prevent you from making emotional, knee-jerk decisions in reaction to market conditions that are changing constantly. A plan will give you some peace of mind and remind you to focus on the long term.

Also, don’t try to time the market. Nobody has been able to time the market consistently over long periods. Also, it’s easier to get out of the market but a lot harder to know when to get back in. You need to be willing to get back in when things look dire – and that’s very hard to do.

Lastly, I tell people to pay attention to the fees they’re paying. Don’t be afraid to ask your advisor about the total fees you’re paying and get a breakdown.

This interview has been edited and condensed.

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