As of July 31, the portfolio of Newhaven Asset Management's president, Ryan Bushell, has 25 to 30 stocks that have seen an annualized total return of about 9 per cent since he joined the firm in April, 2018.
Portfolio manager Ryan Bushell admits feeling a bit left out last year watching the run-up in technology stocks, a sector he has purposely chosen to stay out of for his more conservative clients.
“It felt a bit lonely sitting here and thinking, ‘It would be easy to buy Apple right now,’ ” says the president of Newhaven Asset Management in Toronto, who manages about $130-million in assets.
But Mr. Bushell stuck to his mandate of buying income-producing assets such as infrastructure, banks and telecom companies. He firmly believes these are best-suited to his clients with more modest portfolios of about $1-million to $2-million who are focused on achieving steady returns over the long run.
“I’m building a portfolio to suit their needs,” he says. “They need enough income to live their life and maybe pass some of it on to their kids; they don’t want to risk the capital.”
While all stocks have risk, Mr. Bushell’s focus is on growing companies with hard assets that produce steady cash flow and dividends.
“What I tell people is, ‘this isn’t for everybody, but if you’re trying to retire and not run out of money in 30 years, I think this is a good strategy for you.’ ”
His clients are seeing benefits: As of July 31, Mr. Bushell’s portfolio of 25 to 30 stocks has seen an annualized total return of about 9 per cent since he joined the firm in April, 2018. Its one-year total return is 39.6 per cent, after fees of 1.1 per cent. That compares with a one-year total return of 29 per cent for the S&P/TSX Composite Index and 21.8 per cent for the S&P 500 (when converted to Canadian dollars).
Below are three picks on the infrastructure side that Mr. Bushell believes will perform well in the near future:
Northland Power Inc. (NPI-T)
The renewable electricity provider is one of Newhaven’s largest positions, capitalizing on what Mr. Bushell describes as a “secular shift toward electricity consumption” driven primarily by the electrification of transport. “This means that we need more electricity production and that will be fulfilled by a growing share of renewable production.”
The stock, which Mr. Bushell has owned for clients since he started at the firm, is up 15 per cent over the past year, currently trading around $42.55. While it has pulled back from its record high of $51.45 in February, he sees a bright future for its key offshore wind assets and other renewable projects.
Northland is also an attractive acquisition target that could be snapped up by a pension fund or another energy company looking to beef up its renewable assets, he says.
The stock pays a decent yield of about 2.8 per cent.
One risk for Northland could be whether or not it can regularly land new contracts for its services. “I think the environment is pretty robust, but it’s getting more competitive and it’s not an easy business.”
He says the valuation is also relatively high, so any project setbacks could push the stock lower.
AltaGas Ltd. (ALA-T)
Mr. Bushell likes this company because it’s a hybrid of mid-stream natural gas infrastructure in Western Canada and gas-electric utilities in parts of the United States.
“It’s going to participate in this theme of retrofitting, upgrading and updating gas electric infrastructure and there’s a really nice, clear line of sight to that regulated contracted growth,” he says.
Mr. Bushell also sees a lot of potential for the company given the rising demand for liquified natural gas, including major LNG developments in Canada. AltaGas is well-positioned in the northwest Montney area in Western Canada, “which is where I think a lot of that development will proceed,” he says.
Regulations that could curb natural gas consumption might be a risk for the company, but Mr. Bushell believes such a risk is low given that natural gas is still in high demand and is one of the cleaner sources of electricity generation.
The stock is up 46 per cent over the past year, trading around $25.50. It has a dividend yield of 3.9 per cent.
TC Energy Corp. (TRP-T)
Mr. Bushell describes TC Energy as “the premier natural-gas transportation company in North America” given its reach across Canada, the United States and Mexico.
It has a unique North American footprint, he says, and sees the company playing a major role in the shift to low-carbon fuels such as hydrogen.
The stock hasn’t performed well lately, he notes. It’s down about 2 per cent over the past year. He says an unexpected change in leadership has put a bit of an overhang on the stock, combined with the recent cancellation of the controversial Keystone XL Pipeline Project.
“Now with that, hopefully, in the background, the company can very quietly … continue to evolve its business with the times,” he says.
For now, he says the 5.8-per-cent dividend yield, “really strong underlying contracting” and a “long-term future that fits with an energy transition in a greener world” are positives for the company.
The risks are similar to AltaGas if natural-gas consumption were to drop. “But the bottom line for me, again, is that we just have too much consumption of energy to shut off three of our major sources” – oil, gas and coal – “all without doing nuclear.”
Even then, he says TC Energy has a leg up on its competition given its 48.4-per-cent stake in the Bruce Nuclear Generating Station in Ontario.
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