Money manager Allan Small invests with the same Warren Buffett mantra of being “fearful when others are greedy and greedy when others are fearful” – especially in the current market.
While many investors are turning their backs on technology stocks that have been trounced this year, Mr. Small has been buying companies such as Facebook parent Meta Platforms Inc. and Google parent Alphabet Inc.
He’s also been buying financials, a sector many are shying away from amid the economic slowdown that has curbed lending and puts banks at greater risk of loan defaults.
“I’m a bit of a contrarian,” says Mr. Small, senior investment adviser of Allan Small Financial Group with iA Private Wealth, based in Toronto. “I’m the guy who runs into the house when it’s on fire versus runs out.”
Mr. Small says it’s not timing the market, which he believes is “a bad strategy.”
“It’s about moving money into investments that can both play offence when the market eventually moves higher but is still defensive in case the market moves further to the downside,” he says.
The strategy has helped keep his portfolio ahead of the benchmark. Mr. Small says client portfolios are down by an average of 8 to 10 per cent so far this year, as of last Wednesday, compared with a 15-per-cent drop in the S&P 500 over the same period. The performance is based on total returns, net of fees. He notes the drops are from January, when his portfolio and the U.S. markets were trading at historic highs.
The Globe and Mail recently spoke to Mr. Small about what he’s been buying and selling.
Describe your investing style.
I’m a value investor. I used to be more deep value – someone who looks for rock-bottom sales – but my style has changed because of the way investing has changed over the past decade or so. Very few names are trading at a deep value today, and if they are, it probably means there’s something wrong with them. Now I would describe myself as more GARP, or growth at a reasonable price. I build individual portfolios for my clients from scratch, based on their investment goals, and monitor them and adjust as needed. I don’t buy and hold and ignore. I buy, evaluate and change as necessary. I also stay in the market, even in difficult times like these.
What have you been buying or adding to recently?
I’ve been adding to my positions in big-cap technology names such as Meta, Microsoft, Amazon.com and Alphabet. The only one I haven’t been buying more of is Apple. It’s not that I don’t like Apple. It’s because the price hasn’t fallen as much as the others.
I’ve also been adding to my positions in bank stocks, including CIBC and Scotiabank, mostly for their dividend yields. For example, Scotiabank is paying a 6-per-cent dividend, and its shares are down 30 per cent from their peak earlier this year. How do you not buy Scotiabank? I don’t think there’s a risk that the company is disappearing. The only question is how long is it going to take to regain its former share price. It’s only a matter of time.
I’m buying stocks across sectors such as industrials, pharmaceuticals and retail.
What have you been selling or trimming?
I’ve been selling what I refer to as the “B” names. They’re good quality stocks that I think will go up over time, but they don’t have the same potential for growth as the “A” names I’ve been buying. An example of a company I sold recently is Quest Diagnostics Inc., a U.S. health care company that does diagnosis testing. It’s been a great business, especially through the pandemic, and it’s fairly cheap, but I sold it to buy “A” names. I also sold auto parts company Magna International Inc. It’s a leader in its space, but in the grand scheme of things, I would rather have money in Scotiabank, for example. Both are on sale, but I would rather take my chances with Scotiabank.
Name a stock you wish you bought or didn’t sell.
Amazon is a stock I wish I had bought sooner. I hesitated until I saw it was making a profit. I own a lot of it now and added more this year.
Name one of the best stocks that you’ve owned in your career to date.
Apple. I’ve owned it for years. It’s amazing how much money investors have made on that stock.
How about the one of the worst?
General Motors. It was a value trap. I bought the stock for client accounts in 2015 and 2016 for cheap, trading around $30 a share, and it barely moved. I sold it about a year later at a loss. There are names that you realize are cheap for a reason. Once you realize you’re in one, you want to get out quickly.
What investing advice do you give family and friends when they ask?
Look for an adviser who owns the same investments they’re buying for you. The only differences might be in risk tolerance based on your age.
This interview has been edited and condensed.
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