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Chris Blumas understands why investors may be nervous with a possible recession loom ing.Illustration by illustration Joel Kimmel

Money manager Chris Blumas understands why many investors are reluctant to buy stocks right now, given the economic threats, including growing predictions of recession.

But the way he sees it, the market is a lot less risky today because valuations for many securities have already dropped significantly, which means the potential for better returns is even higher for investors socking away funds for the long term.

“That doesn’t mean that things couldn’t go lower over the short term, but for anybody who has a time horizon beyond three to five years, now is a pretty attractive time to invest if you can look beyond the shorter-term volatility,” says Mr. Blumas, a Toronto-based portfolio manager at Raymond James Investment Counsel Ltd., a multi-manager platform with about $1-billion in assets under management.

“I am seeing lots of value in the market today,” adds Mr. Blumas, who oversees about $10-million since joining Raymond James in March, 2021, following several years of managing money for clients at different Canadian-based firms.

His all-equity portfolios are down 2.4 per cent over the past year as of June 30, on a total return basis, compared with an 11.1-per-cent drop in total returns for the S&P 500 and a 3.9-per-cent drop for the S&P/TSX Composite Index over the same period.

The Globe and Mail recently spoke to Mr. Blumas about what he’s been buying and selling and one stock he regrets selling.

Describe your investing style.

I don’t see myself as one type of investor, such as value or growth. I’m more of a strategic investor looking for value and growth at a reasonable price. Then you whittle that down into an all-star team based on profit margins and capital investment intensity. Then, from the all-stars, I try to find the ‘dream team,’ which includes companies that can compound returns at a great rate. You do have to be value-focused because you don’t want to overpay, which impacts your rate of return. However, at the same time, you don’t want to go too cheap because you’re not likely going to get great companies for something like 30 cents on the dollar.

How much cash are you holding these days in your client portfolios?

Any client who came on board before this year is fully invested. The average cash balance is anywhere from zero to 2 per cent. The portfolios I manage for people are very focused, with 20 to 30 securities. We’re not in everything, but I tend to find some value somewhere. Clients who have come on board this year are holding more cash, which is a function of the volatile market environment. For instance, clients that came on during the first quarter this year at about 20 per cent cash today and I’m reducing that number, typically on the market down days.

What have you been buying lately?

There is no shortage of good companies to buy right now. One stock I bought around the end of the first quarter was S&P Global SPGI-N, the New York-based financial data and analytics company. It provides investors with credit ratings, research and benchmark prices for commodity sectors. It’s a name that I’ve been waiting to buy. The stock sold off hard and was down by about 30 per cent earlier this year, in part because bond issuances are down, so there’s less need for ratings. Still, it’s a massively profitable company with good cash flows.

What have you been selling?

I sold Mondelez International MDLZ-Q, the global snack-food company, to fund the S&P Global purchase. I was concerned about the company’s growth outlook slowing and its ability to pass on cost inflation. I felt there was a risk of margin compression and thought S&P Global had a much better growth profile.

What’s a stock that you wish you bought or didn’t sell?

Intact Financial IFC-T, the property and casualty insurance company. I owned it earlier in my career and sold it around mid-2012 at about $60 per share. I was looking at the valuation difference between Intact and insurer Fairfax Financial FFH-T at the time. I decided to sell Intact because it had a much higher premium. The stock is now trading at about $180 per share. You can likely understand how a missed 200-per-cent return sticks with a person!

That said, the experience helped me evolve as an investor, which is why I often stay with compounders. Earlier in my career, I was more value-focused and would sell when a stock hits its fair value. In the end, if you didn’t find something as good to replace it with, it’s a bad decision.

What investing advice do you give family members when they ask?

Find something great and continue to own it. The speculative stocks you see go up quickly can go down just as fast. We’re seeing that now in areas like cryptocurrency. I try to steer people away from speculation and get them to focus instead on compounding. The reality is that big money is made over the long term.

This interview has been edited and condensed.

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