Amir Karimbhoy still carries much of the enthusiasm and energy that led him to settling in Canada back in 1966.
Born in Karachi, Pakistan, the 62-year-old studied business at the University of London with the intention of heading back home, but as he puts it: "The world was not so small back then, and Pakistan wasn't as developed. I felt that if I wanted to grow personally I needed to stay in the Western world."
He moved to Canada, settled in Toronto, and became a chartered accountant, working for Arthur Andersen and Canadian Imperial Bank of Commerce. One workday in the late seventies, while he was grabbing lunch in the downtown Eaton Centre, he became intrigued by the many shoppers looking through a storefront at photographs being quickly processed in the then-unheard of time of "just one hour" by a newcomer, Japan Camera.
Mr. Karimbhoy soon had borrowed heavily, and landed himself two franchises. He later sold out, but returned to the fold, buying two outlets in Thornhill, Ont., which he still manages.
How he does it
When choosing his stocks, Mr. Karimbhoy looks for strong fundamentals. In part because of his hands-on experience with front-line customers, he likes to see sales increasing, along with growing margins. He also likes to see expenses increasing at a slower rate, but if they're not, he doesn't get too concerned, because he figures it's something that companies can control and bring more into line if pressed.
He tends to play trends, but likes to see them well established before he jumps aboard. For instance, he only began moving into energy stocks in the early fall. And while many gold stocks have been shining all year, he moved into the sector just this past summer.
He bought iUnits S&P/TSX Gold Exchange Traded Fund (XGD-TSX), and also picked up some shares in Placer Dome Inc. (PDG-TSX). At the time, the Placer shares were about $19, and the stock was a laggard compared with the other major gold stocks.
"I thought: 'What was the problem? Nothing except their hedging and that will eventually clear up.' " Placer Dome, which Barrick Gold Corp. is seeking to take over, closed yesterday at $25.70.
For exposure to the juniors, he decided to go the fund route with the John Embry-managed Sprott Gold and Precious Minerals Fund. "I don't have the expertise to choose the smaller companies, so I pay the management expense fee and leave it to the experts."
He regularly attends investment seminars and conferences, and got intrigued when at an investing event in Chicago a speaker noted that a great majority of option contracts expire unexercised. Today, he regularly uses options to give himself some monthly income.
He illustrates his approach with Loblaw Cos. Ltd. (L-TSX). The grocer's stock took a hit this week, in part, Mr. Karimbhoy feels, because of investor concerns over Wal-Mart's announcement that it planned to launch two or three superstores in 2006 that would offer a full range of groceries along with general merchandise. Mr. Karimbhoy says he typically waits for the fourth week of the month to allow option contracts to expire; he allowed the December contracts to expire yesterday (the third Friday in the month). Loblaw stock closed yesterday at $54.25.
If, say, Loblaw stock is trading at about $56 in the coming week, he might sell some $54 puts -- contracts that give the buyer the right to force Mr. Karimbhoy to buy Loblaw shares from them for $54 -- and perhaps get about $1 in premium per contract. If the stock did fall and he was forced to buy the stock at $54, his net cost per share would be $53, a price at which he would be happy to own the stock.
At the same time, he would sell some call options at about $62, earning perhaps a $2 premium from the purchaser, who would then have a right to buy the stock from him at $62. (By selling both puts and calls on the same stock on the same day, he only pays one commission on the two trades with TD Securities Inc.)
Interestingly, if the stock has fallen and looks caught up in a downward trend and he decides he doesn't want to own it when his puts are exercised, he can "roll over" the contracts, selling new puts to replace those that are being exercised, instead of buying the actual shares.
Best move
Research In Motion Ltd. (RIM-TSX) has been a regular favourite of Mr. Karimbhoy on the option front, and he continues to play the stock. For instance, with the current month's options having just expired, he likely will be back into the market.
He'll sell some put options with a strike price at about 10 per cent below the stock price, and also sell call options exercisable some 10 per cent above the stock price. He'll hope to make about $4 a contract in premiums on both the put and the call options.
Worst move
Options-wise, "Cognos is the biggest bloody headache I've had for a long time." Cognos Inc. (CSN-TSX) caught his eye because, while the stock was trending down from more than $50, he thought the company was fundamentally sound. He felt it would reverse when it hit $50 or so, so he sold some puts at $46.
The plans was to earn the premium, and then pick up the stock at what he felt would be a fair price if it fell through the $46 level. That's exactly what happened, only the stock hasn't been a profitable position to be in, with Cognos last closing at $39.08.
Advice
"Don't think that an investment professional can always monitor your investments. Only you can, and you can do it best."
Tony Martin is the co-author of the book Investing For Canadians For Dummies, published by CDG. Interested in being profiled in Me and My Money?
The investor
Amir Karimbhoy
Age: 62
Occupation: Owner of two Japan Camera franchises.
Portfolio: Owns about 70 stocks, including Merck, Pfizer, Motorola, GM, Petro-Canada, extel, Goldcorp, Placer Dome. Also owns Canadian Oil Sands Trust, Goldcorp, iUnits Gold ETF, Sprott Gold and Precious Minerals Fund.
Investment personality: Enthusiastic.
Rate of return: "Excluding dot-com dogs, 16.5 per cent year-to-date on stocks."
Quotes: "Cognos is the biggest bloody headache I've had for a long time."
"The world was not so small back then, and Pakistan wasn't as developed. I felt that if I wanted to grow personally I needed to stay in the Western world."