In the mid-1970s there was an advertising agency that had hit hard times. Its pension fund was shedding company shares, but Peter Cundill was buying them up. So the president asked him, "What do you know that we don't?"
More important than Cundill's answer is the one that anyone who knew him could have offered: a lot.
With the instincts of a pirate and the skills of a forensic accountant, Cundill knew how to recognize investment opportunities in public companies that other less diligent players would miss.
He specialized in value investing, a practice that ascertains a company's true value beyond its share price. He chose companies that looked awful to everyone else, but were in good enough shape in his eyes to make a rebound. A company could have an indicted CEO, be in an industry no longer in fashion or be located in a country no one was paying attention to. But that didn't mean it couldn't still possess a valuable oil field, some prime real estate or future earning power. He had a formula to help him figure out a company's net worth, one that would allow him a margin of safety that lessened the risk.
"All I really need is a company's published reports and records; that plus a sharp pencil, a pocket calculator and patience," he said.
If after studying a company he found enough solid fundamentals, he would begin buying up shares, then wait until they climbed to a price that allowed him to sell them at a very good profit.
The Cundill Value Fund delivered an average compounded rate of return of 13.2 per cent in its more than three decades of existence, well above the 10.8 per cent of the MSCI Index of 1,500 companies around the world for that time. Except for 2008, the fund more than weathered market crashes and burst bubbles, and recorded a year-end loss only five times - none before 1990. It went from an $8-million fund in 1974 to one that now holds almost $15-billion as part of Mackenzie Financial, which bought out Cundell's management company in 2006.
But Cundill was more than a numbers man. He ran marathons - 22 of them - and took shorter inaugural runs around any city he would visit on business, the jog helping him digest the reams of written material he would be reading. He kept daily journals since the 1960s, where he not only weighed important decisions, but also built a repository of philosophical and literary musings on finance. He kept up with a large international network of finance people, many of whom were more than happy to give him the country-specific context he sought in exchange for a stimulating conversation with an investment guru.
His on-the-job credo was to calculate all his risks. But some of his off-the-job pursuits veered into dangerous territory, such as hang-gliding, swimming with sharks and walking on coals. He couldn't stop himself from betting a dollar at a sports event and had a penchant for martinis, cigars, hot dogs and caramel sundaes.
Francis Peter Cundill, who died on Jan. 24 in London, England, at the age of 72 from a rare neurodegenerative disorder called Fragile X-associated tremor/ataxia syndrome (FXTAS), was born on Oct. 29, 1938, in Montreal to Frank and Ruth (née Grierson) Cundill.
When he was a year old, his father went to war and the two did not see each other until 1945. His mother raised Peter during those years and, notwithstanding the occasional help from a few wealthy relatives, the two lived a modest, semi-nomadic life. As a young adult, he told his younger brother Grier, "I will never depend on others."
According to a new book, There's Always Something To Do, his interest in finance came honestly. The book, written by Christopher Risso-Gill, provides an account of Cundill's professional experience and a look into his investing techniques. It recounts how his great-grandfather was a successful importer, while his grandfather was dubbed the King of Camphor in the early part of the 20th century, but lost his fortune in the late 1920s thanks to the discovery of synthetic camphor. His uncle, Pete Scott, was chairman of Wood Gundy and father, Frank, was a floor trader for many years.
There was a love of athletics in his family, with Peter quarterbacking the high school football team, his mother having an avid interest in tennis and his maternal grandfather showing early talent as a competitive rower.
And while his father had an early gambling problem, his mother, Ruth, did successfully get Frank to stop going to the track. His final gamble was graced by Lady Luck and he decided to buy his wife a gift with his winnings. "He gambled enough to buy her a vacuum cleaner," Grier said.
As he grew up, Peter did not show exceptional talent as a student. He did show interest in becoming an investor like his uncle, but his father had a tempering influence. According to Risso-Gill's book, "he paid attention to Frank's remark that the investment business was a gamble and, if he were going to be a gambler, he would do well to have a professional qualification to fall back on, should the need arise."
He decided he would study commerce at McGill University. He qualified as a chartered accountant in 1963, articling at Price Waterhouse. The accounting background would prove to be one of his best assets.
Throughout his career, even from his early days at the Montreal investment firm of Greenshields, he was wary of the herd mentality of investors. In a passage in his journal, he writes: "What I am beginning to perceive is that investors tend to follow trends and fashion rather that taking the trouble to look for value." Many years later he would be proud of always waiting patiently and not giving in to temptation to buy such things as overvalued tech stocks, and wrote: "Being out on a limb, alone and appearing to be wrong is just part of the territory of value investing."
In 1971, living in Vancouver and working for Yorkshire Trust, his relationship was souring with Yorkshire boss Frank Trebell, who Cundill perceived was keeping him in the dark. He took up an offer to open up an office of AGF, which proved prescient, as Trebell was later convicted on a real-estate transaction. Cundill was asked to testify for the prosecution during the trial.
With the money he earned from unloading his Yorkshire shares, Cundill bought up one of Yorkshire's properties, the All Canadian Venture Fund, which was eventually renamed the Cundill Value Fund. At the time, he had begun to discover the writings of Benjamin Graham, the godfather of value investing and his successor, Warren Buffett. He explained the technique to his investors, how buying shares in undervalued, unrecognized and neglected companies could create opportunities. He would become a great proselytizer of the Graham principle.
Wild profits followed in the mid-70s despite recessionary times. From 1978 to 1983, the fund gained more than 40 per cent a year. He was often one of the first investors to venture into various countries, from Japan in the late 1960s to Sweden in the 70s to the distressed debt of Panama in the 80s and Argentina and Ecuador in the 90s.
He was dubbed "the Indiana Jones of Canadian Money Managers." He travelled so much that one day he came into his Vancouver office and the receptionist did not realize who he was. He also moved offices from Vancouver to Paris and eventually to London, where he lived for the last 20 years.
In 1998, he formed a strategic alliance with Mackenzie, which had $25-billion in assets and was the second largest fund company in Canada.
His annual general meetings were legendary, as he would invite world-renowned speakers and offer entertaining and informative sessions called Pete's Mornings, where - in his trademark baby-blue sweater that matched his piercing blue eyes - he would offer up investment knowledge.
He was called "one of the world's best, and bravest, value investors" by Barron's/Nelson ranking of international investors in 1995, in a magazine issue that sported his picture on its cover. In 2001, Cundill's Canadian colleagues gave him an award for the Greatest Mutual Fund Manager of all Time.
In 1998, he felt a tremor in his arm, an early sign of what became wrongly diagnosed as Parkinson's disease. FXTAS would eventually confine him to a wheelchair, something that he fought for many years, continuing to try to keep up his physical agility. He remained involved in various philanthropies, such as the The Cundill International Prize in History at McGill and The Cundill Foundation, which funds numerous charities.
In 2003, he lost his wife Joanie to pancreatic cancer. He leaves his stepdaughter, Evelyn, two grandchildren, his stepson, Roger, and his brother, Grier.
Three memorial services will be held: in London, England, on April 11 at 3 p.m. at St Martin in the Fields, Trafalgar Square; in Toronto on May 12 at the Toronto Club at 5 p.m.; and in Vancouver on May 16 at the Vancouver Club at 5:30 p.m.
Special to the Globe and Mail