The chairman of Calgary-based Mawer Investment Management sticks closely to the firm's value investing playbook. It may be boring, to use Jim Hall's own description, but it works.
What's your assessment of the equity markets?
Our team doesn't see a lot of mispricings in either Canada or the U.S. Valuations seem relatively efficient, which should translate into returns in the mid-single-digit range. However, stock prices are very sensitive to interest rates right now, because rates are so low. Which means the impact of any surprises—positive or negative—will likely be magnified. As a result, it's best to stay balanced, by companies, sectors and geography.
As a value investor, what asset classes, markets or sectors look the most promising in 2016?
Domestically focused European companies have struggled for several years, but countries like Spain and Italy are reforming and recovering faster than investors may appreciate. In terms of sectors, competition has been tough on telecoms, but they're likely to find ways to sell more valuable services over their networks for many years to come.
Which sectors are the most overrated?
Real estate continues to be one we wonder about. Prices in many markets may have been held aloft by unusually low interest rates, and that era may be coming to an end. Supply also appears to be growing.
Should investors pay attention to economic news, quarterly earnings or day-to-day market gyrations—or just ignore it all?
Being informed is part of being an investor, so, yes, investors should pay attention. That doesn't mean they should act on the noise. My advice: Don't act without at least 24 hours' reflection and an honest attempt to see things from multiple angles.
What's the biggest mistake investors make?
Acting too quickly, on emotion, often within a very short time frame, and on the basis of limited information.
What has been your worst investment?
At the top of my personal Wall of Shame is Bracknell Corp. It was a construction company that had its heyday building telecom networks during the Internet bubble. I recommended purchasing it at just under $9. I got out less than a year later at 70 cents, just before it defaulted. It taught me a lot about bubbles and the destructive power of leverage.
What keeps you awake at night?
Worrying is an occupational hazard, so I'm constantly running through different scenarios. On the other hand, the evidence would suggest our firm is following a resilient process, so maybe I should worry a little less.