Investment Universe

Our universe is any security listed on a North American exchange, with a primary focus in Canada. The Canadian business environment is generally less competitive, allowing for more durable advantages and persistently higher returns on capital, as well as greater financial stability. Our team has followed most of these companies for a long time and has a good sense as to what ultimately drives operational and share price performance. Because such a high percentage of the financial assets in Canada are controlled by institutions whose size prohibits them from investing in anything other than large caps, there is a proliferation of great businesses with limited institutional following/sponsorship, little or no research coverage and potentially greater mispricings. We do invest in the U.S., but typically looks for situations where there is reason to believe the market is less efficient for some structural reason (small/mid-caps, bankruptcy reorganizations, spin-offs, etc.).

Investment Philosophy

  • We employ a research-intensive, value-oriented, fundamentally-driven investment process, wherein we view ourselves from the position of being true owners of the business – bringing a private equity discipline to the public markets
  • We are highly cognizant of the macroeconomic environment and its potential impact on asset prices, but in the long-term our greatest success will come from individual security selection
  • We view short-selling as a potential source of alpha generation, not just as a risk mitigant
  • Our ideal investments will display an asymmetric return profile where the potential upside is significantly greater than the downside, and the estimated annualized return over our expected holding period exceeds a minimum threshold. The required ratio of upside to downside and return threshold are determined by a number of factors, including, but not limited to, liquidity, volatility, and expected holding period
  • Such a return profile will usually require us to have a substantially differentiated view of value than the market. We look for those situations where there is a clear path toward reconciliation of these views that is idiosyncratic and uncorrelated with overall markets

Strategies

Long/Short Strategies

Core long positions

  • Market leadership – dominant franchises with sustainable competitive advantages
  • Proven management teams with a track record of capital discipline and value creation, and proper alignment with shareholders
  • High returns on incremental capital and significant reinvestment opportunities
  • Financial flexibility
  • A market price well below our estimate of intrinsic value

Core short positions

  • Weak fundamentals – secular headwinds, undifferentiated products, poor competitive positioning
  • Dispassionate management teams with poor track records and improper (or no) alignment with investors
  • A history of bad capital allocation decisions
  • Unsustainable balance sheets and/or dividends
  • Accounting irregularities
  • A market price well above our estimate of intrinsic value

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