Why this money manager thinks the market is less risky than it was six months ago

Chris Blumas understands why investors might be nervous about a looming recession.Illustration after illustration of Joel Kimmel

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

But in his view, the market is currently much less risky as valuations for many securities have dropped significantly, meaning the potential for better returns is even higher for investors holding funds for the long term.

“That’s not to say that things can’t go down in the short term, but for anyone with a time horizon of more than three to five years, now is a pretty interesting time to invest if you can look beyond short term volatility. , said Mr. Blumas, a Toronto-based portfolio manager at Raymond James Investment Counsel Ltd., a multi-manager platform with approximately $1 billion in assets under management.

“I see a lot of value in the market today,” added Mr. Blumas, who oversees about $10 million since joining Raymond James in March 2021, after several years managing money for clients at various Canadian-based companies.

Its all-equity portfolio fell 2.4 percent over the past year on June 30, based on total returns, compared with an 11.1 percent decline in total returns for the S&P 500 and a 3.9 percent decline for the S&P/TSX Composite Index over the same period.

The Globe and Mail recently spoke to Mr. Blumas about what he has bought and sold and one stock he regrets selling.

Describe your investment style.

I don’t see myself as one type of investor, like value or growth. I am more of a strategic investor looking for value and growth at a fair price. Then you reduce it to an all-star team based on profit margins and capital investment intensity. Then, from the stars, I try to find a ‘dream team’, which includes companies that can increase returns at a rapid rate. You do have to focus on value because you don’t want to overpay, which has an impact on your rate of return. However, at the same time, you don’t want to go too cheap because you are unlikely to get a big company for something like 30 cents on a dollar.

How much cash do you hold today in your client portfolio?

Every client who joined before this year is fully invested. Average cash balances range from zero to 2 percent. The portfolio I manage for people is very focused, with 20 to 30 securities. We’re not at everything, but I tend to find some value somewhere. Clients coming this year hold more cash, which is a function of the volatile market environment. For example, clients who come in during the first quarter of the year are about 20 percent cash today and I reduce that amount, usually on down days.

What have you bought 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, a New York-based financial data and analysis firm. It provides investors with credit ratings, research and benchmark prices for the commodity sector. It’s the name I’ve been waiting to buy. The stock sold out and was down about 30 percent earlier this year, in part because bond issuance fell, so ratings aren’t really needed. However, it is a very profitable company with good cash flow.

What have you sold?

I sold Mondelez International MDLZ-Q, a global snack food company, to fund the purchase of S&P Global. I am concerned about the company’s slowing growth prospects and its ability to sustain cost inflation. I feel there is a risk of margin compression and think S&P Global has a much better growth profile.

What stock would you like to buy or not sell?

Intact Financial IFC-T, a property and casualty insurance company. I owned it early in my career and sold it around mid-2012 for about $60 per share. I saw a difference in valuation between Intact and Fairfax Financial’s insurer FFH-T at the time. I decided to sell Whole because it had a much higher premium. The stock is now trading at around $180 per share. You might be able to understand how a missed 200 percent return sticks with a person!

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

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

Find something great and keep having it. Speculative stocks that you see rising rapidly can fall quickly. We see it now in areas like cryptocurrencies. I try to keep people away from speculation and get them to focus on compounding. The reality is that big money is made in the long run.

This interview has been edited and condensed.

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