On January 31, 2023, the TMX Market Centre was at capacity for the 2023 Annual Equity Symposium. Now in its twentieth year, the annual half-day conference returned to an in-person event hosted by CFA Society Toronto’s Private Wealth Management Committee. The six featured speakers each provided the audience with a twenty-minute presentation outlining their investment ideas, tools, and investment processes across global equity markets, which was moderated by Wanting Zhao, CFA. The presentations were followed by an engaging Q&A with the audience.  

Interestingly, many of the ideas presented were cyclical companies, either due to the nature of the industry in which the business operates or because the product or service provided is a discretionary purchase for which consumers have temporarily pulled back spending.  

John Ewing, CFA, Co-president and Chief Investment Officer at Ewing Morris & Co. Investment Partners Ltd., presented a US-based fibreglass pool manufacturer, Latham Group Inc. (NASDAQ: SWIM). Ewing reminded attendees of investment opportunities with overlooked small-cap companies and proposed looking for hidden growth, referring to companies that are growing within non-growth industries. Another key takeaway is to separate market perception from the reality of the business by recognizing wide moats and patterns. Ewing noted there are “no bonus points for complexity.” He provided the example of material substitution dynamics that have taken place despite flat housing starts over the past 20 years, which have created opportunities for composite decking companies and fibreglass pools alike.  

Izet Elmazi, CFA, CPA, CA, Chief Investment Officer at Bristol Gate Capital Partners, highlighted the US-based global ratings agency Moody’s Corp (NYSE: MCO). As a dividend growth investor, Elmazi presented data that showed share prices follow dividend growth over time and demonstrated the importance of dividends for inflation protection, wealth preservation, and purchasing power over the long term. He suggested considering ideas in regulated industries with rational competitors that are critical to the functioning of the sector—in this case, the functioning of capital markets. Also important is considering portfolio diversification across more than sectors to consider business models, customer sets, etc.   

Jennifer Nowski, CFA, Vice President and Director at TD Asset Management, described a fundamental-driven approach to investing in commodity companies combined with a macro view on the underlying commodity that drives equity performance. Her idea was that oil companies generally have improved their financial discipline in terms of lower net debt on their balance sheets and more focused capital spending. Underinvestment of new global oil reserves over the past few years, combined with higher oil prices, has created the conditions for higher returns to shareholders in the form of dividends and share buybacks. 

Anthony Scilipoti, FCPA, FCA, CPA, President and CEO at Veritas Investment Research, encouraged participants to think like forensic accountants by evaluating the business and reporting control environment, identifying flammable outcomes in advance, and looking for sparks. He emphasized the importance of being a skeptical optimist, not making assumptions, and digging into the details within the financial statements. He also shared that the most powerful question an analyst can ask is “why?” Scilipoti’s advice was for analysts to think through the consensus thesis on Brookfield Asset Management/Brookfield Corporation (TSX: BAM; NYSE: BAM) and be wary of group think.

Rui Cardoso, CFA, MBA, Portfolio Manager at Beutel Goodman presented on Omnicon Group Inc. (NYSE: OMC; LON:0KBK). He encouraged analysts to look in the shadows for companies affected by “misguided hate,” meaning those companies that are of high quality but are deeply depressed at present. Being contrarian is essential to earning a good return and protecting capital on the downside. Valuation at the time of purchase and sale always matters in the long term. 

Discipline also is critical in every kind of market. Cardoso described Beutel Goodman’s automatic trim of every holding at intrinsic value. This action prompts an automatic partial sale of the holding so that the investment team stays disciplined and makes an active decision on whether to continue to hold the position or sell it over time. He suggested keeping a list of companies that you know well and would like to own, and waiting for the market to provide you with an opportunity to earn a good return at a discounted price.  

Trevor Scott, CFA, Portfolio Manager at Tidefall Capital, presented the case that the market rarely offers compelling investment opportunities, so when you find one, make it a significant size in your portfolio. Scott presented Canadian-based insurer Fairfax Financial Holdings Ltd. (TSX:FFH). He recommended looking for businesses that have improved their operations and are structurally able to benefit from changing market conditions that have yet to be broadly identified. He also offered sage advice for dealing with bias in investing: listen to the thesis, write it down, wait 24 hours, then try to disprove it.

Conclusion

Scilipoti opined that it will likely be more challenging to make money in equities than it has been over the last decade, as comparative asset classes have become more attractive. Picking stocks matters because interest rates have reversed their decline from the 1990s. All speakers agreed that the current macroeconomic climate and volatility in the stock market present an opportunity for active investors, reminders to help us all be better investors.

The 2023 Annual Equity Symposium brought together industry peers and colleagues committed to sharing insights and exploring ideas, an example of the CFA Gold Standard in action. Analysts in attendance gained a few new ideas, questioned convention, and reconnected with their peers in the CFA Society Toronto community.