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Standing tall

Manager spotlight Leigh PullenBefore the internet, before Bloomberg terminals, before crazy Jim Cramer, there was Leigh Pullen, aspiring financial journalist. In 1966, Pullen took a job as a reporter at the Toronto Stock Exchange. He filed short updates on the trading action for local radio and television stations. How quaint that seems now, in the era of CNBC and round-the-clock market coverage. But how lucky it was for Pullen, who realized he was more interested in being in the market than behind the microphone.

So began a career in investing-- "my first love"--that has lasted 37 years. Pullen, 62, works long, thinks long-term and tries to invest that way. He has worked for just three investment firms. He got his start at National Trust, as an analyst and portfolio manager, before he shifted to Mawer Investment Management, where he spent nearly two decades as a partner. In 1996, he founded Calgary-based QVGD Investors--the name stands for quality, value, growth and diversification.

As befits a guy who doesn't hop from firm to firm, Pullen's stock-picking leans to companies with stable management. QVGD's portfolios are littered with family-managed businesses. Unlike some money managers, he sees family control as a huge benefit--usually. "If you find a Rémi Marcoux at Transcontinental, who started his business in a garage and has built it up to the multibillion-dollar firm it is now, you know the degree of commitment he has. Or the Mullen family in the Mullen transportation income trust that's out here [in Alberta]," says Pullen. "These people have long and strong commitments to their businesses."

The family theme has guided QVGD into some of its better picks, such as E-L Financial, the holding company run by the Jackman family. It's the kind of stock a lot of big fund managers avoid because it is tightly controlled and the family hasn't split the shares, so the trading float is small. But Pullen has owned it in various funds. In 1995, he and his colleagues at QVGD, led by vice-president of investments Joe Jugovic, felt the market was under-valuing E-L's insurance business and property portfolio. QVGD began buying when the share price was as low as $70, and later paid up to $200; recently, the shares have traded around $600.

For Pullen, business is also a team sport, and he dislikes CEOs who fail to build a strong group around them. That's why, when asked about his biggest mistakes, he mentions Hip Interactive, a now-defunct developer of video games. Pullen says he should have sensed trouble earlier: "We were on guard in the situation because the turnover of staff was very high. People weren't staying." QVGD cut its losses and bailed out before the company fell into receivership in the summer of 2005.

Pullen's faith in good CEOs helps him overcome the fear of investing in beaten-up sectors that may later recover strongly. One recent example is forestry, where he's put his money on the Ketcham family at West Fraser Timber. "A massive readjustment must take place in the forest products industry in Canada. That will happen," says Pullen. In Detroit's moment of misery, he also likes a few auto-parts plays--Martinrea International and Magna International. Yes, that Magna. "There's absolutely no question Magna makes a lot of people uneasy," he says. "We look at the record of performance. We wish there weren't the preferential treatment for Frank Stronach, but we've kind of sucked it up and said, 'Look, he's done it; they seem to be able to continue to do it.'"

His interest in cars is not confined to investments: Pullen recently bought a refurbished 1938 Rover Saloon. He plans to race it in next year's Peking-to-Paris rally, a 12,000-kilometre endurance test that will take him through China, Siberia, Eastern Europe and (he hopes) to the finish line in the French capital. "The guy who survives, wins," says Pullen. Now, that's a long haul.

Clarington Canadian Small Cap Fund

1 year % 3 year % 5 year %
Average annual compound returns (to Sept. 30, 2006) 9.9 20.6 24.4
Index (BMO Nesbitt Burns Cdn. Small Cap Index) 12.0 19.4 19.5

© 2007 The Globe and Mail. All rights reserved.

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