Portfolio manager, AIM Trimark Investments
Ah, summer, season of temptation. Animal fat on a rusty propane grill. Oblivion in a frosted jug--they'll never miss you at work! Just talk to Trimark Canadian Resources Fund manager Rory Ronan about willpower. In a head-banging commodities boom (50 stocks in the S&P/TSX composite index have soared more than fourfold since 2003), Ronan stuck to staid fare that had actual cash flow. "You see a lot of potential deposits" with smaller mining companies, he warns. But a lot of them "haven't been able to put the pieces together."
HOT, HOT, HOT
Not that his caution has hurt returns. The fund was in the top half of its group through 2006 and '07, and in the first four months of this year, it returned 13% to investors. It just celebrated its 10th birthday. The return since inception: a juicy 19.7%. And that's despite a weighting of more than 10% in dreary forestry and packaging stocks. Ronan reckons they'll have their day yet, and he's sticking with West Fraser Timber, one of his major holdings. In a brutal shakeout for wood products, it's likely to be "the last man standing," he says.
Ronan, 37, paid his dues in the merciless desert of mutual fund marketing. He started as a client service rep at Trimark in 1994 before moving to sales, where he cajoled brokers and planners to flog the product. After jumping to the investment department as an analyst in 1999, he started running the resource fund in October, 2001, in the wake of 9/11. "It was a very nice welcome to investment management." He figures his years pitching prospects have given him an edge when it comes to sounding out executives and "dealing with a variety of personalities. It's almost a sixth sense."
In a madcap commodities market, "valuation has become relative rather than absolute," admits Ronan. In other words, airborne stocks look cheap only because others are in the stratosphere. Apart from sharp management, he looks for companies with established businesses that can grow. "It's not an exploration-focused fund." That can leave him with ho-hummers like TransCanada PipeLines. "These names tend to be a lot more stable." Yes, there are plenty of alluring juniors, "but I'm only happy to have 3% to 5%" in exploration plays.
THE HEDGED BETS
Ronan had just over 40% in energy and energy services as of this spring (although that wasn't grossly out of line with the rather scary 30% energy weighting in the broad S&P/TSX index). But he's been going easy on the rocks: Only 8% of the fund was in metals and mining. "Base metal companies were facing rising input costs," Ronan says, "and I was cautious on prices." By late May, his wariness looked sensible as nickel dipped to two-year lows. But would he ever take his weighting in a favourite sector up way high, say to 75%? "Never," he says.
"I might be wrong."
THE BOTTOM LINE
|Trimark Canadian Resources Fund||1 Year %||5 Year %|
|Average annual compound returns (to April 30, 2008)||17.1||27.6|
|Average Canadian equity fund||13.3||27.8|
© 2007 The Globe and Mail. All rights reserved.
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