Effie Wolle, president and chief investment officer at GFI Investment Counsel.The Globe and Mail
Money manager Effie Wolle doesn’t mind a little banter on the latest economic data or whether the economy is heading for a hard or soft landing, but he’s not acting on it.
“It isn’t going to change what we own or when we own it,” says Mr. Wolle, president and chief investment officer at Toronto-based GFI Investment Counsel, which oversees $2-billion in assets.
He says his firm buys stocks to own for several years throughout different economic cycles.
“We don’t time markets. From time to time, it does work for some investors, but we don’t think that’s a repeatable endeavour,” Mr. Wolle says. “We’re looking for companies that can grow over a long period of time with the least obsolescence risk.”
GFI invests in about 18 to 20 companies at one time, with a current split of about one-third Canadian-listed stocks and two-thirds listed in the U.S. Each position ranges from about 4 to 6 per cent of the portfolio.
The firm’s all-equity portfolio returned 21.7 per cent so far this year and 36.9 per cent over the past 12 months. Its annualized three-year return was 8.7 per cent and its five-year annualized return was 14.1 per cent. The performance is based on total returns, net of fees, as of Sept. 30.
The Globe spoke with Mr. Wolle recently about what he’s been buying and selling:
Name three stocks you’ve been buying and continue to own.
American Express Co. AXP-N is a stock we bought in May of this year for US$242.72. It’s the first time we’ve owned it. We’ve always been shareholders of Visa Inc. V-N. We love these companies’ business models, but American Express’s business model differs. Its customers are the credit card holders, whereas Visa and MasterCard Inc.’s MA-N customers are the banks and credit card issuers. Also, American Express is a bank and has to carry capital on its balance sheet whereas Visa and Mastercard don’t. American Express trades cheaper for that reason.
What we like about American Express is that it’s trying to be a premium credit card company, leading to increased rewards and a more affluent clientele. These customers are a little less price-sensitive, which is good for the stock in the long term.
Booz Allen Hamilton Holding Corp. BAH-N is another stock we bought in May, on the same day as American Express, for US$152.79. Booz Allen Hamilton provides consulting services to various U.S. government departments, including the National Security Agency and the Federal Bureau of Investigation. The nature of its work is quite sensitive; its employees must have special security clearances, and the U.S. government must vet the firm’s contracts. Few competitors can do this type of sensitive work. The company grows steadily through increased contract wins and small acquisitions.
Aon PLC AON-N is a stock we bought in April, 2023, for US$330.21. It’s a commercial insurance broker for large- and medium-sized companies. Importantly, it doesn’t take on any insurance risk itself but instead brokers it on behalf of its clients. It’s more of a partner with businesses in terms of mitigating the different risks across their operations.
The nice thing about Aon is that it’s paid in one of two ways: a percentage of its premium as a commission or a flat fee. The percentage commission is good because as risks and pricing premiums increase, Aon’s revenue will increase accordingly. It’s also a capital-light business, similar to Booz Allen Hamilton. That’s something we always look for: companies that can grow without necessarily needing capital to grow.
Name a stock you sold recently.
Comfort Systems USA Inc. FIX-N is a stock we sold in May of this year to buy American Express and Aon. We owned Comfort Systems for just under two years. It’s an electrical and HVAC [heating, ventilation, and air conditioning] contractor for non-residential large industrial projects.
When we bought it, it was trading at a low double-digit cash flow multiple and we liked its down-to-earth management. The stock tripled when we owned it, which is great as a shareholder. However, we felt the valuation was higher than an HVAC company of this nature should trade. We felt there was a limit to how much it could grow, so we sold the business to buy other companies we thought had growth potential at a more reasonable valuation. The stock has risen since we sold, but we still think we made the right decision for the longer term.
This interview has been edited and condensed.
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