Bryden Teich, chief investment officer at Toronto-based Avenue Investment Management Inc.The Globe and Mail
When it comes to money and politics, portfolio manager Bryden Teich believes it’s best to leave personal views on the sidelines.
Mr. Teich, chief investment officer at Toronto-based Avenue Investment Management Inc., says personal politics can cloud judgment and skew some of the analysis needed to make longer-term investment decisions. An example is the recent “Trump bump” in the stock market after Americans re-elected Donald Trump as their next president.
“The reality is, the stock market doesn’t care who the U.S. president is. Sure, it matters on a policy level, but today’s politics are so personality-driven, and the market doesn’t care about the personalities,” says Mr. Teich, whose firm oversees $400-million in assets.
Instead, his team’s approach is to invest in high-quality stocks, specifically North American-based companies with a strong return on invested capital, limited capital requirements and low debt.
“Those characteristics, together, put companies on the best path to stable and growing profits,” he says.
The firm’s average equity portfolio has returned between 14 and 24 per cent this year depending on the strategy (Avenue has a balanced equity portfolio with some corporate bonds and a focused equity strategy more concentrated in stocks). The one-year returns are similar, and the five-year annualized returns are between 5 per cent and 13 per cent, depending on the strategy. The performance is based on total returns, net of fees, as of Nov. 18.
Avenue Investment Management also uses what it describes as a “tail hedge strategy,” which includes various investments that are used to hedge its equity portfolio from market crashes.
The Globe spoke with Mr. Teich recently about what he’s been buying and selling:
Name three stocks you own and would recommend for new clients.
BJ’s Wholesale Club Holdings Inc. BJ-N, a warehouse club chain, is a stock we bought in July, 2023 at US$66.10 a share. We like BJ’s because of consumers’ increasing loyalty to this type of company in the past couple of years amid the rising cost of living. Like Costco Wholesale Corp., BJ’s consumers pay an annual membership fee and get access to bulk goods, usually at lower prices.
The benefit of stocks such as BJ’s is that they get a higher share of the consumer basket. We bought it when the stock was down because of concerns about a recession. We like this business because its ongoing capital investment needs aren’t significant. Most of its capital spending is being used to add new stores, which we think is a very accretive reinvestment that will help grow the business.
Texas Pacific Land Trust TPL-N is a stock we bought in February, 2024 at US$517. The company owns land royalty assets in the U.S., specifically in the Permian Basin in Texas, where there are the most prolific and productive oil wells. All of the major U.S. energy companies produce oil on the land owned by Texas Pacific, which earns a royalty in return. Texas Pacific also has a lot of water infrastructure and sells water to the drillers.
The company is also starting to benefit from the growth of renewable energy infrastructure and data centres that use its land. We like the company because of the high return on capital. It also has no debt, and its reinvestment needs are minimal. We think it’s a very stable business.
Caci International CACI-N, an information technology defence contractor in the U.S., is a stock we bought in February, 2022 for US$250.26 a share. We believe there will be an increase in defence spending worldwide, and what Caci is doing is critical to how government defence departments run. We prefer this type of company to those that build bombs and planes used in warfare, which is a more cyclical business.
Name a stock you’ve sold recently.
We sold agricultural equipment maker Deere & Co. DE-N in August after owning it for about eight months. We decided it was not the right time in the cycle to own it. We think farm incomes will be down a lot this year and next because agricultural commodity prices are showing high levels of disinflation, so there’s less income to upgrade their machinery.
The stock is up from where we sold it, but that’s okay. It happens. We were down about 9 per cent when we sold it, but we believe there are better companies to invest in now. It’s a stock we’d love to buy again at a better point in the agricultural cycle.
This interview has been edited and condensed.