Daymon Loeb of Ravenstone Capital Management in Toronto.The Globe and Mail
Portfolio manager Daymon Loeb doesn’t allow election results, the latest inflation numbers or jobs reports determine which businesses to buy and sell.
“We don’t make any macro forecasts. I’ve never seen it done right consistently,” says Mr. Loeb, partner and chief executive officer at Ravenstone Capital Management Inc. in Toronto, which oversees about $400-million in assets.
Instead, Mr. Loeb and his investment team prefer to pursue companies they can buy and hold long-term.
“At the end of the day, we’re buying minority interests in some of the best businesses in the world. We don’t look at stocks to rent,” he says. “We look to invest in a concentrated but diversified portfolio of high-quality businesses that can compound their free cash flow and earnings over long periods of time. Our goal is, ultimately, to protect and grow our client’s wealth.”
He says the strategy has been successful over many years and through various market cycles. Ravenstone’s equity portfolio, which usually includes 18 to 25 stocks, has returned 18.5 per cent so far this year and increased 29.1 per cent over the past 12 months. The portfolio’s three-year and five-year annualized returns were 6.4 per cent and 13.1 per cent, respectively. The performance is based on total returns, net of fees, as of Sept. 30.
The Globe recently spoke with Mr. Loeb about what he’s been buying and selling.
Name three stocks you own and would recommend for new clients.
Thermo Fisher Scientific Inc. TMO-N, a scientific instrument maker, is a stock we first bought in November, 2018, at about US$238.30 a share.
The thesis behind owning Thermo Fisher Scientific is predicated on an aging global population, which brings with it health concerns, treatments and preventative medicine. The use of medical services is expected to increase dramatically as people age. We think this trend will support the demand growth for health care products and services for many years.
As the old investment saying goes, ‘When everyone’s digging for gold, we prefer to sell them shovels,’ meaning that when we’ve identified a long-term secular growth opportunity, we figure out ways to invest in suppliers and companies that support that growth.
The stock has pulled back from an inventory overhang that most health care supply companies had after the pandemic. We’ve been buying more during the pullbacks and expect to continue holding the company for many years.
Canadian Pacific Kansas City Ltd. CP-T is a stock we bought in April, 2023, at about $107.65 a share after the acquisition closed to combine CP with Kansas City Southern in the U.S. We believe the company provides shareholders with incredible leverage to the resurgence of industrial production and the reshoring theme of manufacturing that we see, specifically in the U.S.
The reality is that this is the only major railway with arteries extending throughout Canada, into the southern U.S. and reaching Mexico. It’s also a well-run company. The barriers to entry are also very high, and rail is still a very efficient way to transport goods from A to B.
We also own rival Canadian National Railway Co. CNR-T. You can’t run the country without these assets. There are short-term risks with weather and economic conditions. Still, over time, we have a high degree of confidence that this business and the dominant rails in North America are well positioned to generate very strong returns with generally low risk to principal over time.
Amphenol Corp. APH-N is a stock we bought in November, 2018, at about US$22.63 a share. It’s one of the world’s two leading makers of connector cables that transmit data between electronic components; think of a phone, a car and a range of other products. The company is broadly diversified, selling into industries ranging from automotive and medical to broadband and industrial sectors.
It’s a picks-and-shovels name on everything electric, not to mention a beneficiary of artificial intelligence, providing products and services to various companies in that space. The stock has done very well recently, particularly with the growth in AI, so a short-term risk for the company is that the valuation is getting too high.
Name a stock you’ve sold recently.
Nike Inc. NKE-N is a stock we sold on the first trading day this year for $106.93 after owning it for five years. We became less comfortable with Nike and its long-term prospects for many reasons, including increased competition and lower revisions of revenue growth expectations, which is a problem. Slower growth rates in China and parts of the U.S. were becoming a growing concern, so we decided to exit the position and reallocate the capital elsewhere.
This interview has been edited and condensed.