Learning the value of value investing

BOB MacKENZIE

Age: 57

Occupation: Financial and insurance adviser living in Ottawa.

Portfolio: Torstar Corp., Fairfax Financial Holdings Ltd., BCE Inc., Royal Bank of Canada, Mackenzie Cundill Value Fund, Mackenzie Cundill Canadian Security Fund, Mackenzie Universal Canadian Growth Fund, and Mackenzie Universal Sustainable Opportunities Fund.

INVESTMENT PATH

Mr. MacKenzie inherited an interest in the stock market from his accountant father. "He helped me to learn how to save and invest over the long term."

He continues to build on what his father taught him. Last June, he attended a value-investing seminar at the Ben Graham Centre for Value Investing at the Richard Ivey School of Business.

The week-long seminar was a valuable experience. "Although costing $3,000 and requiring a lot of work, it was worth learning how to value a business in a rigorous manner under the direction of an enthusiastic and knowledgeable teacher," he said.

For the past 11 years, he has been the co-ordinator of the Ottawa chapter of the ShareClubs organization, which has "an informal monthly gathering" on personal finance topics such as taxation, estate planning and trusts.

INVESTMENT STYLE

Value investing is the preferred approach for most of the mutual funds making up the bulk of his portfolio, with a smaller piece of his portfolio reserved for stocks with dividend income. When looking for stocks, he searches for companies trading below their estimated net asset value (NAV). Estimated NAV is reduced by a third to build in a margin of safety, and if the share price is below this adjusted estimate "and there is a good chance that some catalyst would unlock that value in a few years, it could be considered for investment," he says.

SOME OF HIS INVESTMENTS

He owns shares in media conglomerate Torstar Corp. because "its relatively low price and high dividend are attractive." It may also be able to unlock value by shedding divisions, he says.

Insurer Fairfax Financial "remains a strong firm, guided by one of Canada's top investors, Prem Watsa," who dodged the bear market in stocks by increasing exposure to government bonds.

As for mutual funds, the "Cundill mutual funds at Mackenzie Financial ... have provided excellent long-term performance with reduced volatility." According to Globefund.com, the Mackenzie Cundill Value Fund A has earned 7.1 per cent annually over the past 10 years.

WORST MOVE

"My worst move was buying risky stocks without proper research."

BEST MOVE

"My best move was buying good funds with proven managers."

ADVICE

"Join a good personal finance club, take a basic accounting course ... read Benjamin Graham's classic book The Intelligent Investor and David Dreman's Contrarian Investment Strategies."