Canadian Top Investment Picks: a Manitou Expert Portfolio Manager Discusses the Top Equity Holdings for His Fund and His Investment Methodology

Wall Street Transcript

67 WALL STREET, New York - February 8, 2013 - The Wall Street Transcript has just published its Investing in Canada Report offering a timely review of the sector to serious investors and industry executives. This special feature contains expert industry commentary through in-depth interviews with Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Investing in Canada - Long-Term Investing - Canadian Dollar Investing - Value Investing

Companies include: Canadian Natural Resources Lim (CNQ), Bank of Montreal (BMO), The Bank Of Nova Scotia (BNS) and many more.

In the following excerpt from the Investing in Canada Report, an experienced portfolio manager discusses his investing methodology and top investment picks.

TWST: What are some of your favorite investment ideas right now? Please tell us a bit about them.

Mr. Hofstra: Constellation Software (CSU.TO), which is a company that the firm has held for a long time. Essentially they are a holding company and were created to be a holding company from the outset, to acquire other small software companies. The markets they look at are these highly vertical markets. So think of a golf course scheduling software, that type of thing, and they'll come in and completely dominate that niche market. And they'll do that across things like bus scheduling, but they will come in and dominate these various niches with these smaller software companies, and then look to aggregate these and share best practices and so on.

Because they are a software company, typically do not have to deploy much capital, and they can often do an earn out with the acquisitions. The software is licensed, so there are generally upfront payments. It's a company that we think has taken a while for the market to really recognize its capacity to grow, and one that we've done very well with at Manitou. It instituted a dividend over a year ago, and it's now in the index, so it's become a company that's certainly gaining more attention. That would be one of our favorites.

TWST: Are there any other examples you could share?

Mr. Hofstra: Maybe we can touch upon a few different types of companies. One is Magna (MG.TO), the auto-parts producer, Frank Stronach's company. Frank has now fully left the company, he has other political aspirations, so it was a good agreement as far as his stepping aside. But it's a company that we've known and followed for quite a while and have owned at various points in time. It's a cyclical, what we call a high-quality cyclical; they tend to earn a lot of money over a cycle, but certainly there are ebbs and flows within the auto market, and there's no avoiding the impact on their earnings. So it is one you want to be careful with, but one we've owned through last year, and has done very, very well for us.

We are in the energy area, particularly in energy services, a company like Ensign Energy (ESI.TO), which provides drilling rigs. We've recently acquired a position in Canadian Natural Resources (CNQ). That's a producer, known for their oil sands projects, but also with traditional oil and natural gas. And we have Bank of Montreal (BMO) and Bank of Nova Scotia (BNS); we certainly do see good value in some of the banks today.

For more of this interview and many others visit the Wall Street Transcript - a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs, portfolio managers and research analysts. This special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

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