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Emerging profits don't require emerging markets

Bill Kanko, President of Black Creek Investment Management Inc..

Charla Jones/Charla Jones/The Globe and Mail

Fund manager Bill Kanko has scoured the world for stocks but is avoiding the rush to emerging markets.

"Stocks are pricier in emerging markets because most investors think that is where the highest growth is going to come from," said Mr. Kanko, the president of Toronto based Black Creek Investment Management Inc. "We have a few - like a Brazilian bank - but not many."

Instead, his shopping sprees have taken him to the United States, Europe and even Japan, whose moribund market has kept many investors away. His stalwart investment in just over 20 stocks has helped his Hartford Global Leaders Fund win a Lipper award in the global equity category for the three years ended Oct. 31, 2010.

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The $387-million fund has posted an annualized return of 4 per cent for the period versus a 5.4 per cent loss for the MSCI World Index in Canadian dollars. Hartford Global Leaders is now among funds sold by CI Financial Corp., which recently acquired the Canadian fund unit of U.S.-based Hartford Financial Services Group Inc.

Mr. Kanko, who has run the value oriented fund since 2006, looks for companies flying under the radar because "investors might not see what we see, or pay attention to it." There is also bias to growth - but not overpaying for it, said the veteran manager who has run global stock funds at Trimark Financial Corp., Mackenzie Financial Corp. and also Invesco Trimark Ltd.

But Mr. Kanko, who set up his own firm in 2004, said the geographic location of his stocks stem from stock picking as opposed to a view on the economy or sectors that he thinks will do well. Curiosity about Japan-based Hamamatsu Photonics K. K., which he read about in a research report, led him to analyze its business and buy its stock.

Among U.S. shares, Mr. Kanko bought defence contractor Northrop Grumman Corp. a year and a half ago after its stock got punished by investors' concerns about U.S. military budget cuts. And while he avoided equities in the high flying technology sector in 1999-2000, he now owns names like Adobe Systems Inc., Oracle Corp., Applied Materials Inc. and eBay Inc., partly because of compelling valuations.

While he didn't foresee the financial crisis in 2008, Mr. Kanko stepped up to the plate to do some bargain hunting during the global market meltdown.

"We were finding all sorts of ideas that we thought were better than the ones we owned so there was quite a bit of turnover," he said. "We thought the stock prices were pretty compelling if you could look out 10 years."

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