Morton Erskine, 69
Retired bridge foreman for Canadian Pacific Railway Ltd.
Portfolio: Encana Corp., Canadian Pacific, Brookfield Asset Management Inc., Teck Resources Ltd., Goldcorp Inc., Barrick Gold Corp., Toronto-Dominion Bank, Tarsis Resources Ltd.
While everybody suffered in the market meltdown, Morton Erskine didn't do any selling, and came out of it in fairly good shape. "I hung on mainly because I didn't need the money, and I knew this would pass." He also felt confident in the long-term prospects of his holdings, large companies such as Encana and CP. "They are good-quality companies, and while they did take a correction, they came back." To underscore the point, consider that Mr. Erskine rode gold miner Teck from $52 all the way down to less than $4, before it bounced to recently close in the $35 range. "I never thought they'd go bankrupt because they're too good of a company and they have good assets."
How He Invests: Mr. Erskine looks for large, solid growth companies. With a nod to the pro-commodities American investor and financial author Jim Rogers, he likes to be invested in things that people are going to have to use. "People will always need gas to heat their homes and run their cars," he says. "The growth in China won't be stopping, along with other countries like India that are going to require commodities, because they all want the things we want."
Mr. Erskine has begun adding to his returns by selling puts. This gives the put buyer the right - up to the option's expiry date - to require that Mr. Erskine purchase a set amount of shares of a specific company at a set price. And because the set price on the puts he chooses to sell is far below the underlying stock's market price, he rarely has to buy the actual shares.
He sticks to large-cap U.S. companies such as Microsoft Corp. and Exxon Mobil Corp., saying the volume is too small on Canadian stocks. For instance, with Exxon Mobil recently at around $60 (U.S.), he was looking at making around 50 cents a share by selling $40 puts that expire in January. "I don't try to hit home-runs with them, I'm just collecting some small premiums."
He's also begun researching some small gold stocks. "Gold should be higher because they're printing trillions of dollars in the States, and everybody should have some gold as a defence." He reads mining publications such as The Northern Miner, and likes companies that have small floats. "If there are too many shares out, then too many people have to share if they make a discovery." For instance, he just added Tarsis Resources, which has a gold property in the Yukon. He likes the fact that the company only has just under 18 million shares out, and that 800,000 are owned by Rick Rule, chairman of Global Resource Investments Ltd., a California-based brokerage that focuses on the natural resource sector.
Best Move: Once upon a time, Mr. Erskine bought some shares in Western Silver at around $2 (Canadian). The company was taken over by Glamis Gold, which in turn was bought by Goldcorp, a company he's been very happy to hold. "Its mines aren't in places that are politically unstable where someone could just take them over and nationalize them." He also likes that fact that Goldcorp only has $732-million in debt, compared with a market cap of over $32-billion. "Companies shouldn't have more than 30 to 40 per cent of their market cap in debt," he says.
Worst Move: A decade back, Mr. Erskine bought some shares in Calgary-based Compton Petroleum Corp. at an average of $2, watched the stock run to more than $18, and then collapse in 2008, with the shares last trading at 44 cents.. "They had a lot of good properties in Alberta, but the price of natural gas is down, and they had to sell more shares to pay off some debt."
my"The stock market tends to fool you and go the other way. When all the news is negative, people lock their money up because they're scared of the stock market. That's really when they should be going in and buying up companies like Microsoft and Intel that are on sale."
Special to The Globe and Mail
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