Mike Powell, 25
Master of business administration candidate
Includes shares in Home Depot Inc., Kinder Morgan Energy Partners LP and Dollarama Inc.
Mike Powell is preparing for a career in the investment management industry.
He will soon be graduating from the Sprott School of Business at Carleton University and has obtained hands-on experience by serving as a portfolio manager at Fund @ Sprott, a student entity that invests a portion of the university's endowment funds.
How he invests
"First and foremost, I am a macro investor," Mr. Powell declares.
"During my time at the Sprott School of Business, where I managed a portfolio with $600,000 in assets, I studied under Professor Howard Nemiroff. He's a behavioural economist who really showed me how economics effectively dwarfs every other investment consideration."
The purchase of home renovations retailer Home Depot about two years ago in Mr. Powell's portfolio originated with the expectation that the U.S. housing sector was primed for a cyclical recovery.
Home builder stocks were considered but Home Depot was seen as having less downside risk due in part to its diverse customer base.
His interest in Dollarama was piqued by the potential for tough economic times to drive shoppers to dollar stores.
Further research revealed that the company had "a clear pipeline for growth" regardless of the macroeconomic setting – it faced no real competition and the industry's saturation rate was "nowhere near as high as it is in the U.S."
Once Mr. Powell identifies a promising sector, he employs a range of analytical tools, such as discounted cash flows, to identify the firms whose share prices substantially undervalue growth prospects. Technical analysis helps with timing entry and exit points.
He also carefully analyzes each company. For example, he liked Dollarama's business model because, unlike the "treasure hunts" of other dollar stores, it "offers the same products regularly, which translates into [lower inventory costs] and higher margins."
Generating superior performance in 2011 by "holding a ton of cash" because it was too hard to get a clear read on the macro environment.
"Trading options before I had some grasp of equity markets."
"Read The Intelligent Investor by Ben Graham, The Black Swan by Nassim Nicholas Taleb and take a course in macroeconomics."
Special to The Globe and Mail
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