Return on capital plays key role for Trimark global manager

Jeff Hyrich favours companies that reinvest in their businesses.

Michael Ryval 1 June, 2017 | 5:00PM
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High return on capital is one of the most important attributes associated with strong investment returns, says Jeff Hyrich, lead manager of the $2.2-billion Trimark Global Endeavour. But this valuation should not be considered in isolation, he adds.

"We want to own companies with high returns on capital. But it's only one metric, because we also look at competitive positioning, quality of management, growth opportunities, and the availability to reinvest back in the business," says Hyrich, a vice-president at Trimark Investments, a unit of Toronto-based Invesco Canada Ltd. "We also want to buy them at reasonable valuations. There are a bunch of things that we look for, but return on capital is number one."

As a rule, Hyrich seeks companies that have a return on capital exceeding 15%. Indeed, the average of the 35 companies in the portfolio is more than 20%. "When a company reinvests back in the business at that rate of return, it facilitates better growth."

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Microsoft Corp308.63 USD0.40Rating
Polaris Inc125.50 USD-0.70Rating
Ross Stores Inc110.14 USD0.87Rating

About Author

Michael Ryval

Michael Ryval  Michael Ryval, a regular contributor to Morningstar, is a Toronto-based freelance writer who specializes in business and investing.

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