Global equity specialist Nadim Rizk gives little consideration to macro issues such as the direction of interest rates or which sectors hold more promise. Instead, he focuses on individual companies that are industry leaders and have strong competitive positions.
"Historically, we've been pretty bad at calling the economic cycles, nor do we know whether the market is going up tomorrow -- or down," says Rizk, lead manager of the $523.5-million National Bank Global Equity and vice-president at Montreal-based Fiera Capital Inc. "By the same fashion, we are also fully invested. Over longer periods, the market gives you 7% to 9%. But it's hard to call the years that are better than average, such as the past year."
Working with a seven-person team, Rizk runs a high-conviction portfolio of about 45 names. "Once we find these names, we tend to keep them," says Rizk, noting turnover for the first half of the year was 3.1%. However, it was 135.9% in 2012 as he restructured the portfolio after assuming it in April, when Fiera Capital took over Natcan Investment Management, a unit of National Bank of Canada.
Rizk likes companies that have sustainable competitive advantages, either through global branding or technical know-how. "And size doesn't matter, because it could be a small niche player or a multinational like Nestlé," he says. "They have to be best of breed."
Companies that make the cut benefit from pricing power and organic growth, and have management that achieve high net returns on invested capital. "We use the stock market to find great companies and own them as if we owned a private company," says Rizk.
One representative holding is Schindler Holding AG, a global maker of elevators and escalators. "Schindler is one of five players that have 80% of the global market," says Rizk. "Secondly, barriers to entry are very high. And once you install a system, you typically sign a 15-year maintenance contract. Recession or not, you have to service an elevator system. This is a very stable business."
Born in Beirut, Lebanon, Rizk grew up during the sectarian conflict in the 1970s and 1980s. "I tell people, jokingly, that running funds is easy compared to surviving a war."
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Through his father Victor, a family physician, Rizk developed an interest in investing during high school. After losing his hard-earned money on a technology stock, he decided to study investing experts such as Warren Buffett and Peter Lynch.
In 1995, Rizk emigrated to Canada after earning a bachelor of business administration, with distinction, from the American University in Beirut. Three years later, he received his MBA from McGill University.
Rizk's first job was as an equity analyst at CN Pension Plan. In late 2000, he moved to Montrusco Bolton Inc., which a former CN colleague persuaded him to join. "I covered all kinds of sectors, such as banks and industrials, and different countries, too."
In January 2004, Rizk was appointed portfolio manager of Montrusco U.S. Equity, a fund for institutional investors. By 2005, he became head of global equity and added a global equity fund to his responsibilities.
In March 2009, the founder of Fiera Capital, Jean-Guy Desjardins, recruited Rizk to run global equities. Today, Rizk and his team manage about $3.6 billion in assets, spread across global, international and U.S. equity mandates.
Rizk favours steadily growing companies, such as TJX Companies Inc. TJX, a dominant U.S.-based discount retailer. "They do a great job at running the discount format," he says, noting that the top and bottom lines have grown in aggregate at an annualized 10% for the last decade.
Meanwhile, TJX has bought back 40% of its stock, thus enriching shareholders. Rizk calculates that earnings per share grew 14% a year and when combined with a 1% to 2% dividend yield, the stock has compounded at about 15%. "They've taken a good business and turned it into a great investment," he says. "They run the business really well, and do the same with their capital."
