Garey J. Aitken credits bottom-up stock picking for the top-quartile performance that he's achieved over the past few years with the $2- billion Franklin Bissett Canadian Equity Class 
. But it has also helped that his securities-selection process has resulted in the fund being underweight in cyclical sectors during a period when resources stocks have performed poorly.
"The resource complex has been weak because of what we are seeing out of emerging markets and the (falling) demand for commodities," says Aitken, lead manager and chief investment officer at Calgary-based Bissett Investment Management, a unit of Franklin Templeton Investments Corp. "But if we look at industrials, staples, and even health care and information technology, they have done really well. Financials have done better as well. The common theme is sectors that are less cyclical or geared toward demand coming out of emerging markets."
Aitken says the bull market that ran between 2002 and 2008 was clearly driven by commodities, but it "ran out of steam rather abruptly." He notes that the global economy has struggled since 2008.
Instead of favouring particular sectors, Aitken and co-manager Tim Caulfield have concentrated on about 50 companies that are well managed, secular-growth businesses whose stocks are reasonably priced. That emphasis has resulted in a 5-star rating and top-quartile numbers for the past five years.
For the 12 months ended Aug. 31, the flagship Bissett equity fund returned 17.8%, versus 11.3% for the median fund in the Canadian Equity category. Over three and five years, the fund had annualized returns of 10% and 5.6%, compared with 4.7% and 1% respectively for the median fund in the same period.
"We have had some tailwinds, in the form of being underweight the cyclical group. But depending on the time period, that effect comes and goes," says Aitken. "We are not sector rotators. It comes back to being nimble and finding securities that have outperformed. Easy to say. Hard to execute."
One classic example is Metro Inc. MRU, a leading supermarket chain that is a 3% weighting in the fund. "This is a mature industry with not a lot of growth dynamic. But it is a very profitable business and has great cost control," Aitken says.
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"It's the kind of classic franchise, high-quality business we align ourselves with. The valuation is not as attractive as before its big run," says Aitken, adding that the share price is up about 14% in the last 12 months. "But it's still sufficiently attractive to warrant that weight in the portfolio. On a go-forward basis, it can finesse its way to 5% to 10% annualized earnings-per-share growth."
An Edmonton native, Aitken grew up in Calgary and returned to Edmonton, where he earned a bachelor of commerce at the University of Alberta in 1989. In 1990, he graduated with an MBA from the University of British Columbia.
Aitken's first job was at CIBC, where he spent about three years in corporate credit and helped to finance intermediate to larger-cap energy firms. Then he joined Poco Petroleums Ltd., where he was assistant treasurer. "I did everything from treasury to investor relations to business development."
In early 1998, Aitken joined Bissett. "The buy side was where my heart was. An opportunity presented itself, and the job was in Calgary."
Initially, Aitken worked as an analyst, a role which he relinquished only a couple of years ago. From 2000 to 2002, he was part of the team managing small-cap and micro-cap holdings. He was then appointed director of equity research and joined Fred Pynn in managing the flagship fund. When Pynn retired in 2008, Aitken was named lead manager. Tim Caulfield, vice-president, became co-manager in early 2011.
Aitken is also co-manager, with Jason Hornett, vice-president, of the $293-million Franklin Bissett All Canadian Focus. That 4-star rated fund is quantitatively oriented, and focuses on key measures of profitability, growth, valuation and consistency.
By coincidence, this fund has some of the same holdings as the flagship fund, including Metro. Among the Franklin Bissett All Canadian holdings that are not held in the flagship fund is Valeant Pharmaceuticals International Inc. VRX, which specializes in dermatological and eye-care products.
Though Valeant has also seen significant share-price gains, Aitken continues to hold it. "We're still comfortable with the valuation. Any time that we are not, the stock will not be part of our portfolios."
After a decade of managing funds, Aitken notes that each product will have its ups and downs. Pointing to the flagship fund, which lagged from 2003 to 2007, he says: "We did not change our approach, going into the commodity cycle and coming out of it. For 30 years, we have been consistent. We recognize that there will be times when we are in favour, and also out of favour. That period was a time when we were out of favour. It's an example of what happens when you are an active manager and different from the index."
