Jeff Hyrich- Trimark Investments

True to the Trimark style, this manager focuses on a core group of companies that dominate their respective industries.

Michael Ryval 28 June, 2013 | 6:00PM
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When his favourite stocks weaken, Jeff Hyrich adds to the holdings in the $797-million Trimark Global Endeavour. It's indicative of Hyrich's and the Trimark team's philosophy of focusing on a select group of companies that tend to dominate their industries, and then waiting patiently for market opinion to change.

One recent example is Hyundai Mobis Co. Ltd., which provides after-market auto parts and is a sister company of South Korea's Hyundai Motor Co. Last spring, the company's stock succumbed to three coincidental challenges, pushing its share-price multiple down to about seven times earnings.

"One issue was the weakening Japanese yen, due to the Bank of Japan's quantitative-easing program," recalls Hyrich, vice-president, Trimark Investments, a unit of Toronto-based Invesco Canada Ltd. "Which big competitor in the auto market is most affected by this? South Korea. Second, tensions just ratcheted up with North Korea when its leader Kim Jong-Un made some aggressive statements. And the third thing was margin pressure."

But Hyrich was convinced that Hyundai and its sister company, Kia Motors, which have an 11% market share in the U.S., could overcome the challenges, and in fact, keep growing. "The quality has really gone up, and they offer better value for the money because of their discounting programs," says Hyrich, who bought some more of the stock and was vindicated as the share price rose about 10%.

Hyundai Mobis is one of 27 holdings in a concentrated portfolio. Single positions can be as high as 7.5% of the fund. "We take a Darwinist approach," adds Hyrich, who shares duties with portfolio manager Erin Greenfield. "When Bob Krembil [Trimark's co-founder] ran the Trimark Fund   he began with 20 ideas. And the strong ones always drove out the weak ideas. If you don't do that, then you will own 150 names and won't know them well. And even if it does well, it will be such a small weight that it won't move the needle very much. We look for ideas that are concentrated and can move the needle."

Jeff Hyrich

Hyrich's portfolio turnover tends to be very low. In 2012, it was a mere 7.4%. "We're really focused on the long term: the five and 10 years," he says. Pointing to a list of the 13 largest contributors to the fund's performance since March 2009, Hyrich adds: "Here we are, more than four years later, and we still own 10 of the 13."

A Winnipeg native, Hyrich has been in the investment industry since he graduated in 1997 with a bachelor of commerce, majoring in finance and accounting, from the University of Manitoba. "I thought of becoming an actuary and took my first advanced math course and hated it. Then I took a finance course and my professor happened to work in the investment industry. I thought, 'Yeah, this is intriguing.'" After reading some books on Warren Buffett and Peter Lynch, Hyrich was hooked.

Hyrich landed his first job as an analyst in the active equity group at Ontario Teachers' Pension Plan. "I worked for two years with a bunch of colleagues like Heather Hunter." Like Hunter, and others such as Ian Hardacre, Hyrich joined Trimark in 1999 as the firm brought in new talent. The following year, Hyrich earned the CFA designation.

In October 2001, Hyrich was appointed portfolio manager of Trimark Global Endeavour and for five years worked alongside Geoff MacDonald, who later left the firm. Hyrich has been lead manager since February 2007.

In August 2009, Hyrich became co-manager of the $478-million Trimark Global Balanced. It holds the same equity holdings as the global equity fund, with about 30% in fixed income.

Rated 4-stars by Morningstar, the fund returned 11.6% for the three years ended May 31, compared to 7.5% for the median fund in the Global Equity Balanced category.

Also carrying a 4-star rating, Trimark Global Endeavour had an annualized return of 7.8% for the five years ended May 31, compared to 1.1% for the median fund in the Global Equity category.

The fund slipped into the third quartile in the last 12 months, but only marginally so. Hyrich attributes that to temporary market disenchantment with stocks such as Hyundai Mobis, and McGraw Hill Financial Inc. MHFI.

In the meantime, Hyrich continues to favour names such as U.S. clothing retailer Ross Stores Inc. ROST. "Their business model is selling brand-name merchandise, at a 40% to 50% discount off department stores. It's similar to TJ Maxx Inc., but it's slightly cheaper and growing a little faster," says Hyrich, adding that Ross Stores has about 1,200 outlets in 35 states.

"Here's a company that has had tremendous growth and yet it has generated a lot of free cash flow," Hyrich says, noting that Ross Stores has been one of the fund's top contributors to performance. "They buy back their stock every year, and have raised their dividend annually."

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Michael Ryval

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