Robert Lyon is not sitting on cash in the currently rocky resources space, despite the global downturn.
"There's a lot of bad news out there," says Lyon, a senior vice-president and portfolio manager at AGF Investments Inc. in Toronto, "but it presents opportunities in the market to be buying as opposed to selling." Up until a few months ago, Lyon's global resources mandate held about 8% in cash. Since then, "we've largely put that to work."
Lyon has been the lead manager of the $213-million AGF Canadian Resources Class, and the $172-million AGF Global Resources Class since joining the company in April 2008. He also co-manages AGF Precious Metals 
.
Growth at a reasonable price, or GARP, comes closest to describing Lyon's investment style, which favours top-quality companies that can weather the commodity cycles. His key criteria include the track records of company management, and the quality of the resource reserves.
Well diversified by individual security, Lyon holds approximately 80 stocks in his global resources fund and 100 in the Canadian one. He also diversifies by market capitalization. In the global mandate, the split is roughly 70% in large-cap companies and 30% in small-to-mid caps.
"Between the 70% you can get good stability, earnings and cash flow" says Lyon, "and the 30% adds the incremental growth through the cycles to help generate better long-term performance." Portfolio turnover has been moderate. Over the past four and a half years, says Lyon, turnover has averaged about 40%.
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The foreign content is only 37% in the global mandate, reflecting Canada's global prominence in natural-resources industries. In the Canadian resources fund, foreign securities constitute 17% of the portfolio.
Under Lyon's tenure, AGF Global Resources has an annualized three-year return to July 31 of 1.6% versus the median 4% in the Natural Resources Equity category. During that same period, AGF Canadian Resources retuned an annualized 2.9%.
Tourmaline Oil Corp. TOU, the top holding in both the global and Canadian mandates, "checks all the boxes that we look for in our companies," says Lyon. He says the team believes Tourmaline has one of the best management personnel in the oil patch, and has among the lowest production costs.
"They've exceeded our growth target every year since they've been in existence," Lyon says. In addition, Tourmaline has "a strong balance sheet, with every fundamental thing you could want in a company."
As a bottom-up stock picker who also keeps an eye on the macroeconomic picture, Lyon recognizes that the slowdown in global growth, especially in China, is having a negative impact. He fully understands that worried investors may be asking themselves: "Hey, if China's not there, do I need to be in resources at all?"
Yet Lyon notes that China -- the country that everyone is worried about slowing down -- is buying the Canadian oil and gas company Nexen Inc. NXY. "I think that's an interesting macro message that is being put out there recently," he says.
While demand for resources has slowed in China, it's still growing. Though China's previous double-digit growth rates in GDP have dipped to around 6.5%, that's "still great by Western standards," Lyon says.
Lyon, 47, is a graduate of Carleton University who received a bachelor of commerce degree in 1989. In November of that year, he joined the brokerage Nesbitt Thomson in Toronto as an accounting clerk, working his way up to the finance department.
In 1993, Lyon joined a competing broker ScotiaMcLeod Inc., as a research analyst. He received the CFA designation in 1994. In 1995, he moved to Lévesque Beaubien Geoffrion as a research analyst. Subsequently, in 1997 he worked for I.A. Michael Investment Counsel Ltd., the value-style Toronto firm headed by Irwin Michael, for just under a year.
Before joining TD Newcrest in January 2006, Lyon managed resources funds for the Signature Global Advisors division of CI Investments Inc. He had previously managed a resources fund for the former BPI family of funds, becoming a CI employee when CI acquired BPI in October 1999.
In positioning AGF Global Resources Class, Lyon says natural gas in North America "can move up significantly," regardless of what's going on in the global economy. Another bright spot is the gold sector. "When you look at the fundamentals right now at the macro level, these should be supportive of the gold price." Accordingly, the Canadian resource mandate currently holds about 22% in gold and other precious-metals miners, and the global resources fund is weighted about 17% in this sector.
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