Robert Tattersall

"If people say, 'this is too slow for me, it's just not sexy enough,' well that's okay," says Tattersall. "It's nature's way of telling you that you're in the wrong category."

To stick to contrarian value principles, you also need to have an organization that supports portfolios with a fair amount of "ugly looking stocks," says Tattersall. As well, you need to do that long enough for it to work in your favour, he adds.

The shift away from value stocks has taken its toll, even on Tattersall's longer-term track record. Saxon World Growth has an annualized 15-year return of 7.9%, lagging the median of 8.9% in the Global Small/Mid Cap Equity category, as of June 30. (Though the fund can invest in companies in any size, its placement in the global small-cap category reflects its holding history in recent years.)

Faring better in both relative and absolute terms isSaxon Small Cap, which Tattersall has managed or co-managed since its inception in December 1985. The fund has returned 12%, compared with the Canadian Small/Mid Cap Equity median of 9.2% during the same period. Both Saxon World Growth and Saxon Small Cap are Morningstar Canada Fund Analyst Picks, though they are currently under review because of a pending ownership change.

Since Tattersall's beginnings at the "Confed value school" at the former Confederation Life, there has been a shift in the type of companies showing up on his valuation screens. Compared to 10 years ago, when most cheap stocks were small-capitalization companies, there is now almost a level playing field, he says.

Since the Saxon mandates are all-cap in nature, Tattersall and his colleagues have been buying more quality large-cap companies, such as Wal-Mart Stores, Inc. ( WMT/NYSE), ING Groep N.V. ( ING/NYSE) and Royal Bank of Scotland Group PLC ( RBS/NYSE).

In researching value stocks, Tattersall relies primarily on in-house "numbers" analysis. His key criteria include low price-to-book value, low price to cash flow and a reasonably strong balance sheet.

He says his portfolios are widely diversified because not all of his picks are going to work out. Saxon World Growth holds a mix of 60 to 80 stocks with a maximum weight of about 5% in any one holding. The cash position is characteristically 3% to 6%. Tattersall doesn't hedge the fund's foreign currency exposure, which has hurt his returns in recent periods.

Saxon World Growth's current roughly one-third weighting in U.S. stocks is lower than usual for Tattersall, who admires the entrepreneurial spirit in the U.S. The rest of the portfolio is mainly spread out across Europe, Asia and Australia. From a sector point of view, "we're probably most heavily weighted in consumer and industrials and modest in energy and resources," he says.

Tatttersall follows a buy-and-hold philosophy. He estimates that on average his annual portfolio turnover is about 25%. His sell discipline is triggered primarily when a target price is reached, or when a company's fundamentals have deteriorated.

Born and educated in England, Tattersall graduated from Cambridge University in 1969 with a degree in European medieval history. He then moved to the U.S., where he completed an MBA at Ohio State University in 1971. He is also a CFA charterholder.

Tattersall subsequently obtained a job as a research analyst and later as a portfolio manager with Confederation Life Insurance Co. in Toronto, where he stayed for 10 years. In 1981, he moved to Bolton Tremblay Inc. where he managed international funds.

In 1985, he left to join Horgan Investment Counsel. The firm launched the Saxon line of funds soon afterwards. Subsequently, Tattersall became a co-owner with Richard Howson and the firm was renamed Howson Tattersall Investment Counsel.

Tattersall, 60, now emphasizes the word team, especially since the firm merged in 2003 with an investment management company owned by the Canadian Medical Association, with the CMA retaining a majority stake.

The latest development, announced on Aug. 5, is a friendly takeover offer by IGM Financial Inc. ( IGM/TSX). Along with the CMA, Tattersall and his long-time partner Howson have agreed to tender their shares in publicly traded Saxon Financial Inc. ( SFI/TSX), the holding company that owns their money management businesses including Howson Tattersall.

Under the terms of that deal, Tattersall and Howson reaffirmed the agreement originally made with the CMA, which calls for them to remain with the firm until Dec. 31, 2010. With the prospect of retirement in less than two and a half years, succession planning has become a prime concern. Tattersall now works with three other managers on Saxon World Growth, and with two others on Saxon Small Cap.

Looking ahead, Tattersall expects a more favourable environment for value investing to emerge. "Value has been out of favour for a year or more and the market is being driven by an ever-narrowing group of stocks in Canada," he says. "This is not sustainable and value stocks are the place to be today, precisely because they have recently under-performed."