, is expecting tougher times ahead for the Canadian equity market.
"We've gone through a tremendous run over the last many years," says Stanley. "Now that some of the fast money has been taken off the table, we will move from a liquidity- driven market to one that is driven by fundamentals." Stanley is president, CEO and chief investment officer of Jones Heward Investment Counsel Inc., which has roughly $34 billion under management. He also manages numerous other funds for the BMO and Guardian Group of Funds Ltd. (GGOF) fund families, the latter of which is also a Bank of Montreal subsidiary. The other funds he manages include the $6-billionBMO Monthly Income
and the $2.2-billionBMO Equity .
Stanley's conservative, value-oriented approach is exemplified in BMO Dividend, which he has managed since its inception in October 1994. "When you're buying a fund like this, you want to keep your expectations low," says Stanley.
A Morningstar 3-star rated fund, BMO Dividend has been a middling performer during the last several years of mostly robust markets. Its three-year compound annual return of 15.5% matches the median return in the Canadian Dividend & Income Equity category. But its 10-year return of 12.8%, as of July 31, is well ahead of the median return of 10.5%.
BMO Dividend is the second largest in its category, and Stanley attributes its popularity to its non-aggressive approach and the general trend in favour of income-producing investments. The relatively low management-expense ratio of 1.71% also helps. "I've heard it's an easy sell," says Stanley.
Nor is BMO Mutual Funds contemplating turning new money away. While the question of the fund's size sometimes comes up, says Stanley, there have been no talks about capping the fund. If performance starts to go a little sour, he says, it's more likely to be because the major sectors or companies in the portfolio have fallen out of favour, as opposed to liquidity issues related to the fund's size.
Stanley, 52, has more than 25 years of experience as an analyst and money manager. A University of Toronto graduate, he earned a BA in 1975, followed by an MBA in 1979.
Stanley joined Crown Life in 1979 as an analyst. He obtained his CFA charter in 1982, the same year that he left the company to travel with his wife through Asia and Australia.
Stanley returned to the industry in 1983, joining Royal Trust as an analyst. In January 1984, he joined Halifax Insurance in Toronto to move into money management as a portfolio manager. In August 1985, he moved to MT Associates as a portfolio manager and analyst. In March 1992, he joined an independent investment counsellor in British Columbia.
In December 1993, Stanley moved back to Toronto and in January 1994 joined Bank of Montreal Investment Counsel Ltd. as vice-president of Canadian equities. His role continued to expand after the bank subsidiary was merged with Jones Heward in February 1996.
Most recently, Stanley took on the position of president and CEO in December. With "just a little more reporting requirements," Stanley manages the same way with both the fixed income and equity group reporting to him. Under his multiple mandates, Stanley draws on the ideas of a team of seven equity analysts, two resource managers and two other generalists.
Paying little heed to market benchmarks or macroeconomic criteria, Stanley's focus in BMO Dividend is on the selection of about 35 large, dividend-paying Canadian companies. The weightings of these holdings range from about 1% to 7% of the fund.
Stanley's investment discipline has a value bias, but he's not a deep value investor. He will screen for good balance sheets, positive free cash flow, above-average returns on equity and sound business models.
During its nearly 13-year history, BMO Dividend has been overwhelmingly a pure domestic play. But that may change, Stanley says, due to the continuing foreign takeovers of Canadian companies. "As we lose another 5% of the market over the next little while, we may have to reconsider how pure we'll be going forward," says Stanley.
Financial-services companies currently make up about half the portfolio of BMO Dividend, down from about 60% in April. These have always been a mainstay in the fund, and Stanley says there will be a fair exposure to financials "through thick and thin."
Stanley tends to be a buy-and-hold investor with fairly modest turnover. Historically, turnover has probably "averaged 30% or so," he says. While the cash component of the fund has ranged widely over the years, Stanley has recently been pretty much fully invested, holding about 5% in cash.
"All I can say is that the stocks we own are proven and tested," says Stanley. "It doesn't preclude them from getting caught in some sort of market draft, but it might be just short term."
:quality(80)/cloudfront-us-east-1.images.arcpublishing.com/morningstar/5WSHPTEQ6BADZPVPXVVDYIKL5M.png)
:quality(80)/cloudfront-us-east-1.images.arcpublishing.com/morningstar/Q3KIND5VXRCNHHH6JQHCCYBSSA.png)
