With a tip of the hat to famed investors such as Benjamin Graham and Warren Buffett, Bill Kanko approaches a company as if he were an entrepreneur interested in buying the entire firm.
"You try to understand the economics and characteristics of different businesses and have an idea that the business will be bigger and more profitable, to the surprise of other investors," says Kanko, manager ofHartford Global Leaders. "It means having a view that is different from other investors," adds the 47-year-old president of Toronto-based Black Creek Investment Management Inc.
A 25-year industry veteran who left AIM Trimark Investments two years ago to start his own firm, Kanko describes the exercise of generating investment ideas as "connecting the dots."
He assembles pieces of information gleaned from research reports, conversations with competitors and conference calls with company executives, and then develops a view of the stock that differs from the consensus.
"My portfolio is a collection of 20 or so individual business ideas," says Kanko, referring to the fund. He began managing the fund in June after all its existing holdings had been sold. Previously managed by Boston-based Wellington Management Co. LLP, and launched in April 2000, the global equity fund had been a performance laggard.
Coca-Cola Enterprises Inc. ( CCE/NYSE) is one of the new holdings. A spin-off from Coca-Cola Co. ( KO/NYSE), the firm is a beverage distributor and the world's largest bottler of Coca-Cola products.
Although profit margins at Coca-Cola Enterprises have dropped recently, Kanko's contrarian thesis is that a number of internal organizational and industry-wide changes bode well for the future.
Kanko's interest in investing dates back to his undergraduate days at University of Western Ontario. Even though he didn't make much money as a small investor, he liked the challenge of stock picking and decided to make that his career.
After graduating in 1981 with an honours BA in business administration, he was hired as an analyst at Confederation Life's investment department. During a four-year stay, he rose to assistant portfolio manager.
In 1985, he accepted a job offer from Bob Krembil, chief investment officer of the then-named Trimark Investment Management Inc. In those days, it was a small operation, giving Kanko plenty of opportunities to learn from an acknowledged master the importance of having a view that is different from that of the market.
In 1994, Kanko left Trimark to become a co-founder of Bluewater Investment Management Inc., which became a sub-advisor for Mackenzie Financial Corp. Three years later, he joined Mackenzie, where he managedMackenzie Ivy Foreign Equity
.
But in 1997 Kanko re-joined Trimark, mainly because he preferred to operate within a management culture that used a uniform investment style. That changed, however, when the firm became an AMVESCAP PLC subsidiary in 2000.
In August 2004, Kanko decided to go out on his own again. Although he is managing a considerably smaller pool of assets -- previously he oversaw $13 billion, mainly inTrimark Fund SC andTrimark Select Growth -- Kanko likes running his own show. "I'm quite happy here. There's a lot more flexibility."
The Hartford fund, which has a total of $33 million in assets in various purchase options, mirrors two pooled funds that Kanko manages. Neither of these pools is available to mainstream investors. The larger of the two is the $25-million Newport International Equity, sold to clients of Toronto-based Newport Investment Counsel Inc.
Kanko also looks after his own Black Creek Focus, a $17-million pool that is sold to accredited investors who put up at least $250,000. Recently, he hired an analyst, Matias Galarce, to help him with stock selection.
Once it is fully invested, the Hartford fund will have about 25 names, with typical holdings around 4%. The maximum weight per holding is 10% of fund assets.
While the fund has a global mandate, Kanko is unconcerned about whether a stock is based in the U.S. or UK, or Japan. "Canon Inc. ( CAJ/NYSE) gets most of its business outside Japan, so arguably it's not Japanese anymore," he says. "I look at where a company does its business, where it's competitive, and do cross-border comparisons."
Indeed, when he selected Zimmer Holdings Inc. ( ZMH/NYSE), he also compared the maker of orthopaedic implants to competitors such as U.S.-based Johnson & Johnson ( JNJ/NYSE) and Britain's Smith & Nephew PLC ( SNN/NYSE).
"The list is diversified geographically, but it's not your typical pie-chart fund," says Kanko. And while his list of holdings is relatively tight, he believes it is well diversified. "There are some very different businesses and different investment ideas."
:quality(80)/cloudfront-us-east-1.images.arcpublishing.com/morningstar/Q3KIND5VXRCNHHH6JQHCCYBSSA.png)
