Confirming the quality of a resource company's assets is the first hurdle for Craig Porter, manager of the $104-millionAltamira Resource and the $52.2-millionAltamira Precious & Strategic Metals.
"If there's a lousy gold mine, if doesn't matter how good the management team is. It will be a lousy asset at the end of the day," says Porter, 40, vice-president, Canadian equities, at Natcan Investment Management Inc. in Toronto. "You want to look at a company that has one of the better gold mines, or has strong reserves if it's on the oil and gas side." While secondary, the quality of management is a critical ingredient and can tip the scale in stock selection. That's the case with one of Porter's larger positions, Glamis Gold Ltd. ( GLG/TSX), a junior gold producer. "Whatever management tells you, they live up to. They have one strong mine in Nevada, but they have a path you see," says Porter, noting that Glamis is developing mines in Mexico, Honduras, and Guatemala. Acquired five years ago at about $3, Glamis shares recently traded at more than $21.
Porter didn't start out as a resource specialist. A Toronto native, he studied commerce and economics at University of Toronto, where he graduated with a bachelor of arts in 1987. He was interested in the investment industry and decided to get his feet wet by working in the mutual fund department at Midland Walwyn.
After about a year, he was hired as a retail broker at TD Bank's discount broker, then named Green Line Investor Services Inc. It was during his three-year stay that he noticed that Altamira Investor Services Inc. was attracting a lot of business.
His curiosity piqued, he sent his resumé to Altamira. After working about 18 months on the sales side, he joined the Canadian equity team in 1993.
Initially, Porter allocated trades, handled back-office responsibilities, and learned about portfolio construction. In mid-1994, he began working as an oil industry analyst on the resources fund, as the then manager, Normand Lamarche, was also preoccupied with the newly launched precious metals fund.
Over the next three years, Porter worked on the two funds with Lamarche's successor, Dave Taylor, and Frank Mersch, who was responsible for many of the stock picks. In May 1998, Porter was officially named manager of the two funds. (In November 2003, he joined Natcan, a unit of National Bank of Canada, after it absorbed Altamira Management Ltd., Altamira's management arm.)
By Porter's own admission, the early part of his tenure was hurt by holding some junior oil producers for too long. Over five-years, the resources fund ranks in the third quartile and has a Morningstar Rating of three stars.
But performance has improved considerably on a one- and three-year basis, with the fund moving up to the top quartile. Porter attributes the improvement to his decision to overweight smaller base metals stocks, such as nickel producer Canico Resources Corp. ( CNI/TSX), in anticipation of burgeoning demand from China.
The precious metals fund, which like all others in its category has no Morningstar Rating, has been in the top quartile on a three-year basis. It ranked in the second quartile over the last 12 months.
Porter limits his positions to 3% to 4% of fund assets and tends to have about 50 to 60 names in each portfolio. Turnover is relatively high, with the precious metals fund ranging from 112% in 2000 to 162% in 2002.
Last year, for instance, Porter traded in and out of junior gold companies that were leveraged to the rising gold price, a strategy that paid off. The resources fund's turnover ratio was similarly high, ranging from 141% in 2000 to 240% in 2001.
Looking ahead, Porter is bullish on gold, calling for a US$450 gold bullion price by year-end. While the precious metals fund was in negative territory for the first six months, he expects stocks to rally as the gold price moves up later this year. As key drivers, he cites geopolitical concerns, low interest rates, and continued weakness in the U.S. dollar.
But Porter is wary of oil prices at US$45 or higher. He argues that were it not for turmoil in places such as Iraq, the commodity would be at the US$35 to US$40 level. He is underweighting the sector in the resources fund, focusing on senior players such as Canadian Natural Resources Ltd. ( CNQ/TSX) and Talisman Energy Inc. ( TLM/TSX). "I've taken some profits across the board and taken all the weights down a bit," he says.
