According to U.S. mid-cap veteran Phil Taller, everyone wants to buy a quality company, but if the company is great and everything is going great, usually it's priced that way too. That's why his three-member team prefers to factor in market risks well in advance and focus on resilient companies and conservative forecast models to reduce volatility.
"Quite often, we're buying companies where the stock is down because there's some problem," says Taller, senior vice president at Mackenzie Investments in Toronto and the lead manager of Mackenzie U.S. Mid Cap Growth Class A. "With our models, we are valuing the next 30 years of free cash flows. "So whatever today's stories are, and whatever volatility erupts, you can take a longer-term view. We think a lot of our edge ends up being that long-term focus and the psychology to deal with things that aren't going so well."
As an example, Taller cites the newly proposed tariffs on imports of steel and aluminum by the United States. "In general," he says, "a long-lasting trade conflict will not be positive for anyone." Taller does not own many companies that are heavy consumers of steel and aluminum, but he believes the tariffs might generate some volatility on which his investment team could act to increase exposure to metal buyers, if the prices reflect enough pessimism.
