These ‘High Endurance’ Managers Build a Portfolio They Can Keep

How StonePine puts together solid portfolios with very low turnover. 

Abdulai Mohamed, CFA 28 April, 2023 | 4:08AM
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High turnover portfolios usually mean higher trading fees, commissions, and risks with timing the market. But it’s hard not to buy or sell when markets are busy.

Nadim Rizk and co-managers at StonePine Asset Management make it easier with high-conviction choices. With a love for long-term compounders, their US, International, and Global Equity picks have weathered market ups and downs and generated strong long-term returns.

Steady and Effective

During the volatile market of the 2020s, Rizk remained calm and made no hasty portfolio moves. Drawing on two decades of experience, Rizk stays focused on the bigger picture, disregarding short-term market fluctuations that could derail his investment strategy. He uses fundamental analysis to identify firms with moats or durable competitive advantages, such as strong brand recognition, pricing power, and high barriers to entry, that allow them to compound returns over time.

Sticking Together for Long-Term Success

Rizk and co-manager Andrew Chan, now StonePine's head of investment research, have worked together since their days at Montrusco Bolton from 2005 to 2007. Chan followed Rizk to Fiera Capital after 2009 where they built a compact team of nine and a solid record. In 2021, that entire squad left with Rizk to form StonePine. Since then, their strong sense of unity and mutual support has been instrumental in contributing to their overall success.

More than half the holdings in StonePine’s strategies are over 10 years old, and turnover is on average about 10%. Once a stock makes it into their portfolios, the team prefers to let the company's business do most of the work generating returns. However, the team also remains flexible; it trims or adjusts holdings while keeping an eye on valuation and fundamentals.

The team at StonePine employs a combination of quantitative screening, industry expertise, and competitor analysis to narrow their focus, and then further filter by screening for market caps, liquidity, leverage, and other key metrics. Using a proprietary tool, they then rank these companies based on key metrics, with a particular emphasis on those that exhibit a strong competitive advantage, sustained free cash flow growth, and the ability to generate high returns on invested capital. The team keeps a watchlist of around 20 names that it continually reevaluates, always looking for new opportunities.

Patience Makes Long-Term Performance

Currently, StonePine sub-advises several funds offered in North America, including National Bank Investment’s five-star, Morningstar analyst bronze rated NBI US Equity F, which between December 2013 and March 31, 2023 gained 15.5% annualized, surpassing both its average U.S. equity Morningstar category peer’s 10.1% and the Morningstar US Market Gross Index’s 13.4%. StonePine’s patient, disciplined investment approach is a great example of the power of ‘time in the market’, versus ‘timing the market’.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
NBI US Equity F47.64 CAD0.23Rating

About Author

Abdulai Mohamed, CFA  is a Manager Research Analyst for Morningstar.  

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