Manager keeps his fingers on market's pulse. Warner Sulz
RBC Asset Management Inc.
Manager keeps his fingers on market's pulse.
by Diana Cawfield | 14 Jul 06 | E-mail Article to a Friend
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Keeping on top of late-breaking market news is a top priority for Warner Sulz, lead manager of the newly renamed $1.1-billion RBC North American Growth. The name change for the former RBC Canadian Growth, effective July 4, reflects the fund's broader investment mandate, approved last month by unitholders.
"As you can see, I don't have a computer in my office," says Sulz, "because I'm mostly at the trading desk where you can see rotations going on in the market. I hear it first; I feel it. The market tells you where it wants to go and I will participate because, at the end of the day, the market rules."
Sulz, a senior vice-president at RBC Asset Management Inc. in Toronto, co-heads the Canadian equity team with John Varao. Sulz has managed RBC North American Growth since October 2003.
Along with the name change, unitholders of RBC North American Growth agreed to double the allowable foreign content to 50%. The fund's holdings will remain predominantly in Canada and the U.S. However, right now more than 90% of the portfolio is held in Canada, which Sulz says is the better performing market.
Sulz employs a "multi-disciplined" approach. His core holdings may look similar to those of RBC Canadian Equity, which he co-manages. But RBC North American Growth will have greater emphasis on mid-capitalization companies. "The funny thing about Canada," says Sulz, "is that a lot of times, large-cap managers won't buy anything less than $1 billion [in market capitalization], so there's a lot of return to be made."
Sulz says the key to strong performance is to identify emerging companies that may be riskier but that are also much more rewarding. He cites one of his smaller-cap holdings, HudBay Minerals Inc. (HBM/TSX), as a prime example of what he looks for in a growth company: seasoned management, a growing business, an attractive stock price and an excellent debt-equity ratio.
The 45-year-old Sulz, who has produced above-average returns with the former RBC Canadian Growth in the nearly three years before the fund's mandate change, draws on two decades of investment experience. After graduating with a business degree from York University in 1983, he worked in the computer industry for a few years before joining Dominion Securities in 1986.
In 1992, Sulz moved from the institutional equity desk to what was then Royal Bank Investment Management. He initially managed a portfolio for the bank and also ended up running the trading operation for a number of years.
He has also co-managed the $4.5-billion RBC Canadian Equity since December 2004, along with co-managing the $1-billion RBC Balanced Growth since its inception in 1998. In total, Sulz is responsible for close to $6.2 billion in assets under management.
Sulz believes in identifying good, solid companies and sticking with them. He considers being able to "leverage the expertise" of more than 10 portfolio managers and analysts a key competitive advantage.
He typically holds about 100 names, a total that is swollen by holdings of smaller companies. He tends to be a buy-and-hold investor in his core large-cap holdings, but his active trading of some of the smaller names tends to increase his overall portfolio turnover. "That's how you get to around 50% [turnover]," he says.
Identifying industry-sector trends is of fundamental importance to Sulz, who looks at various technical, fundamental, quantitative and momentum measures. To avoid the "torpedoes or bombs," he uses a scoring mechanism to flag the poorest performing stocks.
Sulz says he's happy that the recent market correction didn't force him to give back much of the fund's outperformance. "That's because I did take profits and built up cash a little bit. It's not like I wait for things to break down and say 'there's a whole bunch of risk out there, I'd better sell.'"
As stocks trade toward their upper end of valuations, Sulz will take some profits. That gives him room to buy back when the stocks revert to the lower end, he adds. He'll also sell during sector shifts.
"Right now, I'm overweight in materials," says Sulz. "I think that's the best place to be to participate in the rebound in this market, at which point I'll probably pull that back."