John Wilson, the new Senior Portfolio manager at Toronto-based Sprott Inc. (TSX: T.SII, Stock Forum) is a fan of companies with strong balance sheets, predictable cash flow, and attractive dividend yields.
In his previous role as chief investment officer at a Toronto asset management firm, Wilson placed the emphasis on capital appreciation with a level of safety attached to it.
It is a strategy that would seem to put him at odds with new boss Eric Sprott, the Canadian hedge fund manager (and Sprott Chairman), who has built his reputation on the theory that the banks will come crashing down and all roads lead to precious metals, the traditional safe havens in times of uncertainty.
But in an interview with Stockhouse, Wilson gave every indication that he is just as pessimistic about the outlook for the global financial system as his boss. It’s just that he takes a different view of how clients should invest their money in order to benefit from global macroeconomic events as they unfold.
For example, he believes austerity measures aimed at easing debt problems in Europe will put a damper on economic growth, potentially creating a recessionary environment that could be a drag on the U.S. economy.
“This is not wildly positive for equities,” he said.
To a degree, Wilson says people have taken their eye off what the U.S. is going to do with its own economic imbalances. But as the U.S. election heats up and people find that they aren’t hearing anyone talking about how these problems might be fixed, it will be a concern to global investors.
He is confident that investors can look forward to another round of quantitative easing from the U.S. Federal Reserve, possibly as early as June.
In his new role as senior portfolio manager, Wilson will oversee a basket of new mutual and hedge funds that Sprott is preparing to roll out. The aim is to give investors an alternative to the highly volatile, precious metals focused funds that are run by Eric Sprott, by offering balanced and income funds that seek steady returns.
At Sprott, Wilson said he will take a similar approach to the one he deployed as chief investment officer at Cumberland Private Wealth Management, which has about $1.5 billion in assets under management.
“Our mandate there was to grow the assets of high net worth families with a focus on preservation of capital, minimizing volatility and trying to compound client’s wealth a plus sign, while avoiding big negative years along the way,’’ he said.
“It’s a strategy that obviously has high appeal for wealthy individuals. But as volatility in global markets has increased in the last year, it is become appealing to almost everybody.”
Names that the strategy have owned in the past include Vodaphone Group Plc (NASDAQ: VOD, Stock Forum) and Phillip Morris International Inc. (NYSE: PM, Stock Forum). Wilson said these are global franchises with strong brand names, cash flow and dividend yields.
“In Canada, a name that I have really liked has been Canadian Pacific Railway Ltd. (TSX: T.CP, Stock Forum),’’ Wilson said John Wilson.
He said he finds CP attractive because he believes its already strong railway transportation business will benefit from management changes that appear to be under way, and should eventually be reflected in the company’s stock price, which traded at $71.81 this week.
Raised in Ottawa, Wilson trained as an electrical engineer and spent about 10 years working in the North American technology sector before switching to finance in the mid 1990s. Since then he has worked as a research analyst at UBS Canada, RBC Capital Markets, and at Ddx Capital Partners, a company he started on his own.
When Sprott came calling, he had spent almost three years with Cumberland Private Wealth.
During the interview with Stockhouse, Wilsondeclined to be specific about where the smart money will go this year.
Where the smart money might go
“Honestly, I think the large policy problems facing developed markets – and even developing ones like China – are so substantial, you can get a variety of outcomes this year and you are probably going to get a lot of fluctuations back and forth,’’ he said.
As a result, he said the smart money would be invested in a way that feels protected in this environment because it is just too hard to predict what happens in three, six, nine months from now.
“The reality is that with the market doing what it did last year, if you are a person like me that loves high free cash flow yields, great businesses, with predictable cash flows and earnings visibility, I can find a lot of those right now in a lot of sectors,’’ he said.
Meanwhile, Wilson said he was attracted to Sprott for three main reasons:
- “We have a common view of the world in terms of how things are likely to unfold.’’
- “They have tremendous resources and a tremendous platform that I think my type of strategy can really get leverage on.’’
- “Their brand name and their recognition on all of the distribution channels is top notch.’’
“It was an easy decision to come [to Sprott],’’ he said.