Jeff Mo, portfolio manager with Mawer Investment Management Ltd.The Globe and Mail
Money manager Jeff Mo believes he has the right investing strategy as U.S. President Donald Trump’s aggressive trade policies rock markets and cause widespread economic anxiety.
The Mawer Investment Management Ltd. portfolio manager says he’s sticking with companies with a strong competitive advantage that he believes can withstand a world of potentially slower growth, higher costs and inflation.
“How we choose companies becomes even more important because, when the pricing of your inputs or outputs potentially change quite a bit in short periods of time, having competitive advantages means your customers are going to be a little bit stickier to your products or services than the average company out there,” says Mr. Mo, who manages about $3.3-billion in assets, including the firm’s Mawer U.S. Mid Cap Equity Fund and the Mawer New Canada Fund.
Mr. Mo says his firm is also focused on buying what it calls “wealth-creating companies,” which are those with a higher return on invested capital than cost of capital.
His U.S. Mid Cap Equity Fund has returned 3.4 per cent over the past year. Its three-year annualized return is 7.6 per cent and its annualized return since inception in September, 2021, is 4 per cent.
His Mawer New Canada Fund, which launched in 1988 and has been mostly closed to new investors since 2004, is down 0.5 per cent over the past year. Its three-year annualized return is 2.3 per cent and its five-year annualized return is 12.3 per cent. The performance is based on total returns, net of fees, as of March 17.
The Globe spoke with Mr. Mo, who’s based in Calgary, about three stocks he’s been buying in the U.S. Mid Cap Equity Fund and one he recently sold:
Name three stocks you own today and why.
Amphenol Corp. APH-N, one of the world’s largest makers of electronic connectors, is a stock we bought for US$38 a share when we launched the U.S. mid-cap fund in September, 2021. With the electrification of the world, the need for connectors and various sensors has continued to increase, and Amphenol has seen organic growth in the high single digits over the past several years.
Management also supplements that growth with a disciplined and thoughtful mergers and acquisitions strategy, targeting mostly smaller companies. It has done a good job of adding value consistently with its acquisitions. It’s also a very strong operator. Its biggest growth area today is selling connectors to servers used for AI [artificial intelligence].
One risk for the stock is its higher valuation and any potential impact from tariffs, given that about 22 per cent of its annual sales are in China.
Interactive Brokers Group Inc. IBKR-Q is a stock we bought in January, 2024, at US$88 a share, and we bought more in October at US$150. We view this company as the world’s most innovative electronic brokerage. It consistently wins market share because of its robust platform and technical integration into more than 100 markets worldwide.
Its platform caters to more sophisticated traders. For example, it’s the largest platform for hedge funds under US$50-million. It has a lending business for margin traders that’s like a bank but not regulated like a bank. It also has the highest operating margins of any company in my portfolio, at more than 70 per cent. A prolonged market downturn and lower interest rates are risks for this company.
Resmed Inc. RMD-N is a stock we bought in December, 2023, at US$174 a share and again in February, 2024, at US$183. It’s a global leader in CPAP [continuous positive airway pressure] machines used for sleep apnea, with a 50 per cent market share. The company is expected to grow as more people are diagnosed with sleep apnea, particularly with the higher use of smartwatches that detect it.
The biggest risk is new weight-loss drugs and studies that show they may also reduce sleep apnea in some patients. If these drugs are effective enough, incidents of sleep apnea may decrease.
Name a stock you sold recently.
Ulta Beauty Inc. ULTA-Q, the largest specialty retailer of skincare and cosmetics in the U.S., is a stock we bought in October, 2023, at US$379 a share. We sold it in December, 2024, at US$395.
We bought it because it had a long and successful history of increasing market share and margins. When we bought it, the stock had started to come off after a large boom in cosmetic usage during the pandemic, when people wanted to look good on Zoom. We thought there was an opportunity to buy a strong compounder at a reasonable valuation.
We sold a year later because we realized that growth had continued to decelerate and, more importantly, there was increased competition – something we hadn’t seen as much of previously. Also, management said it wouldn’t open as many more stores. We decided to sell the stock and find better opportunities.
This interview has been edited and condensed.