Rebecca Teltscher, portfolio manager at Newhaven Asset Management Inc. in Toronto. Illustration by Joel KimmelThe Globe and Mail
Money manager Rebecca Teltscher has advice for investors on how to respond when markets are extremely volatile, as they’ve been this week: Be patient and do nothing.
“The advice goes both ways: Don’t panic and sell everything, because you think stocks could go to zero. And don’t buy the dip on the first day the market is down,” says Ms. Teltscher, portfolio manager at Newhaven Asset Management Inc. in Toronto, who co-manages about $250-million of the firm’s $465-million in assets alongside chief executive officer and portfolio manager Ryan Bushell.
Despite the recent selloff, Ms. Teltscher says market valuations remain elevated across many sectors, and the latest geopolitical tensions are far from over.
Her firm has followed the same advice, standing pat on its portfolio of largely Canadian dividend-paying stocks in what it believes are more defensive sectors such as utilities, pipelines, banks and infrastructure.
“All the stocks we own can withstand volatility,” she says. “We’re going to sleep at night knowing that everything we own is going to be okay at the end of this because we own companies that can thrive in every part of the economic cycle.”
Her team’s portfolio has returned 9.8 per cent year-to-date and 31 per cent over the past 12 months, as of Feb. 28. Its three- and five-year annualized returns were 18.1 per cent and 14.6 per cent, respectively. The performance is based on total returns, net of fees.
The Globe spoke with Ms. Teltscher recently about what she’s been buying and selling:
Name three stocks you’ve been buying.
ARC Resources Ltd. ARX-T, the Calgary-based oil and gas company, is a stock we’ve held since 2019. We bought the bulk of it in 2020 and added to it in early February, when the stock dropped by about 10 per cent, to about $23 a share, after its latest earnings report.
The company said it would intentionally slow the development of its Attachie project to optimize the well design. It also removed the project’s 2026 production guidance. This led three banks to downgrade the stock, and the shares took a dive.
We believe management is doing the right thing to get the project right before they deploy more capital to it. Where the market is impatient and doesn’t want to wait for results, we’re happy to be patient.
We know this asset has value and, in the meantime, the rest of its production is fine. As long as the investment thesis on the overall name is intact, which we believe it is, this is a buying opportunity for us. We have a longer-term time horizon.
K-Bro Linen Inc. KBL-T, the Edmonton-based commercial laundry company, is a stock we’ve held since 2022 and have been buying more of for less than $36 a share throughout last year and in January and February this year.
The stock has been fairly flat over the past few years, but we believe the market is undervaluing it. About half of K-Bro’s business is health care, which is more recession-proof. Also, last year, the company made what it described as a ‘transformational’ acquisition of U.K-based Star Mayan Ltd.
K-Bro has a very competent, conservative, all-female C-suite team, which we believe has been downplaying the potential results of this acquisition.
We expect the upcoming earnings to be good, which could be a catalyst for the stock. In the meantime, it has been a very consistent dividend-payer, yielding about 3.3 per cent.
Telus Corp. T-T, the Vancouver-based telecommunications company, is a stock we have held since early 2018 and have been buying recently for clients for less than $20 a share.
Telecom has been our worst-performing sector for a few years now, but the market is starting to shift back toward more capital-intensive companies, especially given the growing need for communication towers.
In Canada, there are no competitors coming in to build the same infrastructure as Telus, BCE Inc. BCE-T or Rogers Communications Inc. RCI-B-T. To me, these hard assets are valuable and irreplaceable.
Telus is the structural leader in the space. Last year, it was the first – and so far the only – telco to sell off a portion of its towers. Telus may also start selling real estate and some of its health assets. So, it has a lot of flexibility. It’s also further ahead with its fibre-to-home capital deployment, so it should be able to reduce its debt levels faster.
The stock has been down since the announcement that Victor Dodig from Canadian Imperial Bank of Commerce CM-T would take over, raising concerns among some investors that he may cut the dividend.
[In December, the company said it was pausing dividend increases until it believes its share price reflects its growth prospects.]
I wouldn’t be surprised if it cut the dividend – although I hope it doesn’t. If it does, it would likely still yield about 5 per cent to maintain investors. It goes back to markets being impatient; we’re not.
Name a stock you’ve sold or trimmed:
Aecon Group Inc. ARE-T is a stock we’ve been trimming since it surpassed $30 a share in December last year. Our average cost basis for Aecon is $16, and for some clients, we initially purchased the stock below $10 in 2022.
The company faced some challenges because of legacy fixed-price contracts, resulting in a period of underperformance and creating an attractive buying opportunity. During this time, we bought shares at favourable prices and collected dividends as we patiently awaited the stock’s recovery.
Over the subsequent years, Aecon’s backlog reached record levels, supported by robust government infrastructure spending, increasing demand in the power sector, nuclear refurbishments and expansion into the U.S. As a result, the company’s outlook has significantly improved.
While we remain positive about Aecon’s prospects and continue to hold the stock, we recognize its cyclical nature. As a result, we’ve opted to trim our position in client portfolios where the stock has more than doubled.
This interview has been edited and condensed.