Rebecca Teltscher, portfolio manager at Newhaven Asset Management Inc. in Toronto.The Globe and Mail
As a millennial money manager, Rebecca Teltscher is all too familiar with the advice provided to her peers about taking on more market risk when you’re younger and reducing it as you age. But she’s not buying it.
“Younger investors benefit from the length of time they can compound a steady return with the added benefit of being able to withstand volatility,” says Ms. Teltscher, portfolio manager at Newhaven Asset Management Inc. in Toronto, who co-manages about $160-million of the firm’s $332-million in assets alongside president and portfolio manager Ryan Bushell. Her firm’s investment philosophy focuses on capital preservation and producing a steady stream of dividend income that can be reinvested and compounded over time.
“In our view, a steady compounding strategy is the best risk-adjusted strategy for investors of any age,” she adds. “The concept of steady compounding is extremely powerful and, unfortunately, it’s underappreciated by many investors, especially with how certain areas of the market have performed recently.”
While her firm’s portfolios are weighted heavily toward equities, she says the team controls risk by choosing companies with sustainable business models that can withstand economic downturns and produce reliable cash flows for decades.
“We buy companies, not stocks,” she says. “We focus on long-term structural trends, which often present opportunities given we have a different perspective relative to average market participants with ever-decreasing time frames. We feel that patience is an underutilized investment skill these days.”
While market valuations are high after two years of strong returns, Ms. Teltscher still sees opportunities to purchase quality companies in Canada at reasonable prices, focusing on sectors such as utilities, infrastructure, energy, financial services and telecommunications.
Her portfolio returned 18.43 per cent in 2024. Its three-year and five-year annualized returns were 7.12 per cent and 8.42 per cent, respectively. The performance is based on total returns, net of fees, as of Dec. 31.
The Globe and Mail spoke with Ms. Teltscher recently about three stocks she likes right now and one she’s been trimming selectively:
Name three stocks you own and recommend to investors.
Canadian Natural Resources Ltd. CNQ-T is a stock we’ve owned since 2018 and continue to buy for new clients. CNQ is the largest crude oil producer in Canada and the second-largest natural gas producer, with an approximately 60-per-cent oil and 40-per-cent gas production mix. We view it as a Canadian success story with one of the strongest management teams in the world that manages to keep costs low, maintain premium low-decline assets [that produce oil reliably over a long period] and make accretive long-term acquisitions at extremely attractive prices.
Following the acquisition of Chevron Canada Ltd.’s Western Canadian assets at the end of 2024, the company refreshed its shareholder returns framework in which 60 per cent of free cash flow (FCF) will be allocated to shareholder returns once debt falls below $15-billion. Once debt falls below $12-billion, 100 per cent of FCF will be allocated to shareholder returns via dividend increases and share buybacks.
Over the past six months, the stock has dropped 10 per cent as investor sentiment shifted away from energy stocks. We view this as an attractive entry point for clients looking to initiate or add to an existing position in a stellar long-term compounder that has increased its dividend each year for the past 25 years.
Northland Power Inc. NPI-T is a stock I’ve owned for my clients dating back to 2015 at a previous firm. At the time, it was a small Canadian power producer in the process of building two offshore wind farms in Europe backed by long-term contracts at extremely good prices. The stock yielded 6 per cent, and investor sentiment was negative as the payout ratio was above 100 per cent for a couple of years while the projects were under construction.
This is where having a long-term view can pay off. It was clear cash flow would increase dramatically once the projects were operating, so we took an initial position and waited. The projects were completed ahead of schedule and under budget as Northland Power had prudently built-in time and cost buffers in their project costs. Positive sentiment returned, and the stock price performed exceptionally well for a few years.
Fast forward to 2023, and the company is in a similar predicament: It currently has three large projects under construction, all tracking on time and on budget. Once complete in 2027, they will add $600-million in adjusted EBITDA [earnings before interest, taxes, depreciation and amortization] annually.
Investor sentiment for renewables has weakened recently, and Northland Power has particularly struggled with some management changes. However, the power demand has only continued to increase. Northland Power continues to demonstrate its capability to build renewable energy solutions in jurisdictions that demand them.
Savaria Corp. SIS-T is a stock we’ve owned since June, 2020. It’s a North American leader in the accessibility industry benefiting from aging demographics, a shortage of health care workers and a desire to live at home as long as possible. The accessibility business segment includes stairlifts, elevators and wheelchair lifts, while its patient-care segment includes items such as beds, mattresses and slings.
The stock had performed exceptionally well for most of 2024 as management delivered revenue growth and solid margin expansion. However, the stock has dropped more than 10 per cent in the past month amid tariff concerns. Savaria generates almost half of its revenue in the U.S., and its production facilities are located in North America, Europe and China. While the concern surrounding Savaria’s exposure to potential tariffs is valid, we believe the stock price reaction is overblown. Savaria’s products have been exempt from tariffs in the past, given that the U.S. Food and Drug Administration regulates them.
Name one stock you’ve sold recently and why.
We haven’t completely sold out of a name in more than two years. We have a rigorous selection process for new securities meant to find compounders we can own for clients for many years if not decades. That said, if a client is withdrawing cash or rebalancing for a specific need, we’ve been trimming Manulife Financial Corp. MFC-T.
We still own the name for all our clients and are happy to continue to own it. After a few years of lacklustre returns, our patience paid off, as the stock appreciated over 50 per cent last year. The decision to trim comes from a positive place as some of our clients’ positions have grown so large that trimming is prudent to avoid single issuer exposure. We are comfortable trimming any overweight positions back to their target weight should clients require extra cash in their accounts.
This interview has been edited and condensed.