Paul Carter, chief investment officer at Langley, B.C.-based Capstone Asset Management Inc. Illustration by Joel KimmelThe Globe and Mail
Like many investors these days, money manager Paul Carter believes stock market valuations are pretty expensive, but he still sees good value in a handful of Canadian companies.
“This is an environment in which, if you own good Canadian businesses and pay reasonable prices for them – and then wait for the market to recognize their value – you should be well positioned for the long term,” says Mr. Carter, chief investment officer at Langley, B.C.-based Capstone Asset Management Inc., which oversees about $700-million in assets. He’s also lead manager of Capstone’s Canadian equity accounts.
Although U.S. tariffs remain a risk for some Canadian companies, Mr. Carter says many are benefiting from increased spending in areas such as infrastructure and defence and in resources such as energy and critical minerals.
He says his “dividend-income focused, value-oriented” investing style is guided by Capstone’s Christian principles. For example, his team doesn’t invest in alcohol, gaming, tobacco or adult entertainment stocks and looks for companies with “responsible business practices.”
Capstone’s Canadian equity composite – which he says represents a group of Canadian equity accounts rather than a single fund – returned 16.9 per cent year-to-date, while its one-year return was 23.7 per cent. Its annualized three-year return is 26.9 per cent. Since inception on Nov. 1, 2022, the annualized return is 22.3 per cent. Performance is as of Sept. 30 and is based on total returns, gross of fees. The standard fee is 1.5 per cent.
As of Sept. 30, his firm’s top five Canadian holdings were B2Gold Corp. (BTO-T), Bank of Nova Scotia (BNS-T), Power Corp. of Canada (POW-T), Canadian Natural Resources Ltd. (CNQ-T) and OpenText Corp. (OTEX-T). His three largest sector weights were financials, at 29 per cent, energy, at 17 per cent, and industrials, at 11 per cent.
The Globe spoke with Mr. Carter about three Canadian stocks he bought recently and one he sold:
Name three stocks you’ve been buying recently.
Premium Brands Holdings Corp. (PBH-T), the Richmond, B.C.-based specialty foods company, is a stock we started buying in March. We believe it has a good underlying business, with more than 100 brands across categories such as meat, seafood, baked goods and prepared foods.
The stock has been held back by some near-term issues, such as higher beef costs, weaker lobster volumes and the costs of integrating some of its recent acquisitions. Still, we like the business’s long-term economics, particularly its ability to grow both organically and through acquisitions.
We believe the company is currently trading below its underlying value and that now is a good time to buy the stock. We think investors could see a very good return over the next several years.
Pet Valu Holdings Ltd. (PET-T), a leading Canadian specialty pet retailer, is a stock we started buying in July after it had fallen substantially. I thought the market was becoming too pessimistic about a very good business.
Although same-store sales have been soft, the company is still growing revenue, EBITDA and earnings, generating strong free cash flow and opening new stores.
It also has a strong loyalty program and much of what it sells is driven by recurring consumer demand. Even when the economy gets tough, people aren’t going to stop feeding their pets.
So, although it’s not growing at the same rate it has in the past, we think it’s a stable business. At current levels, we believe we’re paying a modest price for a high-quality business with several ways to grow in the coming years.
Intact Financial Corp. (IFC-T), the Toronto-based property and casualty insurance company, is a stock we bought in August. The shares came under pressure after its second-quarter results were hurt by higher catastrophe and large losses.
Intact also recently estimated approximately $660-million of catastrophe losses for its third quarter, net of reinsurance, reflecting severe weather events including flooding, wind damage and wildfires. Still, we don’t believe the business economics have changed.
Intact has an exceptional underwriting franchise, a strong balance sheet and significant opportunities to reinvest capital. While the stock is still under pressure, especially as bond yields have gone up, our process isn’t about trying to pick the exact bottom.
We’re willing to buy a very good business when we believe the market is overemphasizing short-term earnings volatility and we still think long-term earnings power remains. We saw an opportunity to buy it at an attractive valuation and a good entry point for longer-term shareholder growth.
Name one stock you sold recently.
National Bank of Canada (NA-T) is a stock we sold in August to buy Intact. For background, we bought Canadian Western Bank (CWB) in 2022, when the stock was out of favour. Then, National Bank bought CWB in early 2025 in a share-for-share transaction. We decided to hold the investment as National Bank realized the synergies of buying CWB. We then sold National Bank shares at more than $200 each, more than quadrupling our investment over about four years.
We sold when we did because we’d been getting a little concerned for a while about overall bank stock valuations. Also, National Bank isn’t one of Canada’s top five banks. We hold Bank of Nova Scotia and Royal Bank of Canada (RY-T), so we’ve narrowed it down to two Canadian banks from three.
This interview has been edited and condensed.