Paul Harris, partner and portfolio manager at Toronto-based Harris Douglas Asset Management Inc.The Globe and Mail
For money manager Paul Harris, investing is akin to meditation, especially when markets are as volatile as they’ve been lately.
“When you meditate, you’re supposed to let things happen and not react. It’s the same kind of philosophy I have with investing, which is to just absorb what’s happening, because often it’s only short-term,” says Mr. Harris, a partner and portfolio manager at Toronto-based Harris Douglas Asset Management Inc.
He prefers to buy companies with strong operating margins and return on capital, and hold them for years – including through market downturns – to benefit from compounding returns.
“We don’t worry about quarterly earnings results, but instead look at the business on an ongoing basis,” says Mr. Harris, who oversees about $180-million in assets.
His Harris Douglas Equity Portfolio has returned 3.4 per cent over the past year, as of Aug. 11. Its three-year and five-year annualized returns were 10.6 per cent and 10.7 per cent, respectively. The performance is based on total returns, net of fees.
The Globe spoke with Mr. Harris recently about what he’s been buying and selling:
Name three stocks you bought recently.
Meta Platforms Inc. META-Q, the parent of Facebook and Instagram, is a stock we bought last month. We owned it before, from 2020 to 2022, and did well on it.
Meta is a strong player in social media, even with the rise of competitors such as TikTok. On the AI side, it benefits from using technology to influence users into making purchases. It’s driving higher rates of return, and more quickly than other companies. For instance, Microsoft Corp MSFT-Q is benefiting from AI but it takes longer for it to realize the returns because it’s dealing with other companies.
There’s a risk that CEO Mark Zuckerberg may overspend in areas, similar to the metaverse, but we believe the investment in AI mitigates this risk.
Nvidia Corp. NVDA-Q, the giant chipmaker, is a stock we bought earlier this year when it and other AI stocks dropped following the launch of China-based DeepSeek.
What we think is good about Nvidia is that none of its competitors are even coming close to what it’s doing with its technology, at least not for now. What’s more, the company is not slowing down on research and development spending to keep up its momentum. It’s also another company that makes money from AI right away.
The biggest risk for the company is if clients such as Microsoft, Amazon.com Inc. AMZN-Q and Alphabet Inc. GOOG-Q cut back on capital expenditures that include Nvidia’s chips, but we see that as a minor risk. There’s also a risk of Nvidia losing business in China. However, we don’t see that as a near-term threat given the recent deal with the Trump administration.
We didn’t own Nvidia previously. We did some extensive research on the stock, but it was a time when the semi-conductor sector was falling and I thought I could buy the stock cheaper and missed it.
TD Bank TD-T is a stock we’ve owned since 2018 and have been adding more of recently. The bank is going through a big transition this year (following a $3-billion settlement with U.S. regulators over anti-money laundering violations, which includes restrictions on its U.S. growth).
TD has new management that’s working on restructuring its balance sheet, driving better rates of return and using technology to improve its risk management. We believe all of this will force the company to be better, and that now is a great time to own the company while it works on regaining its premium multiple. The stock has done well recently and I think it will continue to do well going forward.
Name a stock you recently trimmed or sold.
BCE Inc. BCE-T, the Canadian media and telecom company, is a stock we sold in January after owning it for about four years. The dividend was good, but we felt that its management was doing a poor job by not cutting it sooner. (The dividend was cut in May.)
It has a lot of capital expenditures but not a lot of growth. In my view, it should exit its media business and stick to being a telecom player. However, it’s not easy to sell media assets these days.
I also don’t think 5G is taking off as quickly as many expected. The regulatory environment in Canada is also tough for telecom companies, and the push to provide service in more rural towns is costly and doesn’t come with very high rates of return. We put the proceeds into Nvidia and Meta.
This interview has been edited and condensed.
Editor’s note: A previous version of this article stated that Mr. Harris managed $200-million in assets, but that figure was reduced to eliminate assets from the firm’s pooled fund that the source had double counted.