Jordan Zinberg, chief executive officer at Toronto-based Bedford Park Capital Corp.The Globe and Mail
For small-cap money manager Jordan Zinberg, April’s market sell-off and subsequent rebound underscore his belief in buying good companies and holding them for longer periods.
Mr. Zinberg, chief executive officer at Toronto-based Bedford Park Capital Corp., also thinks there’s more upside for many of the higher-quality companies in his investment universe trading at reasonable valuations.
“Despite the recent strength we’ve seen in the market, a lot of the companies that we look at in the small- and mid-cap space are still performing well operationally, but they’re trading at single-digit [price-to-earning] multiples,” says Mr. Zinberg, who’s also portfolio manager of the $110-million Bedford Park Opportunities Fund.
His team looks for profitable smaller-cap companies with the potential to grow their earnings, and then increases its position steadily before larger funds take notice and potentially drive up valuations.
“That lack of attention in the market can create inefficiencies and valuation dislocation among small and mid-sized companies relative to larger companies – and that’s where the opportunity is for investors like us,” he says.
The fund, which holds 18 stocks, has returned 12.6 per cent in the past 12 months. Its three-year annualized return is 19.4 per cent and its five-year annualized return is 21.6 per cent. The performance numbers are based on total returns, net of fees and expenses, as of May 31.
The fund’s top three holdings include consumer lender Goeasy Ltd. GSY-T, financial technology company Propel Holdings Inc. PRL-T, and frac sand producer and distributor Source Energy Services Ltd. SHLE-T
The Globe spoke with Mr. Zinberg recently about what he has been buying and selling:
Name three stocks you own today and why.
Propel Holdings Inc. PRL-T, the Toronto-based fintech, is one of our largest holdings today. We’ve owned it since it went public in 2021 at $9.75 a share. The stock has done extremely well since then, trading as high as $43 earlier this year. We recently added to the position when it fell to $22 during the April sell-off.
Propel provides customers in North America and the U.K. with fast access to instalment loans and lines of credit. It has one of the highest and most consistent growth profiles of any company we own or follow. We believe the company offers investors a combination of impressive top- and bottom-line growth, while still trading at a very reasonable multiple. On top of that, the company pays a small but fast-growing dividend, which it has raised multiple times over the past few years.
We also like the fact that management owns close to half the company. We believe it will become a $100 stock within three to five years. The biggest risk for lending businesses such as this one is regulatory changes that can impact margins.
McCoy Global Inc. MCB-T, the Edmonton-based energy services company, is a stock we bought for $1.99 a share in September, 2024. It has more than doubled since. We recently added to our position at just less than $4.
McCoy has customers in more than 50 countries. It provides equipment and technologies for tubular running services [pipes in oil and gas well construction] that help improve worker safety and reduce costs. The company has seen strong growth and is very profitable. One of the things I like about it is its pristine balance sheet; it’s in a net cash position with no debt. It’s a well-managed business. It also has a small but growing recurring revenue component, which is relatively unique for an energy services company.
Insiders own more than 40 per cent of the company. The stock has doubled since September, which means there’s increased investor awareness. The risk for this company would be a downturn in the energy sector, reducing demand for its products and services.
Tornado Infrastructure Equipment Ltd. TGH-T, the Calgary-based company that designs and manufactures vacuum trucks, is a stock we bought in May for $1.40 a share. It uses high-pressure water to access critical infrastructure for repair and installation. Examples include environmental storm response, pipelines, utility corridors and fibre optic lines.
The company is growing fast. It recently announced an acquisition of Custom Vacuum Services Ltd., which will help it expand its product offering and customer base and give it substantial cost synergies. We started with a small position and plan to add to it over time if the company keeps executing the way it has.
The company also has a strong insider ownership of more than 40 per cent. The biggest risk for this company is future competition.
Name a stock you sold recently.
Sylogist Ltd. SYZ-T, which provides software-as-a-service to public sector companies, is a stock we sold in early June. It’s a high-margin business with a sticky customer base, but we sold it because it isn’t growing as fast as we expected. The past few quarters have been disappointing, and the stock has been relatively flat.
It’s not a case where we sold it because of a huge problem in the business; it’s simply because we feel our capital would be better allocated elsewhere. We bought it just more than a year ago at around $8 a share and sold it in the low- to mid-$9 range.
This interview has been edited and condensed