Paul Carter, chief investment officer at Capstone Asset Management Inc. in Langley, B.C. Illustration by Joel KimmelThe Globe and Mail
Like many investors, money manager Paul Carter’s portfolio has done well this year amid the market runup. Still, higher stock valuations are making it harder, although he says not impossible, to find value.
“It’s great that stocks have gone up as much as they have, but we’re always looking for the next thing,” says Mr. Carter, chief investment officer at Capstone Asset Management Inc. in Langley, B.C. and lead manager of Capstone Canadian Equity Income Strategy fund.
“There are pockets of the market where you can find opportunities, and hopefully benefit from later this year, or going into 2026,” he says.
Mr. Carter describes himself as a contrarian investor who seeks inexpensive, “unloved” companies with a strong balance sheet and positive cash flow outlook.
“We’re taking advantage of that discovery effect,” says Mr. Carter, who oversees about $800-million in assets.
Capstone Canadian Equity Income Strategy has returned 23.7 per cent year-to-date and 25.8 per cent over the past year. Its annualized return since inception in November, 2022, is 19.8 per cent. The performance data are based on total returns, net of fees, as of Sept. 30.
The Globe spoke with Mr. Carter recently about what he’s been buying and selling:
Name three stocks you own today and why.
Power Corp. POW-T is a stock we started buying in October, 2024, at around $44 a share. Power is a diversified conglomerate with holdings across insurance and wealth management, including 69 per cent of Great-West Lifeco Inc. and 63 per cent of IGM Financial Inc.
About two-thirds of Power’s value comes from its stake in Great-West, which has been posting strong double-digit earnings growth recently, driven by its wealth and group benefits businesses.
At the current stock price, Power’s market cap roughly equals its Great-West stake, meaning as a shareholder, you’re effectively getting the other businesses for free.
The stock trades at about a 17-per-cent discount to its net asset value. While that discount has narrowed since we first bought the stock, we believe there’s still room for it to tighten further. Even if it doesn’t, Power will continue to benefit from the growth of its underlying businesses.
On top of that, Power pays a quarterly dividend that annualizes to 4.1 per cent, and it has increased the dividend each year over the past decade at an average rate of 7 per cent a year (9 per cent in 2025).
Martinrea International Inc. MRE-T, the Vaughan, Ont.-based auto parts manufacturer, is a stock we began buying in August, 2024, at $11 a share. It seemed like a good value at the time, and the risks of an upcoming Trump administration and tariffs were discounted in the stock price.
We saw longer-term upside through organic growth and acquisitions. We were admittedly a little early on Martinrea, as concerns about tariffs earlier this year pushed the stock down to about $6 a share in April, but that gave us the chance to buy more. The stock has since rebounded to our original purchase price.
In August, after a better-than-expected second-quarter report, executive chairman Rob Wildeboer remarked that ‘the tariff bite has not been nearly as bad as the tariff bark.’ With strong margins, solid free cash flow, a healthy balance sheet and an attractive valuation, we believe there’s plenty of upside remaining in the coming years.
We also like its strategic investment in NanoXplore Inc. GRA-T, [which makes graphene powder for use in transportation and industrial markets], which could be another tailwind that potentially could propel the stock price in the future.
B2Gold Corp. BTO-T, the Vancouver-based international gold producer, is a stock we’ve owned since 2023. We aren’t gold bugs by any means and are underweight gold stocks relatively to the index, but we like this one. It’s a low-cost gold producer that we believed was undervalued compared to its peers.
The stock is up by about 90 per cent year-to-date, but it has lagged peers in a gold bull market, partly due to political and operational issues in Mali, home to B2Gold’s largest mine.
In June, B2Gold poured its first gold at the Goose Mine in Nunavut – its first producing asset in Canada. We believe that mine will provide significant benefits to the company in terms of earnings growth in the second half of this year and into 2026 and 2027.
The company also pays a regular dividend, which not all gold companies of its size do, so that’s another reason we were excited about it.
Name a stock you sold recently.
Manulife Financial Corp. MFC-T is a stock we sold in the fourth quarter of last year after owning it for a couple of years. The stock climbed 88 per cent over the time we owned it, and our total return (including dividends) was 101 per cent.
When we bought it in 2022, it was trading at a significant discount relative to other Canadian life insurers, including Great-West, Power, Sun Life, and iA Financial. Throughout 2024, the stock had a strong run, with its forward price-earnings ratio rising from under 7 times to 10.5 times, despite earnings growth of around 12 per cent.
This peer-relative multiple expansion was exactly what we had anticipated when we bought the stock, so after this played out, we felt there were better opportunities to redeploy the capital.
We would’ve been happy to sort of hold it over the long run. We don’t think that anything fundamentally changed for the worse at the company, but we used the capital to acquire Power instead.
This interview has been edited and condensed.