FOCUS 2026: Value in focus: Opportunities in volatile markets – Dan Dupont

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Subtitles are AI Generated

 

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All right, back at Nashville.

 

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First time.

 

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First time, yeah.

 

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First time too. I hope everyone's enjoying themselves and

 

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thank you to everyone joining us online for being with us

 

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today. We had the pleasure of talking just a

 

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few weeks ago actually in Vancouver, had a great

 

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discussion. Looking forward to picking up and picking your

 

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brain a little bit more as to where we left off.

 

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Just a level set for everyone tuning in,

 

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let's talk about where we're at in the current

 

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market cycle There's so much happening.

 

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There's yields moving higher,

 

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trade uncertainty is still in the thick of it, inflation

 

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seems to be persistent.

 

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Give us your thoughts, the current market environment,

 

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let's set the tone.

 

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Let's do that. Thanks for showing up, thanks to everyone

 

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watching as well.

 

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I always come up with little tidbits that

 

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make me think this is a sign of this and that that I like

 

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to bring up to people. I may or may not have talked about

 

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the fact that Google issued a 100-year

 

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bond earlier this year which is very unusual.

 

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The last 100-year bond we had from a corporate was in

 

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1997 from Motorola.

 

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It was a few months before Nokia came out with their

 

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5510, that little brick that was indestructible.

 

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Sometimes when you have these events they tell you that

 

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maybe we're definitely not at the bottom.

 

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I cannot be the only one that heard earlier about a jam

 

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session and thought, oh my God, are we getting closer to

 

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the top? We're actually going to play music at an

 

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investment event but we'll see.

 

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Where we are, we've talked about AI a lot today already,

 

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we're gonna talk about AI even more tomorrow.

 

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We have a lot of great people coming on stage.

 

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Will is gonna be there, definitely gonna be watching that

 

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closely myself.

 

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Evan's gonna be on stage which is a phenomenal analyst,

 

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he's gonna very helpful.

 

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I get a lot on my understanding of AI from

 

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Evan, honestly.

 

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So maybe talk more about the way I view the world

 

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from my investment portfolios, how it's evolved

 

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over the last few quarters.

 

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We started the year, I had about 30% liquidity

 

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in my big funds.

 

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Didn't find a lot of areas that were interesting

 

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either in the US or abroad.

 

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The same old themes for me were still true, tobacco,

 

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staples, but I had difficulty finding new

 

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areas to deploy capital.

 

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Then slowly but surely software started to

 

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be a little more interesting and the whole stress around

 

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the AI impact to software became bigger and bigger and

 

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bigger. I think we were fairly decently

 

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patient about it and we deployed a lot of capital there.

 

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In the Canadian funds you'll see a lot a Constellation

 

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that's been bought in Q1.

 

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You'll see a lot more OpenText

that's showing up in the holdings.

 

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Software has been an interesting area for me to invest this

 

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year. We're still somewhat deployed

 

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there.

 

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I think the big, big theme for me is the K-shaped

 

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economy and the impact that interest rates have

 

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on on valuations

 

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generally across the board.

 

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We've seen long rates keep going up

 

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so that's one side of the equation.

 

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The other side is the K-shaped economy which has

 

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been quite dramatic. The

 

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really top, top end of the market has a lot of

 

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wealth. We know that the top 1% owns,

 

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in the US, 50% of stocks and ETFs.

 

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The bottom 50 owns 1%.

 

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I remember you bringing this up in Vancouver.

 

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It's a staggering statistic in the sense of just that

 

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inequity happening that we're seeing in that economy shift.

 

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That's why the profitability of a lot of corporations has

 

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been concentrated in companies that will cater to people

 

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who have way more money, or to the

 

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corporate sector now because of the AI infrastructure

 

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build which has been massive.

 

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We've seen a lot of the changes in composition

 

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of the indices in the last few quarters get to a

 

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point where, in my view, the S&P

 

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500 is starting to resemble Canada a little bit.

 

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We've said for years that the Canadian economy is not the

 

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stock market, and I think it's becoming more and more true

 

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in the US.

 

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For my process of low downside

 

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I am forced in areas where there's been a lot of pressure

 

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on valuations and margins and

 

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the business itself has been really tough.

 

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The K-shaped economy has been going on for years now.

 

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With rates actually going up I think a lot of

 

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investors have started just giving up on valuations, just

 

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thinking, you know what, these rates are just not going to

 

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go down, whereas a year ago if you were anything

 

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related to interest rate sensitive sectors that

 

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were kind of cyclical people wanted to be patient,

 

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keep the valuation decent because at some point the rates

 

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are going to go down.  They haven't and now those

 

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valuations have been crushed.

 

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A lot of securities have been going down 20, 30,

 

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40, 50% year-to-date and that's

 

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where I've tried to be patient because I know myself, I

 

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invest way too quickly.

 

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I get excited too quickly about valuation.

 

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After 15 years I'm getting better.

 

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I'm not as good as I want to be but I'm getting better.

 

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I think some of these stocks are actually getting to

 

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points that are really, really interesting.

 

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We'll move around and we'll talk about the different

 

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sectors that you're invested in but let's talk about the

 

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consumer.

 

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Higher rates, weaker consumer demand.

 

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It's really taking a hit on the housing related industry,

 

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consumer dependent type businesses.

 

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Peel that back and is there any areas of opportunity

 

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because of that? What are you seeing related to that?

 

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I think investors in my funds could have seen

 

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a hint of my start to go in that direction a

 

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few quarters ago when I bought West Fraser Timber.

 

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Lumber has been very depressed because US housing

 

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has been sputtering.

 

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New houses built has been depressed for

 

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quite a while now.

 

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The housing market itself is not doing great.

 

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That was kind of the first phase of going into those

 

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types of sectors.

 

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West Fraser is a good example, great balance sheet, they

 

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made a lot of money during COVID because everybody needed

 

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to buy a house and do some renovations.

 

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There's a lot of money around.

 

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They've been smart, kept that money, did not make any

 

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acquisitions. Mills are being closed.

 

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Lumber is really, really depressed right now.

 

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What people don't realize, I think, is that once this turns

 

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even so marginally

 

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because there's no capacity a little bit of increase in

 

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demand is going to crunch supply quite

 

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decently. I think prices are going to go up more than

 

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people think in that particular sector.

 

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We move on to, let's say, housing.

 

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Like I said, home building stocks were holding in

 

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because people thought, well, at some point rates are going

 

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to go down. Eventually they just kept going up

 

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and now mortgage rates are just unaffordable to anybody

 

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in the US so people have just given up.

 

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That's a sector that's starting to look interesting.

 

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Around it, companies are building pools

 

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or equipment for things like

 

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pools or outdoor stuff for your house or

 

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furniture, everything around that has been really,

 

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really depressed.

 

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Now the stocks have actually started to really show

 

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and mirror that really depressed

 

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end market in their business.

 

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So that catches your eye.

 

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That does catch my eye. I can't discuss names but I would

 

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say I'm certainly starting to put some

 

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dollars to work there. It also is ...

 

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it goes all the way to small purchases that

 

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people do for their own pleasure.

 

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Again, it doesn't really show that much in

 

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the S&P index because it's really concentrated in

 

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everything AI but when you go down the bottom some stocks

 

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are down 40, 50, 60%. Sneakers

 

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is a great example. There's three, four companies there

 

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that everybody knows, they've been hit really, really

 

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badly. It can't be across the board.

 

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There's gotta be something fundamental there and the thing

 

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that's fundamental is just people are crunched for cash.

 

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I mean, there's a grocery company that

 

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missed earnings, pre-announced a quarter a few weeks ago.

 

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Things are really, really tough if you're in the bottom 50.

 

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I was going to say, if you're in that bottom 50%, like

 

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you've talked about, what needs to happen for that consumer

 

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to get better?

 

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Well, I think the stock market tries to anticipate things a

 

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little ahead of time. I think one of the things that we

 

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need to see, and I don't know what the catalyst for that

 

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would have to be, but if ever rates stabilize

 

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and come down.

 

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I think a lot of people think, well, if rates go down

 

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the whole market's going to go up. Well, it depends why

 

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they go down. If at some point, whatever's happening

 

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in AI, and we can touch on it a little bit, creates

 

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this uncertainty

 

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and this variability and unpredictability and/or

 

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softness and spreads expand

 

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in credit then we could see government bond yields go down

 

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a little bit. I can tell you that a lot of these companies

 

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that have been very very depressed would probably

 

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revalue up quite significantly.

 

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I'm getting fairly

 

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bullish there on those companies.

 

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On the flip side, if we want to spend a minute on what the

 

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catalyst would be, I mean, we are in a giant

 

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investment cycle.

 

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We know that S&P 500 companies are spending over 2%

 

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of GDP right now in capital expenditures.

 

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That's been topped only once which was one

 

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quarter during the 2000 bubble.

 

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We didn't go through that during ...

 

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I mean, '07 was an investment cycle that was pretty small,

 

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actually. It was there but it was pretty small.

 

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The other big one was the shale CapEx

 

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cycle. Again, in those

 

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previous times we saw a continuation

 

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of the CapEx as stocks and the economy

 

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started to roll over.

 

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It was such a big amount of money that was being sent into

 

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one direction that eventually the market anticipated in the

 

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credit cycle, the credit markets started to anticipate that

 

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there was a little bit of over

 

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exaggeration in that spending.

 

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We'll see if it happens this time again.

 

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The previous times we didn't need a CapEx turn

 

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for the market to really start to slow down.

 

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You've talked about in the past just that extreme number

 

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that we're seeing on the CapEx spend, specifically in AI.

 

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It's continuing to push your

 

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energy into other areas, other sectors.

 

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Let's talk about that. You had mentioned software before,

 

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I think one of the key differentiators of how you manage

 

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your portfolio is your ability to move really large

 

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sums of capital and liquidity in a very,

 

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very timely manner.

 

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Can you just give us an example of ...

 

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maybe it was the software trade recently that we had

 

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but just to maybe set the stage for our audience and for

 

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all of our advisors watching today, you know, what does

 

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that mean and what's the magnitude of that?

 

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'Cause it is quite unique to your style.

 

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It is and it's a part of the process that I've

 

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evolved slowly but surely as the pot of

 

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money has gotten bigger. Canadian Large Cap and the

 

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funds that are around it, and now everything that I touch

 

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really comes under this umbrella.

 

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We can use this amount of capital to

 

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create liquidity for the market.

 

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We've become a liquidity provider. Large Cap specifically

 

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is the lowest cost of trading fund

 

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of any fund in the platform.

 

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One of the reasons, I guess one of the main reasons, is

 

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that we get approached with offers

 

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to buy our shares or offers to sell shares to

 

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us.

 

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It doesn't seem like a big deal but when you're

 

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trading a stock that has a decent bid-ask spread,

 

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well, you're always buying on the bid or even lower.

 

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Sometimes the block is so big that somebody needs to sell.

 

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Sometimes I just need

 

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to call the analyst for 30 seconds because sometimes I

 

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haven't looked at the company in a few months.

 

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The whole support

 

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team, the analysts around the world, all the other PMs,

 

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everything that we do all day long, every week, every

 

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month, meeting companies that travel the world and keeping

 

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up to date comes to these very important moments

 

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where somebody approaches us with a block like that.

 

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All kinds of blocks that we get offered.

 

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Constellation software earlier this year, I've talked about

 

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this before.

 

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It was phenomenal because it's a very low liquidity stock.

 

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It's a really large market cap.

 

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A lot of investors that owned a lot of shares didn't

 

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remember that it was not a highly liquid company because

 

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it had been doing so well for so long and then everybody

 

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wanted out at the same time.

 

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I just waited and waited and waited.

 

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At some point when I got calls I would say no and

 

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no and no and eventually it got

to a price that I found interesting.

 

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We sat there, and we just need to draw the

 

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line in the sand to have the conviction to do it.

 

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That's the tough part.

 

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You need the liquidity, like you said.

 

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So I do sit in arbitrage and cash...

 

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I was going to say, let's talk about how you generate that

 

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liquidity  because merger arbitrage is a big piece of how

 

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you manage as well.

 

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A lot of key components here.

 

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It is. Arbitrage is simple for those

 

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who don't really know what it is. It's a company being

 

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acquired. Everybody knows it, it's happening.

 

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When is it gonna close and what are the conditions for it

 

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to close? Maybe something happens and it doesn't

 

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get acquired in the end. If there's financing financing

 

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conditions left, maybe a regulator needs to approve

 

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the deal. A really well-known one in Canada would be

 

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Laurentian Bank right now.

 

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Everything has been approved.

 

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And so where are you currently positioned in the portfolios

 

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in terms of your

 

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merger arbitrage exposure?

 

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Are you fairly heavily [crosstalk]?

 

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I started the year at 30 in liquidity, mostly

 

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arbitrage. We went down to 10 for a few weeks

 

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there where there was a lot of opportunity mostly in

 

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software and then we pulled it back up to like 22, 23

 

13:51.897 --> 13:53.632

and now it's coming back down.

 

13:53.632 --> 13:56.735

Those moves are basically me getting out

 

13:56.735 --> 13:59.972

of arbitrage and then getting back in.

 

13:59.972 --> 14:02.942

Sometimes there's smaller deals that we have to deal

 

14:02.942 --> 14:04.677

with. I'm usually fairly well diversified.

 

14:04.677 --> 14:07.680

There's 20, 25 of them so don't be too stressed out

 

14:07.680 --> 14:10.282

about if one eventually doesn't close.

 

14:10.282 --> 14:11.517

That was going to lead into my next question.

 

14:11.517 --> 14:14.520

At the beginning of the year you were extremely

 

14:14.520 --> 14:16.822

defensive in your positioning.

 

14:16.822 --> 14:19.024

When we were just chatting before this you were saying you

 

14:19.024 --> 14:21.627

know things could be moving in flux in the sense of is your

 

14:21.627 --> 14:24.730

appetite maybe shifting in terms of finding

 

14:24.730 --> 14:27.466

more exciting opportunities to be deploying this cash in.

 

14:27.466 --> 14:29.034

Talk to us about that.

 

14:29.034 --> 14:32.638

You always have to be pushing and looking for new ideas.

 

14:32.638 --> 14:34.974

It's okay to look at your portfolio and, you know, oh, my

 

14:34.974 --> 14:37.877

God, the market's expensive let's be defensive.

 

14:37.877 --> 14:39.678

You'll see Will on stage tomorrow.

 

14:39.678 --> 14:42.648

Will's been a big inspiration for me and

 

14:42.648 --> 14:44.016

Joel Tillinghast as well.

 

14:44.016 --> 14:46.819

They always present every year and they made the point that

 

14:46.819 --> 14:48.988

just ... and it also came from Peter Lynch as well, right,

 

14:48.988 --> 14:51.857

just always turn rocks, just keep pushing, keep pushing.

 

14:51.857 --> 14:53.525

You need to keep looking.

 

14:53.525 --> 14:54.860

That's what I try to do.

 

14:54.860 --> 14:57.997

Even though the S&P's basically at all-time highs the

 

14:57.997 --> 15:01.000

market is so diverging that there are a lot

 

15:01.000 --> 15:04.503

of opportunities. So yes, it is very much in flux.

 

15:04.503 --> 15:07.973

I was quite bearish on the US market generally for

 

15:07.973 --> 15:11.043

many quarters and now all of a sudden I'm more

 

15:11.043 --> 15:14.413

bullish on the US. You'll see more US holdings only because

 

15:14.413 --> 15:17.516

of that divergence between the more cyclical interest rate

 

15:17.516 --> 15:20.486

sensitive names and,

 

15:20.486 --> 15:22.421

I guess, the large-caps AI trade.

 

15:22.421 --> 15:24.323

Okay, excellent.

 

15:24.323 --> 15:26.959

Speaking of being bearish, you do run the Global Value

 

15:26.992 --> 15:30.162

Long/Short Fund and that does allow you to short and

 

15:30.162 --> 15:32.031

have a short position on the short side.

 

15:32.031 --> 15:35.301

Talk to us about what is the criteria to get into

 

15:35.301 --> 15:37.736

one of those shorting positions and then give us an update

 

15:37.736 --> 15:41.040

as to what the portfolio is currently standing

 

15:41.040 --> 15:42.341

like.

 

15:42.341 --> 15:44.843

Well, I'm going to be a broken record on this one.

 

15:44.843 --> 15:48.113

Just as a reminder, the short book, for me

 

15:48.113 --> 15:51.150

shorting generally in the markets, there's been a few great

 

15:51.150 --> 15:52.952

periods in history.

 

15:52.952 --> 15:56.622

We've had basically '73, we've had '99,

 

15:56.622 --> 15:59.825

we've had 2021, and then we have right now.

 

15:59.825 --> 16:01.193

There's a lot of great exaggerated...

 

16:01.193 --> 16:04.563

Wow, so 2026 falls into that category.

 

16:04.563 --> 16:07.032

Absolutely. It's very different than 2021.

 

16:07.032 --> 16:10.069

I was there in 2021 and we made a lot of

 

16:10.069 --> 16:12.805

money which now sounds easy when you talk about it.

 

16:12.805 --> 16:13.939

The arguments that I had

 

16:16.709 --> 16:18.410

[audio cuts out], how can you short, I mean, we made so

 

16:18.410 --> 16:19.778

much money shorting electric car companies.

 

16:19.778 --> 16:21.246

A lot of them went bankrupt.

 

16:21.246 --> 16:24.783

We made a lot of money shorting marijuana companies

 

16:24.783 --> 16:27.519

because there was no profitability to be had there because

 

16:27.519 --> 16:29.388

no product was differentiated.

 

16:31.657 --> 16:33.759

Everybody forgets these things for some reason.

 

16:33.759 --> 16:36.962

A lot of people argued with me about

 

16:36.962 --> 16:40.132

3D printing and how it was redefining the

 

16:40.132 --> 16:42.101

North American industrial base.

 

16:42.101 --> 16:45.004

You could print a car now and you could print anything and

 

16:45.004 --> 16:48.040

therefore you should not be shorting 3D printing

 

16:48.040 --> 16:49.041

companies.

 

16:49.775 --> 16:53.212

Move forward to now we have again,

 

16:53.212 --> 16:56.482

like in 2021, there's a lot of companies that are basically

 

16:56.482 --> 16:58.650

attached to the cryptocurrency market

 

16:59.718 --> 17:03.022

and probably won't be making any money at

 

17:03.022 --> 17:06.291

any point. There's quantum computing, there's

 

17:06.291 --> 17:08.961

a whole bunch of financial companies.

 

17:08.961 --> 17:12.297

What I'm starting to really tiptoe into,

 

17:12.297 --> 17:15.667

I will be honest, is the areas

 

17:15.667 --> 17:18.170

where there will probably be problems when the credit

 

17:18.170 --> 17:19.505

market turns.

 

17:19.505 --> 17:21.173

I'm just really doing it very slowly.

 

17:23.142 --> 17:26.211

I've done a lot of reading and research on

 

17:26.211 --> 17:29.314

private equity, on captive insurers inside private

 

17:29.314 --> 17:30.582

equity.

 

17:30.582 --> 17:33.352

Again, I've said many times, when I was a bank analyst you

 

17:33.352 --> 17:35.754

couldn't see where the problems were coming up from.

 

17:35.754 --> 17:38.690

It was impossible to predict but when the tide went out you

 

17:38.690 --> 17:40.659

knew there would be problems.

 

17:40.659 --> 17:43.829

I would say the captive insurers inside private

 

17:43.862 --> 17:47.132

equity, if there's no problems there in the next turn

 

17:47.132 --> 17:48.367

I will be absolutely shocked.

 

17:51.837 --> 17:53.439

The numbers are huge, first of all.

 

17:53.439 --> 17:57.009

There's a high probability

 

17:57.042 --> 18:00.012

and there's high ability to do things that

 

18:00.012 --> 18:02.681

are very, very grey areas.

 

18:02.681 --> 18:06.185

It's actually come out this week or last week that

 

18:06.185 --> 18:09.755

a private equity firm bankrupted an insurer that was

 

18:09.755 --> 18:13.292

basically 175 year old.

 

18:13.292 --> 18:16.462

They kind of played with some

 

18:16.462 --> 18:19.531

of the capital there and sent it

 

18:19.531 --> 18:20.966

to the reinsurer.

 

18:20.966 --> 18:23.068

Basically, the whole thing is insolvent now.

 

18:23.068 --> 18:26.238

The people who had insurance with that

 

18:26.238 --> 18:29.241

company are suing the company for the fact that

 

18:29.241 --> 18:31.043

basically there's no money left in it.

 

18:31.043 --> 18:33.679

That's how things slowly start, right?

 

18:33.712 --> 18:37.316

We saw some fraud in 07, early '07.

 

18:37.316 --> 18:39.151

That's giving you some indicators.

 

18:39.151 --> 18:41.687

Yeah, I think it doesn't mean that we're going in that

 

18:41.687 --> 18:44.790

direction. We haven't seen really big systemic

 

18:44.790 --> 18:48.093

problems yet but the fact that some of these

 

18:48.093 --> 18:51.263

quasi-fraudulent cases are coming up to the surface should,

 

18:51.263 --> 18:54.500

you know, give us, you know, they're definitely like

 

18:54.500 --> 18:56.301

yellow lights that we should be watching.

 

18:56.301 --> 18:59.338

So not quite yet but the yellow is flashing.

 

18:59.338 --> 19:02.174

And that's, I think, when I want to be starting to short

 

19:02.174 --> 19:03.909

ever so slightly.

 

19:03.942 --> 19:07.179

Once things turn it'll be a little too late

 

19:07.179 --> 19:09.348

to take advantage of the big swoon.

 

19:09.348 --> 19:12.251

I'm trying to put my chips down here and there.

 

19:12.251 --> 19:15.220

And we've seen that mandate evolve, and it is also a piece

 

19:15.220 --> 19:17.956

of the Global Equity+ portfolio that you do share with Hugo

 

19:17.956 --> 19:21.026

and Mark Schmehl, so a great way to access also

 

19:21.026 --> 19:24.530

that diversification from your lens.

 

19:24.530 --> 19:26.632

Let's look back to the long side.

 

19:26.632 --> 19:29.801

Healthcare has been an area that you have been exploring

 

19:29.801 --> 19:31.236

a little bit more.

 

19:31.236 --> 19:33.939

You have some high conviction names like Pfizer, Boston

 

19:33.939 --> 19:36.675

Scientific. Give us your thesis around healthcare.

 

19:36.675 --> 19:38.844

We've heard a few other managers talk about it.

 

19:38.844 --> 19:41.246

It seems like the tides are shifting over there.

 

19:42.514 --> 19:44.349

Healthcare is a few different areas.

 

19:44.349 --> 19:46.185

For me, obviously, it's gonna be the ones that are a little

 

19:46.185 --> 19:48.887

cheaper, a little bit bigger, a little safer,

 

19:48.887 --> 19:51.223

That's kind of the approach I have.

 

19:51.223 --> 19:54.459

Healthcare is part of that group of companies that is

 

19:54.459 --> 19:57.563

much cheaper than the rest because they're more defensive.

 

19:57.563 --> 20:00.232

We have staples, healthcare, utilities.

 

20:00.599 --> 20:03.068

That whole interest rate angle seems to have more of an

 

20:03.068 --> 20:04.870

impact there, obviously.

 

20:04.870 --> 20:07.906

Healthcare, I started to really look at it Q4 last

 

20:07.906 --> 20:10.976

year and all of this year, because as

 

20:10.976 --> 20:13.946

this concentration keeps happening at the top we

 

20:13.946 --> 20:17.282

see some of these stocks just keep falling by the wayside.

 

20:17.282 --> 20:19.885

I'd say Boston Scientific was one of those.

 

20:20.986 --> 20:24.223

The fact that they're not super cyclical, generally,

 

20:24.223 --> 20:26.892

because budgets for healthcare are typically a lot less

 

20:26.892 --> 20:30.195

cyclical, it just gives me an added benefit

 

20:30.195 --> 20:33.198

of having less downside

 

20:33.198 --> 20:36.134

if ever anything happens that is wrong in

 

20:36.134 --> 20:36.501

the market.

 

20:36.501 --> 20:40.272

So it meets your criteria quite nicely in terms of that.

 

20:40.272 --> 20:41.673

Let's pivot to the Canadian market.

 

20:41.673 --> 20:43.308

You do manage Canadian Large Cap Fund.

 

20:43.308 --> 20:46.311

That has been your baby for a very long time, over 15

 

20:46.311 --> 20:49.448

years. There was just the big Canadian investment summit

 

20:49.448 --> 20:52.184

that raised about $500 billion of investment in the

 

20:52.184 --> 20:55.187

Canadian landscape. Give us your overview about the

 

20:55.187 --> 20:56.922

investment opportunity set.

 

20:56.922 --> 20:59.424

I know you've been taking more of a global approach, been

 

20:59.424 --> 21:02.094

leaning more into the US recently, but for all of our

 

21:02.094 --> 21:04.129

Canadian advisors what's your take on the Canadian

 

21:04.129 --> 21:05.130

landscape?

 

21:06.131 --> 21:08.133

My process here matters a lot.

 

21:08.133 --> 21:10.702

I'm not disagreeing that this is very good for the Canadian

 

21:10.702 --> 21:13.639

market. Somehow the Canadian dollar seems to not care at

 

21:13.639 --> 21:15.507

all, we've just hit under 70 cents.

 

21:15.507 --> 21:19.244

Generally speaking, for me,

 

21:19.244 --> 21:20.646

downside is everything.

 

21:20.646 --> 21:23.682

If I go sector by sector it's very difficult to

 

21:23.682 --> 21:26.451

find one that has very little downside if something goes

 

21:26.451 --> 21:29.688

wrong. We can go across every single sector quickly.

 

21:31.056 --> 21:33.825

Oil and gas is probably gonna benefit quite substantially

 

21:33.825 --> 21:35.427

from the inflow of capital.

 

21:35.427 --> 21:38.130

They're all trading at really high multiples of book.

 

21:38.130 --> 21:41.366

They're very capital intensive businesses.

 

21:41.366 --> 21:44.369

For me, a sector like that is way more interesting in

 

21:44.369 --> 21:45.370

2020.

 

21:46.305 --> 21:48.473

No oil and gas before 2020.

 

21:48.473 --> 21:51.943

We went from zero to 30% in weight when

 

21:51.943 --> 21:54.946

it was really, really cheap and the oil price was at

 

21:54.946 --> 21:58.150

a price that was just not sustainable and was unsustainably

 

21:58.150 --> 21:59.151

low.

 

21:59.818 --> 22:02.421

I think now we're kind of closer to the other end of the

 

22:02.421 --> 22:05.123

spectrum. Are we in ending seven or eight, I don't know,

 

22:05.123 --> 22:08.093

but it's certainly not my game at all to try to figure out

 

22:08.093 --> 22:11.029

where that is going. So oil and gas is basically a zero

 

22:11.029 --> 22:12.864

weight in Canadian Large Cap Fund.

 

22:12.864 --> 22:16.001

If we go to the banks, they're 2 1/2 times book, they've

 

22:16.001 --> 22:19.571

corrected a little bit. I used to say if

 

22:19.604 --> 22:21.973

you want to spend two minutes on banks per year and then go

 

22:21.973 --> 22:25.477

golfing, you buy them at 1.2 times book or 1.1,

 

22:25.477 --> 22:28.613

sell them at 1.8 and the rest of the time just

 

22:28.613 --> 22:29.614

don't do anything.

 

22:30.415 --> 22:33.685

They're now 2 1/2 plus times book value.

 

22:33.685 --> 22:35.620

Certainly at this point of the cycle where everybody feels

 

22:35.620 --> 22:36.755

really good about them.

 

22:37.823 --> 22:40.792

Credit is fine and housing

 

22:40.792 --> 22:43.862

hasn't seemed to impact them at all so let's

 

22:43.862 --> 22:45.831

keep pushing and they're going to be great.

 

22:45.831 --> 22:47.632

For me, it's just not a place where I want to be.

 

22:47.632 --> 22:50.736

Maybe I've seen the bottom of the abyss in '08

 

22:50.736 --> 22:52.871

and that's why I'm just too defensive about them.

 

22:52.904 --> 22:55.374

You've been extremely close to it over your career.

 

22:55.374 --> 22:58.710

Yeah, I actually saw a

 

22:58.710 --> 23:01.313

bank analyst from 20 years ago last week.

 

23:01.313 --> 23:04.850

It was, well, bad memories came back,

 

23:04.850 --> 23:05.851

unfortunately, for him.

 

23:07.853 --> 23:10.856

That's bank. Life insurers, quickly, they're

 

23:10.856 --> 23:12.758

really driven by two factors.

 

23:12.758 --> 23:14.493

It's interest rates and asset prices.

 

23:14.493 --> 23:16.862

Both have been really good for them because rates going up

 

23:16.862 --> 23:19.364

means your liability side is lower.

 

23:19.364 --> 23:22.200

Asset prices going up means your asset side is great.

 

23:22.200 --> 23:24.569

All in, everything's great and then everybody's paying a

 

23:24.569 --> 23:27.439

high multiple for that. It's absolutely not my game again.

 

23:28.874 --> 23:30.642

Base metals, same thing.

 

23:30.642 --> 23:33.445

Some of them are in pretty good shape in terms of

 

23:33.445 --> 23:35.947

valuation. Copper has been great.

 

23:35.947 --> 23:39.418

We're seeing a lot of demand from construction

 

23:39.418 --> 23:42.154

of the whole AI infrastructure build.

 

23:43.455 --> 23:46.491

I have to find other places in Canada where things

 

23:46.491 --> 23:49.528

are interesting. Software was really welcome earlier this

 

23:49.528 --> 23:51.296

year. That pullback was fantastic.

 

23:52.364 --> 23:55.434

Then we have our core holdings that I like that I keep

 

23:55.434 --> 23:58.437

and that eventually I wouldn't mind getting

 

23:58.437 --> 24:00.572

out of if it gets really extreme, you know, the Couche

 

24:00.572 --> 24:03.975

Tards and the Metros, but unless something extreme happens

 

24:03.975 --> 24:05.444

they're gonna be a core part of the fund.

 

24:05.444 --> 24:08.513

They're compounding slowly but surely and they gave

 

24:08.513 --> 24:10.515

us kind of this stability.

 

24:10.515 --> 24:14.085

Great. More to come I guess on the Canadian outlook

 

24:14.085 --> 24:15.387

until it meets your criteria.

 

24:15.387 --> 24:18.457

We have one minute left and I think it's so important

 

24:18.457 --> 24:20.692

to get to this question from the audience, thank you for

 

24:20.692 --> 24:23.361

submitting, but also where I wanted to end as well, Global

 

24:23.361 --> 24:26.364

Concentrated Value. You launched in May this year.

 

24:26.364 --> 24:27.966

It's had a wonderful start.

 

24:27.966 --> 24:30.969

It's really you with a global mandate

 

24:30.969 --> 24:34.072

to employ as you see fit, employ your style, employ

 

24:34.072 --> 24:36.641

your process. Talk to us about how that's just a little bit

 

24:36.641 --> 24:38.243

different from the strategies and what you're excited

 

24:38.243 --> 24:39.277

about.

 

24:39.277 --> 24:42.214

It's the same process as every other strategy I've done.

 

24:42.214 --> 24:44.716

It's basically the same as Large Cap, but with less

 

24:44.716 --> 24:46.885

geographical restrictions.

 

24:46.885 --> 24:49.054

Therefore, you could say this is putting a bit of pressure

 

24:49.054 --> 24:52.057

on me because it has less restrictions

 

24:52.057 --> 24:54.159

and I can do whatever I want.

 

24:54.159 --> 24:57.395

I can invest anywhere. I can concentrate in a geography

 

24:57.395 --> 24:59.798

or a sector that I think is very attractive that is gonna

 

24:59.798 --> 25:00.799

protect us better.

 

25:01.700 --> 25:05.003

In over a three, five-year period, technically,

 

25:05.003 --> 25:07.973

this fund should do as well or ever so

 

25:07.973 --> 25:10.876

slightly better than Large Cap and maybe protect capital a

 

25:10.876 --> 25:12.177

little bit better.

 

25:12.177 --> 25:14.179

We'll see. That's the goal.

 

25:14.179 --> 25:16.948

It's been fun because it was started from scratch.

 

25:16.948 --> 25:20.018

It's now close to $300 million in assets,

 

25:20.018 --> 25:23.622

I think. It is slowly building up and it's

 

25:23.622 --> 25:25.824

been fun to have a bit more flexibility.

 

25:26.992 --> 25:30.428

Things like buying a few small-cap Japanese companies,

 

25:30.428 --> 25:32.931

which are incredibly attractive on valuation right now,

 

25:32.931 --> 25:36.101

some small, mid-cap Korean names, things I

 

25:36.101 --> 25:38.904

couldn't do in Canadian Large Cap Fund.

 

25:38.904 --> 25:40.906

It's been fun.

 

25:40.906 --> 25:42.440

I've had a blast with it.

 

25:42.440 --> 25:44.643

It's Dan's best ideas all packaged in one.

 

25:44.643 --> 25:48.013

It really is, and I can find

 

25:48.013 --> 25:51.049

these small ideas that I haven't worked on in

 

25:51.049 --> 25:54.052

such a long time and talk with analysts that cover

 

25:54.052 --> 25:57.556

stocks that are in sectors that may be a little off

 

25:57.556 --> 25:59.524

of the beaten path because the companies are a little too

 

25:59.524 --> 26:02.294

small. Now I can deploy a little bit of capital there too.

 

26:02.294 --> 26:04.129

So it's really a lot of fun.

 

26:04.129 --> 26:05.830

Excellent. Dan, thank you for being here.

 

26:05.830 --> 26:07.666

Thank you for being in Nashville.

 

26:07.666 --> 26:08.867

Wish you all the best with that new mandate.

 

26:11.636 --> 26:15.941

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26:48.607 --> 26:52.377

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Thanks again. We'll see you next time.