Jason Whiting, the lead manager of the $207-million Trimark Canadian Small Companies, looks to the U.S. for opportunities to boost performance. Currently, U.S. stocks make up 35% of the portfolio.
“I can go up to 50% of my equity holdings outside of Canada,” says Whiting, “and I tend to try and take advantage of that. The bigger the ocean you can fish in, the more likely you’re going to land a big fish.”
Until recently, says Whiting, the U.S. was considered one of the world’s most attractively valued markets out there. “Coming out of the financial crisis on the U.S. side, there were great opportunities,” he says. “I continue to hold those today.” He is also comfortable with the U.S. market, in terms of understanding its rules, its competitive dynamics and the workings of government.
Whiting is a vice-president and portfolio manager at Trimark Investments, a division of Invesco Canada Ltd. in Toronto. He has held the lead role in managing Trimark Canadian Small Companies since April 2011. His responsibilities also include serving as lead manager of Trimark North American Endeavour. In all, he manages more than $600 million.
Whiting is a member of the Toronto-based small-cap team headed by Robert Mikalachki. The team’s investment discipline relies on extensive in-house research, including on-site company visits and meetings with company management and their competitors.
A graduate of Wilfrid Laurier University, Whiting, 37, received a BBA (Honours) in 2000. After graduation, he joined Laketon Investment Management in Toronto as a research analyst, supporting the Canadian and global equity teams. In October 2003, the year he received the CFA designation, he moved to Trimark as an analyst. In 2005, he was promoted to portfolio manager on Canadian and global mandates.
The second-generation investment manager follows in the footsteps of his father, Richard Whiting, whose three-decade career included seven years as a Trimark portfolio manager.
“For sure, my father would be one of the big influences in my life,” says Whiting, “not just in investing.” From an industry perspective, “he was definitely a value guy, but he always looked for growth. So quality growth companies on the value spectrum came from him.”
Whiting also credits his mentor and former Trimark manager Geoff MacDonald, who trained him as an analyst. “Having a great idea that’s different from the market, and then buying it cheap, was a big part of my development,” Whiting says.
From a value perspective, “I’ve bought things that are deep discount,” says Whiting, “50 cents on the dollar, but we much prefer to skew the business to what I could hold forever.” But these types of quality businesses aren’t always available at a price he’s willing to pay, he adds. If the opportunities aren’t there, he’ll opt for a slightly lower-quality business at a cheaper price.
In terms of market-capitalization constraints for purchasing smaller-cap companies, Whiting’s upper limit is $1.3 billion for the Canadian content and $3 billion for foreign holdings. The market-cap weighted average in the fund is currently $565 million.
Whiting employs quantitative screens and says the “numbers” have to be there in potential stock picks. However, he emphasizes the importance of qualitative criteria such as the quality of management, barriers to entry, competitive advantages and growth opportunities.
Whiting manages a concentrated mandate of 20 to 30 smaller-cap names, and has no sector constraints. “I would rather diversify by idea,” he says. For example, among energy-related companies, his holdings include service companies as well as commodity producers.
Among his Canadian holdings is Aveda Transportation & Energy Services Inc. (TSX:AVE).”I was attracted to the great, entrepreneurial-type manager,” says Whiting, “and the big-picture view on strategy and savvy acquisitions.” As well, the company has a great track record and was well priced.
Whiting’s U.S. holdings include America’s Car-Mart Inc. (Nasdaq:CRMT), which lends money and sells cars to people with poor or no credit history. “Through the financial crisis, their credit metrics held up phenomenally well,” says Whiting. “The management has a great history of not getting greedy, chasing credit and staying disciplined.” With more than 133 stores today in about 10 states, America’s Car-Mart offers a “huge growth opportunity to professionalize what is a pretty seedy, very fragmented business.”
Under Whiting’s tenure, Trimark Canadian Small Companies has a three-year annualized return of 13.8% compared with the median 6.7% return in the Canadian Focused Small/Mid Cap Equity category, as of March. 31. “The concentration,” says Whiting, “is probably the biggest factor that leads to the outperformance over time.”
After last year’s strong market, Whiting started selling when holdings became fully valued but is now finding “more good than great ideas. I came into 2013 with single-digit cash, around 5%,” he says, “and it’s a little above 20% today,” the highest in his history. “I’m fine holding it, waiting for better opportunities.”