Manager Monitor: Peter Imhof, AGF Investments Inc.

Employing a growth-at-a-reasonable-price (GARP) approach, Imhof has the flexibility in the AGF fund to invest in companies of any size. But he has a bias toward the small/mid cap segment “because it’s my specialty.” The fund currently holds about a 40% weighting in smaller-cap companies, 28% in large-caps, 20% in mid-caps, and about 5% to 10% in cash.

Since taking over AGF Canadian Growth Equity, one of AGF’s oldest and best known funds, Imhof has pared the number of holdings to 105, from about 150 previously. “I think 100 will be my sweet spot,” he says.

Once the transition of the portfolio is fully completed, Imhof will be taking a longer view of all of his holdings. He expects the portfolio turnover will be around 30% annually.

Imhof says he favours companies that have “real” multiples behind them, meaning that their earnings and cash flow are visible. “I can sleep well at night holding them.”

Among financial-services stocks, Imhof looks beyond the banks. He’s seeking more growth and higher returns from selected small- to- mid-cap financials. For example, his holdings include Callidus Capital Corp. (TSX:CBL) a provider of flexible and innovative asset-based loans. He also likes the stock because of what he calls its excellent management team.

When it comes to small- and mid-cap companies, there’s often not much analyst coverage, and “the names are much more volatile,” Imhof says, “so the biggest thing for me is I need to meet the management.”

Callidus was the first initial public offering that Imhof purchased at AGF. “I think Callidus is up about 45% in the last four or five months,” he says. “That’s where my skill set is, looking for better growth.”

Among resources stocks, Imhof’s holdings include Rock Energy Inc. (TSX:RE), an oil and gas producer in Western Canada. “It was kind of unloved by the Street,” says Imhof. “It trades at a very low multiple to cash flow. The stock has done very well, and over the next few quarters I expect them to come out with some very strong results. The production growth has been there.”

In researching companies, Imhof draws on an investment team of 10 specialists at AGF. “The analysts’ pool was part of the reason I wanted to come here,” he says. “There’s a lot of experience within those sectors.”

Imhof, 43, brings an uncommon background to the investment industry. After graduating from Algonquin College in Ottawa in 1994 in business administration, he toured the tennis circuit, combining playing and teaching. During that time, he pursued his interest in the stock markets by taking industry courses and meeting with fund managers and company management teams.

In early 1998, Imhof approached small-cap veteran Allan Jacobs at a conference in Toronto that would prove pivotal to his career. He expressed his interest in the investment industry, and in joining Sceptre Investment Counsel Ltd., but Jacobs wasn’t keen at first.

Imhof persevered, surprising Jacobs with details about the companies in his fund holdings. This led to Sceptre offering Imhof a job in March 1998 as a quantitative and risk analyst. In the spring of 2001, Jacobs brought Imhof on to the small-cap team.

In August 2007, both Imhof and Jacobs moved to Sprott Asset Management LP, with Jacobs heading the Sprott small-cap team and Imhof serving as an investment strategist. The funds that Imhof managed with Jacobs included Sprott Small Cap Equity.

“Working with Allan Jacobs and working with Eric Sprott,” says Imhof of his previous employer before joining AGF, “has given me very good insight in terms of what to look for in companies and how to approach investing.”

Imhof thinks that since small caps in Canada have underperformed over the last three years, there’s going to be outperformance over the next few years. In part, this will be because of takeover activity. “More larger-cap companies are buying small-cap ones and now what you’re seeing in the marketplace is that both (large-caps and their small-cap targets) are being rewarded in acquisitions.”