Chris Kerlow, senior portfolio manager and investment advisor with Langsford Wealth Counsel at Canaccord Genuity Wealth Management.
Illustration by Joel KimmelThe Globe and Mail
While many investors worry about volatility, money manager Chris Kerlow leans into it to add assets selectively to his portfolios for long-term growth.
“Markets aren’t going to move up in a straight line and, with our defensive posturing, volatility provides more opportunity than a threat to the way we’re managing portfolios,” says Mr. Kerlow, senior portfolio manager and investment advisor with Langsford Wealth Counsel at Canaccord Genuity Wealth Management (Canada) in Oakville, Ont., whose team oversees $1.2-billion in assets.
His portfolio includes Canadian dividend stocks, U.S. growth stocks and some international equities and alternative investments – including a managed futures fund, a long-short credit strategy, a merger arbitrage fund, and some fixed income held in U.S. dollars.
His model growth portfolio, which includes about 55-per-cent equities, 20-per-cent fixed income and 25-per-cent alternative investments, is up 14.2 per cent year-to-date and 20 per cent over the past year. Its three-year annualized return is 17.7 per cent and 14.9 per cent since inception in October, 2022. The performance is based on total returns, net of fees, as of Aug. 31.
The Globe spoke with Mr. Kerlow recently about what he’s been buying and selling:
Name three stocks you’ve been buying.
Pembina Pipeline Corp. (PPL-T), the Calgary-based energy transportation and midstream services company, is a stock we added at the start of this year.
Heading into January, we flagged high oil prices as a market risk and wanted to increase our overall exposure to energy and energy infrastructure. We added more in August after the stock pulled back a bit.
Pembina has durable infrastructure cash flows, but what we’re really excited about is its Greenlight Electricity Centre, a 932-megawatt natural gas-fired facility to support Meta Platform Inc.’s Alberta data centre project.
This project sets a strong precedent, which we think could open the door to more infrastructure buildouts like it. It’s part of the data centre theme, but you’re getting that through a low-risk infrastructure play with clear cash-flow generation.
The second catalyst that we don’t think is fully priced in is Pembina’s stake in the West Coast Oil Pipeline project, a million-barrel-a-day pipeline connecting Alberta to the West Coast. Building pipelines in Canada is challenging, but we believe this is probably one of the most supportive administrations to help get it done.
Pembina also provides a high dividend currently yielding about 4.5 per cent.
PrairieSky Royalty Ltd. (PSK-T), the Calgary-based oil and gas royalty company, is a stock we bought in June. Our purchase coincided with the first signing of a memorandum of understanding to reopen the Strait of Hormuz.
Oil prices came way back into the US$70 range and we thought the biggest risk was that deal not going through, so we leaned into our energy trade.
As a royalty-based business, which holds an interest in about 10-million acres of mineral title lands across Western Canada, PrairieSky has low capital requirements to generate cash flow. What we love about PrairieSky is that it continues to add more and more third-party operators to its program.
In the second quarter, it reported 178 wells [on its royalty acreage], up from 117 the year earlier. Funds from operations increased 38 per cent because of those additional operating wells.
The company continues to strengthen its balance sheet and its dividend, which currently yields about 3 per cent.
Biogen Inc. (BIIB-Q), the Cambridge, Mass.-based drug developer and manufacturer, is a stock we first bought in December last year and added to in mid-July.
The stock has been challenged for a while because its legacy multiple sclerosis business has come off patent and has been generating less income.
However, the company has been generating more revenue from what it calls its ‘growth portfolio,’ [which includes drugs to treat Alzheimer’s and other diseases]. So, while it has a problem in its legacy business, which the market has punished it for, we thought that was overshadowing its growth portfolio. Also, in general, we like the health care space and believe it’s a good part of a U.S. portfolio to be overweight.
Name one stock you sold recently.
Netflix Inc. (NFLX-Q), the Los Gatos, Calif.-based entertainment company, is a stock we sold in July after buying it in mid-March of last year.
The stock started to sell off after it made a bid for Warner Bros. [in December last year]. We thought it would probably lose that bid and, once it did, the stock could recover. That happened, but the stock has struggled to get back to where it was [before the Warner Bros. offer].
Given the headwinds Netflix faces from competitors such as YouTube and its increased spending on original content, we decided to exit our position.
This interview has been edited and condensed.