Based in Vancouver, Canada, the PH&N Canadian Equity Team follows a collaborative, disciplined investment process. Their investment philosophy is best described as “quality growth at a reasonable price (‘GARP’)”. The PH&N Canadian Equity Team believes that: higher quality companies outperform poorer quality companies over the long term; growth is key to long-term value creation; and the price paid for a stock matters to long-term returns.
The foundation of the investment strategy is the team’s fundamental knowledge and ongoing research of individual companies. The main objective of their fundamental approach is to develop a view on the risk and reward for each company in the team’s investment universe, as well as Canadian-domiciled companies that are not part of the index but are large enough to allow investment.
GARP investment approach
The team’s quality GARP investment approach is characterized by an emphasis on high-quality growing companies, whether cyclical or non-cyclical in earnings patterns. Their definition of a “good company” encompasses measurements of management quality, profitability, financial strength, and growth opportunities. They look for companies that:
- are leaders in their industry or market niche;
- generate a high level of growth and profitability relative to others in their industry;
- are in a sound financial position given the nature of their business and the stage of their business cycle;
- generate free cash flow after capital expenditures to maintain their asset base and fund future growth; and
- understand the key ESG factors relevant to their business and have processes in place that address the risks associated with these factors.
Valuation is a key consideration, as the team recognizes that the price initially paid for a stock is one of the most important determinants of long-term returns. The method they use to determine the “reasonable price” will depend on the specific industry or sector. The team considers relative and absolute valuations specific to each industry.
Concise & actionable stock inputs
- Outputs: business drivers, base/best/worst scenario road signs, buy/sell triggers, ESG quality
- Key benefits: facilitates collaboration, continuity, PM decision-making & continuous improvement
Concise & actionable industry framework
- Outputs: industry drivers, road signs triggering outperformance/underperformance
- Key benefits: roadmap guiding sector strategy & timing sector weight decision-making
Dashboard aggregates buy and sell prices from template and playbook research
- Outputs: risk/reward framework across Canadian market
- Key benefits: real-time risk/reward trade-offs
Conviction checklist ranks trade-offs to inform position sizing
- Outputs: top-to-bottom sector ranking on risk/reward, ESG score, analyst confidence in drivers
- Key benefits: allows us to optimize position sizing for all quantitative & qualitative inputs