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How to invest: Fairfax trades on the Toronto and New York exchanges under the ticker FFH. To learn more, read Watsa’s annual letters to shareholders at www.fairfax.ca. They’re informative, plain-spoken and always interesting.
Tim McElvaine
McElvaine Investment Trust
Vancouver
Who is he?: McElvaine, 44, is a native of Kingston, Ont., and a graduate of Queen’s University. He qualified as a chartered accountant and earned his Chartered Financial Analyst designation before going to work for Peter Cundill, the famed value investor and fund manager, in 1991. Five years later, McElvaine set up the McElvaine Investment Trust.
Best call: The McElvaine Investment Trust has produced 14% average annual returns for investors since 1997, more than doubling the results of a typical Canadian equity fund. It has never lost money over the course of a year.
Worst call: The Trust has produced decent returns over the past four years, but it has lagged behind the Canadian stock index during that period. Last year it managed to produce only a meagre 0.6% gain. McElvaine’s big sin? He’s decided to sit out the mad rush for commodity stocks. “I’m the only money manager I can think of to have entirely missed the oil and gas boom,” he says.
Why he’s like Buffett: McElvaine is funny, self-deprecating and likeable. He also makes a point of eating his own cooking — 98% of his personal portfolio is invested in his fund. Like Buffett, he regards buying a stock as buying a piece of the company. Consequently, he looks for stable, undervalued companies that can withstand economic storms and that aren’t tied to cyclical industries. He particularly likes companies that are headed by owners who have their personal fortunes tied up in their enterprises. At the end of 2007, his holdings included Glacier Ventures, a publisher of small-town newspapers in Western Canada; Maple Leaf Foods, the Toronto meat packager; and Citadel Broadcasting, a U.S. radio broadcaster.
Why he’s NOT like Buffett: McElvaine is a fund manager, not a CEO. That means he charges annual fees: 1% of your investment, plus 20% of any gains over 6%. Also, in contrast to Buffett’s sprawling empire, McElvaine runs a highly concentrated portfolio focused on a handful of what he considers outstanding values. At the end of 2007, a mere eight stocks made up 85% of his holdings.
What he’s doing now: Not much, according to McElvaine. “I make Homer Simpson look active,” he insists. But all jokes aside, he’s always on the lookout for undervalued stocks and special situations. The classic McElvaine holding is a firm of significant size in its own industry, with a reasonable debt load, headed by an owner-CEO who is in the middle of restructuring the company. “Take Michael McCain at Maple Leaf Foods,” says McElvaine. “He’s very focused on taking his company out of commodity products and into branded lines. If he can get it done the stock is worth significantly more than it is now.”
How to invest: The McElvaine Investment Trust is open only to qualified investors, which means that the minimum investment is anywhere from $10,000 to $150,000, depending upon your province of residence. For more info, visit www.mcelvaine.com — and, while you’re there, make a point of reading McElvaine’s annual letters. They’re both fun and illuminating.
Dr. Michael Burry
Scion Capital
Cupertino, Calif.
Who is he?: Burry, 36, studied economics at UCLA, but despite a long-standing fascination with the stock market, stuck to his original plan of becoming a doctor. In 1995, as he was finishing his training at Vanderbilt Medical School, his father died and Burry began investing a small amount of trust money. Two years later, he launched his own website and began to write about stocks in the only time he had free — between midnight and three in the morning. His dissections of value stocks attracted a following and in 2000, Forbes magazine named his hobby site as one of the top investing destinations on the web. By then Burry was in the third year of a residency in neurology at Stanford University Medical Center and he figured it was time to choose between medicine and money management. He set up a hedge fund, named it Scion Capital, and became a full-time investor.
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