Contrarian investor Benj Gallander of Contra the Heard Investment Letter also shares his investing criteria and stocks he likes.
Where should investors put their money in 2018? At this year’s PDAC convention, contrarian investor Benj Gallander shared his thoughts.
Gallander, who is president of Contra the Heard Investment Letter, also pointed to drilling as a sector with potential. “Those companies are [also] really beaten up. I own Cathedral Energy Services (TSX:CET) in that one,” he said.
While he said he’s reasonably positive about the resource space moving forward, Gallander also cautioned that the cannabis and cryptocurrency industries are diverting funds away from the sector.
He also encouraged investors to consider paying down their debt before pursuing other endeavours. “I think one of the best ways to get a sure return is to pay off your debt, or pay down your debt,” he said.
Watch the video above for more insight from Gallander, including what stocks he likes right now. You can also read the transcript below or click here to view our full PDAC playlist.
INN: We’re here at PDAC, and it’s day three of the conference. How are you feeling? How does the mood feel to you so far?
BG: I’ve been coming here for at least 25 years, and I’ve been here through the good times and the bad. When I first started coming Bre-X was doing really well, and that turned into a complete fraud; after that, all of a sudden the people stayed away.
This place tends to flow, of course, with the commodity prices, so being a contrarian buying when stocks are out of favor, I like it when there’s not a lot of people here because that means there’s more things for me to buy. Right now, I’d say things are going pretty well, there’s quite a few people. It’s not bursting at the seams, but the mood right now is fairly positive overall.
INN: How do you feel about the resource space in 2018? Will we see continued positivity throughout the year?
BG: That’s a good question. I’m not — I don’t usually go into short term, where things are going. When you’ve got certain commodities at record prices like cobalt and lithium and palladium, that’s often a sign that things can continue to go up to some degree, but there may be a bubble that’s getting ready to burst. So in terms of time you have, it’s always very, very difficult.
You know, gold hasn’t been doing much for quite awhile now, silver hasn’t been particularly exciting. Not all the commodities are doing great, plus at this point you have more of a challenge with things like cryptocurrencies and marijuana stocks. A lot of times people move into the mining space because they’re looking to have a tremendous return; now a lot of them are looking to cryptocurrencies and marijuana, which means there’s less money to go into the mining space. I’m reasonably positive about it now, but at the same time it’s difficult for me to find bargains in the way that we look.
INN: US and Canadian budgets and their impact on the market right now — can you speak a little bit about that for us?
BG: Absolutely. I think the States have made a huge mistake because effectively they’re cutting the taxes for the rich. If you want an economy to do well, you want to cut the taxes or give more money into the hands of people at the bottom, because they’re the people who are going to buy the washers, the dryers, the televisions, the cars, etc. because they don’t have it.
In Canada too, the budget — I mean, the economy is moving very well now, unemployment is very low now, same as in the States. Canada I think it’s the lowest rate for about 16 years, the States 40 years. At that point in time you want to try and get your government budget in order. Neither country is doing that. So in the short run that can help the economies, but longer term, when things go bad, it’s going to really hurt stocks I think. It may help gold because people may move to that as a haven for safety, which I don’t really think that it is, but a lot of people do. I think there’s a falseness at play right now via the governments, and that will hurt us more later on.
INN: I’m going to have you back up a little bit. You’ve mentioned being a contrarian investor — can you explain what that means for people who may not know?
BG: We buy into companies that have been badly beaten up. I’m only buying companies that have been around for at least 10 years, companies that have at least 100-percent-plus upside — often 200, 300, 400 percent. Companies — when I say that percentage on the upside, they have all traded at the level where I’m looking to target them before. Our returns are amongst the best out there for the past 15 years, annualized better than 16 percent; [in the] past five years, better than 22 percent.
We’ve being doing this for almost 25 years, I’ve been investing for about 40. So we look at things that people don’t like and hope will get really good returns. We look at things like financial ratios, we look at management in the commodity sector, we look at commodity prices. But we like what other people generally don’t, we hope that they’ll hop on board, push up the stock price and when the party is in elation, we like to get out.
INN: Those are some very specific criteria. Can you speak about any stocks that you like currently?
BG: In the commodity space we own Alacer Gold (TSX:ASR) at this point in time. I own … Aegon (NYSE:AEG), which is a huge insurance company in the States. There’s GMP Capital (TSX:GMP), they raise money in the commodity space, also in the marijuana space, also [in the] cyber currency space right now — GMP I like a lot. [There’s also] Quarterhill (TSX:QTRH,NASDAQ:QTRH), which is in the internet of things, and they seem to be turning around.
Both of those two companies also are paying a dividend right now, which is nice, because if I’m getting a dividend that allows me to be stupid longer — so if the companies don’t do well or if they go down, at least if I’m getting a dividend I’m getting some sort of payback at that point in time. Dividends are big for me, and I like companies that actually do have revenues.
INN: Those are companies that are across diverse industries, so obviously you’re not only looking at the resource space. What industry do you see the most opportunity for going forward?
BG: That’s a great question. Oil and gas has come back to a certain degree, but I still think there’s a lot of opportunity there. The shipping industry of which I don’t own any right now, although we do have Diana Shipping (NYSE:DSX) in one of the portfolios, they’re really beaten up.
The drilling space specifically, those companies are really beaten up. I own Cathedral Energy Services in that one, in the Vice-
INN: Final question. What advice would you leave investors with heading into the rest of the year?
BG: I think one of the best ways to get a sure return is to pay off your debt, or pay down your debt. I know we’re talking investing, that’s a way to invest in yourself. If you want to deleverage your personal risk profile, by paying down your debt it’s like a guaranteed return. So before one should invest in cyber currencies or marijuana and go crazy there, often paying down debt makes a lot of sense. A lot of people … want to look for that big, big return and they want leverage and [to] go crazy; often that leads to people crying into their soup.
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Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.