‘Legendary’ stock picker keeps his humility
Joel Tillinghast is widely regarded as one of his generation’s best stock pickers, but the Fidelity Investments “legend” hasn’t let his performance or being compared to Warren Buffett go to his head.
He is as modest as the day he started managing money in the late 1980s and is all too aware that his reputation rests on his future performance as much as it does his past.
“You have to stay on your toes in this business,” he said during a phone interview. “If I buy a (professional) hockey team or a boat that is equivalent to someone’s net worth, then sell all of my funds immediately.”
Tillinghast has no plans to do either. Instead, he and his colleague Salim Hart remain solely focused on finding high-quality companies at cheap prices as co-managers of Fidelity’s Global Intrinsic Value Class fund, which is now available in Canada.
In particular, the two portfolio managers, who also add their expertise to the recently launched Fidelity American Balanced Fund, are scouring the world looking for companies that have normal, sustainable earnings with a yield of eight per cent or higher.
That equates to a price/ earnings ratio of no greater than 12.5, unless the company’s growth potential is such that it can justify a higher multiple.
“I will go (higher than 12.5), but it’s for higher-certainty companies,” Tillinghast said. “Ultimately, I’m striving to fill my portfolio with companies that can give us an eight-per-cent return.”
Admittedly, that’s not an easy task in the current environment and it’s become increasingly difficult to find stocks that meet his objective.
If anything, Tillinghast is having more luck finding opportunities overseas than he is at home in the United States.
Generally speaking, he likes Japanese small-cap companies at the moment and thinks there is good value in Korea and other Asian countries in the smallcap space as well.
Europe also offers some attractive opportunities, he added, but it is not quite as compelling.
“It’s really important to look globally,” he said. “The U.S. is the most successful economy in the world, but it is not the only successful economy in the world and there are lots of opportunities elsewhere.”
Energy stocks, meanwhile, are a tricky play given the uncertainty around oil prices, he said.
“We have been more interested lately,” he said. “Energy stocks are selling at lowish price-to-book ratios, but the question is: Are we in a period like 1981 to 2000 where energy does a whole lot of nothing or are we in a period like 1986 and ’87 or 2009-10 where an energy glut quickly turns?’”