Consumer focus pays off
Big- picture views, current issues, outlook and picks. By Jonathan Ratner
W hat Michael Bregman and Gordon Henderson don’t do might be as telling as what they do focus on.
The value-oriented principals at Toronto-based Tailwind Capital avoid technology, energy, metals and other commodities in favour of consumer-related companies, a strategy that has generated a return 59% higher than the S&P 500 in the past five years.
The Tailwind Fund LP typically has between 15 and 25 positions and the managers use a bottom-up approach to target companies that can flourish given the challenging environment.
“If we’re right, we want each position to move the needle,” Bregman said.
The hedge fund managers don’t see the structural problems in Europe, Asia and North America disappearing anytime soon, neither do they anticipate a particularly buoyant economy, but that’s not necessarily a bad thing.
“A difficult environment better separates the winners from the losers,” Bregman said. “In this environment, you have to be very good, so in some ways it makes it easier for us.”
Bregman’s primary focus is on the quality of companies and management teams and operational issues, a result of his time as CEO and chairman of Second Cup Ltd. until it was sold in 2002.
Henderson’s previous roles as an investment banker and a derivatives trader lead him to concentrate more on company financials. He said last winter’s warmer weather was great for a lot of retailers, but it is unlikely “we’re going to see such benevolent weather repeated.”
Henderson also highlighted the protracted U.S. fiscal cliff negotiations as a potential drag, noting its constant presence in the media doesn’t help anyone’s confidence.
“You could say the same thing about whatever drama takes place in Europe and Asia,” he said. “You set those factors up against a market that has run up substantially since the start of the year and there is scope for downside. There are reasons to be cautious.”