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Insights into North America’s ever-evolving financial landscape.

Join Chief Strategy Officer Gavin Graham in a conversation with Paul Beattie of BT Global, a top-performing Montreal-based hedge fund. Together they discuss Mr. Beattie’s career history, BT Global’s long/short approach to value investing, and his current favoured investment themes—Canada, Commodities, and Cannabis.

About the Speakers

About Paul

Mr. Beattie earned his MBA from the prestigious INSEAD in France and has over 33 years of experience as a finance professional in Canadian and US markets. He began his career as an investment banker, and he went on to head M&A at one of Canada’s most successful cellular phone companies. He founded BT Global Growth with his partner Jacques Lacroix in 2006, and since its inception, the fund has achieved impressive returns compared to its benchmark.

About Gavin

Mr. Graham joins SmartBe with over 30 years of experience in Canadian and international markets. A graduate of Magdalen College at the University of Oxford, Mr. Graham has directed investment strategy at numerous institutions, such as the Guardian Group of Funds in the UK and BMO Asset Management in Canada. In addition to his position at SmartBe, he serves as a contributing editor to The Income Investor, a respected online Canadian investment journal. The Gavin Graham Show is a platform for Gavin to share his wealth of knowledge with the SmartBe community, as well as engage in stimulating conversations with peers and thought leaders.


[00:00:00] Gavin: Hello, and welcome to the Gavin Graham Show sponsored by SmartBe Investments. We're delighted to have the opportunity of speaking with Paul Beattie, who is the founder and Chief Investment Officer of BT Global Growth, which is one of the most successful hedge funds in Canada with over 15 years of providing excellent returns.

Thanks very much for joining us, Paul.

[00:00:25] Paul: Thank you, Gavin.

[00:00:26] Gavin: Pleasure to be here. So, if you could just briefly describe the way that you ended up getting into investment, a little bit about your background and one of the reasons maybe why you feel it has helped you in the way that you run your money.

[00:00:39] Paul: So fairly simple story, really my partner and co-founder, Jacque Lacroix, and myself, we've actually been working together for going on 25 years.

We started up a company here in Montreal and we're finance people. We joined a merchant bank and years ago that run by Mr. Charles Surrault, a very successful company. It became known as Telus System International Wireless. Went public back in the roaring telecom age, in the nineties, we're entrepreneurs, we're still in that industry.

So it Jacques was the second employee. I was the fourth. And we worked together running around the world buying mobile telephone companies. So mobile radio, paging, and cellular. And so we worked together in all sorts of exciting markets and then went into China. And builds this company up.

Jacques did all the finance, he ran the finance team and I was head of mergers and acquisitions. So, you know, a lot of global experience. The company did well in the end we sold it to Vodafone for about $6 billion. Unfortunately we had 4 billion in high yield debt at the time. So shareholders did well, but bond holders did very well. During all of that time, that was through the .com era. Jacques and I co-invested in, you know, in, in ideas on the stock market and the telecom space and the crew to other areas. And we actually did very well personally investing in all sorts of things, including TIW. The stock actually went as high as $83 and to send it all the way to 33 cents. I actually, I was out of the company at that point and, and I bought millions of shares at 33 cents and sold them six months later at $6. And so I approached Jacques, why don't we actually set up a hedge fund because the Canadian market just doesn't get complicated stories very well. And then we think it's somewhat inefficient and he agreed.

And the two of us started this fund 16 years ago.

[00:02:22] Gavin: And so that's one of the differentiating points. I think it's fair to say, Paul is your best in Montreal. Do you find that find gives you a better access to, or a better handle on what's going on?

[00:02:33] Paul: Well, it's a, certainly a terrific place to run money. And Montreal is a fabulous place.

In fact, anybody who's looking to raise money in Canada, anybody wants to raise, I don't know, $50 million to do an IPO financing. Then they end up coming through town. And unlike perhaps in Toronto, where there might be 50 people that meet with, we have a lot of folks come through our offices. We never leave the office.

You can spend a day in Montreal, you go meet the five or six or seven players. And we get the benefit of having brokers bring companies through. So it's been great. We started here. We opened offices in Toronto as well. We raised money across the country. We're getting most of our money now from the West. Investors come in from all across the country.

And we're very happy to be in this city. It's been working well.

[00:03:13] Gavin: And could you briefly describe for our listeners, the structure of the BT Global Growth Fund.

[00:03:19] Paul: We call it a hedge fund. I know that scares Canadians quite a bit. It's an un-levered fund. So our biggest contributions we are long and short value investors.

We do not like stocks that trad at, you know, 50 times revenue and 150 times earnings or cashflow. We are value investors. We pick our industries and right now we've got about six or seven preferred industries and we go long and short companies within those industries. You go long companies at a three and four times cashflow.

And you short companies at a 50 times revenue. Not that complicated, but it's a lot of work. So right now, you know the fund's about 70% long and about 30% short. So theoretically the net exposure to the market is 50, 60% and we plan to make money on both sides of the trade.

[00:04:05] Gavin: Yeah, no, that's very impressive.

And in fact, that would be fair to say, Paul, is a return to the original concept of a hedge fund. Which was effectively you long the companies you liked in an industry and short the ones you didn't, and you'd be able to add value on both sides. And you've been able to do that very success.

[00:04:21] Paul: Exactly. I'm not sure why it is.

We don't have all the answers, but it just seems that some part of the markets here in Canada in particular that are just way overvalued, and then other parts of other sectors just become tremendously. Inexpensive. You saw it with energy just recently, right? I mean, six months ago you could buy all sorts of energy companies at two times EBDA, now they're trading more like three and four, but so what they're still cheap as can be, and nobody wanted to be in the energy sector. And what do you know? Here are six months later. The number one performing sector by far is energy.

[00:04:54] Gavin: You mentioned you had 5 or 6 sectors, are those sectors where you feel you have some competitive advantage, some particular knowledge or ones where you feel there's a major secular trend?

[00:05:04] Paul: I must say, investing with people that have a great deal of international experience helps. And Jacques and I have done business on every continent. And it's so clear to us that, you know, the emerging middle class that's developing in Asia and Latin America.

We're not dissing these mega trends that are just going to continue. So what are the mega trends? What's not just going to be hot for the next five years, but what's going to be a essential to the world over the next 10, 15 years? So we do have a heavy weight towards a commodity stocks. You take the copper industry.

We love this theme of electronic vehicles are coming. There's just zero doubt about that, but where's the copper going to come from? Tesla, where are you going to find your ? All these charging stations? The rebuilding of the grid, not only is China gonna build a massive grid the size of the U.S. All of this requires copper.

Where's it going to come from? We're not sure, but we're going to invest in copper companies today, producers today, and maybe people that are on the verge of producing the next four or five years. This is, you know, these are tremendous opportunities we think, and Canada is filled with these companies.

Whereas the rest of the world doesn't actually have that many plays. The us doesn't have, you know, 20 copper plays at all, right? So we're big into that. We're big into energy. We can talk about uranium all day long. With the developments that just happened today, I mean Sweden just this morning I was told just canceled their agreement with Russia to source uranium.

So where is Sweden gonna get their uranium from? If it's not from Russia? Well, Canada comes to mind. So we're into the uranium space.

[00:06:31] Gavin: But you mentioned the emerging middle-class and are there also some other demographic trends that you like in the playing as well?

[00:06:38] Paul: I mean the health care space is a complete no brainer here in North America.

What is it? Every day, 10,000 Americans are turning 65. This trend is not going to stop. Right? So as our population ages, you've got to be invested in the health care. There are a number of Canadian companies. Their entire business is focused on the U.S. but they trade up here in Canada. So we we love those stories. We can talk about cannabis for a little bit where in the U.S. Not sure that we're going to have federal legalization anytime soon, but it really doesn't matter.

These companies are growing. They're well-run. They're cheap stocks. Would come off tremendously. And so we gave up a bunch of returns last year in the space, but these companies are down to five and six times cashflow multiples, and you cannot replicate them. I mean, it's not easy to say you can't replicate a company, but I can tell you cannot replicate the MSOs in the U.S. these guys that are in multiple states with licenses, with distribution, with growing operations. It's not easy to get those licenses anymore.

And so these companies all trade up here in Canada. We think they're very good value.

[00:07:38] Gavin: Whereas I believe you're not too enthused about the Canadian cannabis companies.

[00:07:42] Paul: Yeah. Unfortunately they continue their downward trends and the government's just far too involved in the business up here. They're going to take all the profits, unfortunately.

[00:07:52] Gavin: So that will be a classic example of being long companies in a space which have good fundamentals and achieve, and short the ones that have unattractive fundamentals.

[00:08:00] Paul: That's exactly it. And so that's the ultimate trade.

[00:08:03] Gavin: So are there other sectors that you feel that are attractive?

[00:08:06] Paul: The steel business. Let's take that in Canada.

There are two steel companies. Stelco came out with their earnings last night, it made six and a half dollars a share in the quarter. By the way, they're buying back another 10% of their shares. They bought back almost 30% of the company last year, and they're buying back another 10 this year. This stock is trading around let's call it three times earnings. And then we've got Algoma steal.

The numbers even lower. Interestingly enough I just saw comp chart, came out from National Bank talking about Stelco. They had all the American comps, but they sort of forgot to put on a Algoma Steel, the closest competitor in the same country. And, by the way, if they had to put those numbers up, Stelco would look actually expensive on a relative basis.

So it's kind of funny that a major Canadian bank kinda forgets about a Canadian steel company on their comp charts. The story from Algoma is not getting out, but this company right now is trading at less than one time EBDA. I mean, imagine that Canada at least is going to come to recognize it. That's great value there.

[00:08:59] Gavin: And of course there's the secular trend of the whole infrastructure build out for which we're going to need lots of steel. And therefore, if you're actually able to buy these companies at these types of valuations, it's not merely, oh the steel price is going to go up in the next year or two it's a five or 10 year process.

[00:09:14] Paul: Sure. Absolutely. People are saying, well, as steel prices are high now, therefore they're going to go lower. Therefore, you, you sell the stocks. Well, I don't know, you're trading close to one times or two times EBDA and you know, the industry is going to do well. I mean, if you just read about whatever car manufacturer, how much they're going to increase production this year and next. I mean, the numbers are quite staggering.

That requires steel. If you're going to make cars, you need steel. So I'm not sure the steel prices are going to sink way back down dramatically. Quite the opposite. I think they're going to stay at the elevated levels and these companies within 24 months, they're going to create their entire valuation in cash.

[00:09:50] Gavin: Absolutely. So all of that would, and again, I know you're not necessarily a big macro forecaster in terms of the way that you run money. The implication of what you've been saying in terms of energy and materials and commodities and steel would imply, wouldn't it, that inflation is likely to remain at a relatively elevated level?

Paul: We've been talking about inflation over 5% in urban cities in North America for years. I think now the governments are admitting that inflation's running uncomfortably high for them, but we've been seeing it for years. So what is the real inflation rate? I'm not sure, but I think 8% 9% is probably not far off.

So how do you protect yourself against it? You invest in funds like ours, you invest in the companies that we like to invest in. You own a lot of hard assets. Okay? Real companies producing real things. And then precious metals. What's wrong with precious metals? I mean, just today, it's clear as can be today with the Ukraine invasion.

What happens to all the crypto land? Falls 8% in a day because of something that's happening in the Ukraine. Okay. What happened to gold? Gold goes up 2%. You need to have hard assets and you can't have enough. So we've got a big precious metal position. About 20% of the fund. Again, long short within the gold space.

We we have the names we like. We don't think we're paying excessive. We bought into Calibre Mining. Just to give you an idea, the Calibre is trading at a five times EBDA. It's a growth company in the gold space and trading at five times EBDA. It's just too cheap. So we like these stories. K92 came out with their numbers the other day.

This is our biggest holding. It's a fabulous company, huge gold reserves. Papa New Guinea, that's actually when gold is, and we're quite comfortable. We've been invested for years. We liked their cashflow multiple, and we'd like to grow. So yeah, hard assets.

Gavin: Would that imply, therefore that you're not especially enthusiastic on financials? Or because sometimes people will say, well, actually they'll benefit if interest rates rise to account for inflation. That improves their spreads and that improves their valuations. Do you have an exposure to financials? Are there any areas of the financials sector that you don't have exposure to?

[00:11:51] Paul: We do like financials. Well, and we like, certainly in Canada, one of our favorite stocks is this crazy company called goeasy. Good company, crazy name.

But anyway, what they do is it's very simple. They lend money to everybody the Canadian banks will not touch. So higher risk lending perhaps, but these people know exactly what they're doing. The company's been around for all the time we've been around. 15, 16 years. They've done extraordinarily

well. And then just in the last seven, eight months the share price came off a healthy 30% and we decided we just had to own it these levels. So this company's trading around 12 times earnings. Return on equity is 30% plus. They've never had a down quarter. So this is a growth company, very technically savvy as well.

Right? They use artificial intelligence and algorithms to monitor their loan book. They lend money out at higher rates and they have higher losses, but it's a very good business in Canada. So we love that company. It's now our third largest position on it. So goeasy we like.. And frankly, it's cheaper than the banks.

[00:12:48] Gavin: And correct me if I'm wrong here,Paul, that you don't own the banks simply because every other Canadian manager owns a bank. So therefore, what you're trying to do is to give some differentiation?

[00:12:57] Paul: Exactly. I mean, people don't pay us to go buy bank stocks. Every investor we have probably owns a ton of Canadian bank stocks and frankly some of the other, you know, the Canadian utilities we don't touch. The phone companies we don't touch. Just because it's easy to own them. Right? Anybody can buy Roger's stock and stuff. So we're more focused on the opportunities outside of probably half the index. Right? If you add up the banks, you add up the phone companies, and the telcos, the insurance companies, that's about 50% of the market, right?

[00:13:23] Gavin: So adding BT Global to your asset allocation will definitely be a differentiator. And also, as you mentioned, the ability to go long, short. You're short Canadian cannabis, you mentioned. Are there any other sectors where you are short or where you feel the fundamentals are particularly attractive?

[00:13:41] Paul: We really just do not like the U.S. tech space. Maybe not the top stocks, the Apples and the Fang stocks. Maybe that's okay. But you go one level down, there's a slew of technology companies, basically. You know, Kathy Woods is on TV, on CNBC, talking about her portfolio all the time. "Valuations don't matter. It's all about the future."

Endorsing stocks of companies. Imagine this, you know, a company with a hundred billion dollars market cap and 1 billion in revenue. And by the way, no earnings or cashflow of any kind, right? Probably losing half a billion a year. You just look at these valuations and you just shake your head going: what? Why? Why do I have to pay this much?

And so, as I said, our short books up about 40%. We're short all sorts of these names. And then the private equity guys keep bringing these opportunities to us. Like look at the recent IPOs in the U.S. in the tech space, or, you know, you take that Rivian Motors or Lucid. You know, these car manufacturers, these electronic vehicle, EV car manufacturer, truck manufacturers. They come public, but at evaluation of completely absurd 60, $70 billion.

Anyway, now they're trading for 40 billion. So the stocks down 50% or something, but where are they going? I'm going to suggest they go lower. Much lower. Because the valuations make no sense. So we talked about Peloton. Peloton, the valuation was absolutely mind numbing. And now that the stocks down 80% valuation is still too high.

And in Canada here as well, the company Shopify is fabulous. But the valuation is insane and now has fallen in half and some people are okay now it's cheap. Well, it's certainly cheaper. I mean...

[00:15:18] Gavin: Well as you know, Paul, it's the old curse. If your stock market capitalization becomes bigger than Royal Bank, it's not good news. Because it means you remember it was Nortel in 2000 and RIM in 2008 and Valiant in 2015 and now Shopify. And all of them, the only reason you get bigger than the biggest bank in Canada is because you are really, really expensive. The winner's curse.

[00:15:36] Paul: Yeah, exactly. Let's look forward to the next one that accomplishes that because you're right. That's one of the Canadian no-brainer investment opportunities, right? It was kind of funny at Lightspeed did very, very well, right. I mean, just got to a tremendous valuation. And then these guys in the U S called Toast, TOST is the symbol.

They come out at an even higher valuation, if you can imagine. So the private equity guys own this thing, right? And then the banks brought it out and then evaluation is absurd. So we're looking at all this and we go, well, how do you compete against Lightspeed? Or the guys from Toast. They don't even have any competition in their marketing documents at a all. No comp charts, no valuation metrics.

And we call up the guys from Lightspeed and say, what about Toast? And they go, well, they don't refer to toast either. They don't have a comp table compared to evaluations. And we're like, wow, we can't figure out which of these two companies is more overvalued. So we shorted both. Anyway, these are, it's just absurd.

So buy companies at five times cashflow or less, and short companies at 50 times revenue.

[00:16:36] Gavin: Your track record since you started, which is now, whatever 15 years, that you have outperformed both the TSX, which is not particularly difficult, I need to be fair, but you've also performed the S&P 500 in Canadian dollar terms, which is a much more impressive feat.

Would you attribute a large part of that to the short side? As you mentioned, it contributed a lot in the last few months, but has that been a major part of it? Or has it simply been the fact that you've been able to identify these undervalued stocks and in time they've actually come good?

[00:17:03] Paul: Well, you know, we made basically five and a half times their money over 16 years. I'd say four and a half of that was from long positions. So, certainly a full term of the entire portfolio. One of the multiples came from the short side. The way we look at is the way to manage the volatility. You know, having a healthy, short book and you can't do it on your own and you can't short stocks in your personal portfolio, you have to be glued to the screen all day long. But you can't do it in a fund like,

you know, the first diversified. You can certainly have a healthy short book. And ours is pretty healthy right now. You know, we're up around 30%. It keeps us active.

[00:17:37] Gavin: In terms of the number of positions, you're a fairly concentrated portfolio?

[00:17:40] Paul: We're on the long side. 25 to 30. But it's concentrated in 10 and then we get up to 30. And on the short side, it's more like 15. So more concentrated.

[00:17:51] Gavin: So effectively around 40 or 50 in total at both long and short. So again, it's going to look, as you say, you'd only invest in half of the Canadian index anyway, and what you do invest in, it's pretty concentrated. A little bit about the structure of your fund.

How is it organized and what's the the size and the ability to put money in and take it out?

[00:18:10] Paul: Well, it's a simple structure. We're a limited partnership. So it's only for Canadian investors for high net worth folks. Or accredited investors are welcome to join anytime. And you can invest on any month and you can redeem on any quarter to give us a month's notice, you know, just send us a note and say, you know, I'd like to take some or all my money out.

You can do it four times a year. And there are no fees for taking your money out. It's your money. We like to grow the fund. That's why we're working with SmartBe. We're very excited about getting this fund up or a well over 150 million is our goal and maybe a little higher, and we're only at 50 million today.

That's a priority for us. It's good for all our investors that we can get this thing larger. And then we have a trust. We just put together last year, a registered eligible trust. And the only thing that trust does is invest in the fund, but you can invest now through your RSP or your RIFF or TFSA. Invest in the trust, and then we'll take care of the rest. We'll just put all the money into the fund.

[00:19:03] Gavin: And in terms of fees, you've got the traditional 2% of AUM, which hedge funds do. Performance fee as well?

[00:19:09] Paul: Yes, we have a performance fee. So we'll charge you 2%. Everybody says it's a lot. Although Justin Trudeau pays for half, right? It's all tax deductible. So you actually, as a high net worth Canadian, you're only going to pay 1 and 10.

We do have a performance fee. So we have to make you back your 2%, we make you 5% as a hurdle rate. I have to make an extra five each year, and then we split the profits over and above that 80/20.

[00:19:31] Gavin: So in other words, again, that's a very traditional hedge fund structure. And one of the things about fees is that people tend to in this day of index investing and Passive and Vanguard, dig it at one center or even zero, get very obsessed about how high fees are for actively managed.

But obviously if you're adding value in the way that you have consistently managed to one might feel that that's a reasonable fee to pay.

[00:19:53] Paul: There's an obsession

In our industry about fees. What nobody talks about is, you know, other costs of running a fund. And I can tell you Jacques and I have most of our net worth invested in this very same fund.

We're very conscious about running it as efficiently as possible. I mean, it's so funny that National Bank came out with their earnings last night. Their earnings are very impressive. They make a lot of money in the asset management business. So that's taking my money and managing it somehow. And yet they charge low fees.

Does nobody ask the question: how do they make so much money and not charge fees? What's really happening is behind the scenes, they're making extraordinary amounts of money off of execution and trading what I call an execution, right? Yeah, they may charge a low fees, but they still make a ton of your capital.

So I think with us, we just tell you up front you are paying higher fees, you get to deduct it. And then we run the fund as efficiently as possible with the best execution we can muster. We deal with probably 10, 11 investment banks. So we trade around the street and it's in the street helps us tremendously.

And so ...

[00:20:54] Gavin: No cause it's one of those points, which is about, that's a very valid point to bring up, I think, in terms of what price are you executing at? What's the spreads? Just the trading expenses as a percentage. And it was always a fascinating exercise to actually do the analysis on that and go, it doesn't matter if your fees are relatively low.

If you're trading like a drunken sailor and getting really bad execution. So that would not be an issue for you. You mentioned it's about 50 million in assets and you'd hope to get up at least 250 or whatever. Would there be capacity perhaps for maybe quarter of a billion or something like that?

[00:21:24] Paul: No. We're all about returns. Since the day we started the fund, you know, 16 years ago and said we'd like to outperform the markets. It's not an easy thing to do, but our goal was to do it and we have been doing it . We think we're going to continue to do it, but you can't do it with two large a book.

What's the right number? I think, you know, 200 million would be great. It's ridiculous. If we were living in New York, we probably have the 200 million by the end of next week, but in Canada it's, as you know, it's trickier more difficult to raise the capital. So we'd like to, we'd like to get it to a certain level where it won't affect the returns negatively in it.

I'm not sure what that number exactly is. Let's get there first, but we're not going to be a large billion dollar fund. Forget that. In Canada anything above 200 million, 300 million, I think you start to lose performance.

[00:22:10] Gavin: Is that a reflection of both the size of the Canadian market, but also the relatively liquid nature?

And that's maybe one of the reasons why you do have these inefficiencies?

[00:22:19] Paul: Yeah. The market cap of exciting growth stories. They're just not that many, you know, Shopifys, for instance, coming out of this country that we would get to meet management and get to know them well. There are opportunities, but they're not, you know, billion dollar company opportunities as much as maybe a $200, $300 million company that turn into a billion or two over five years say. You can't write $30 million checks in this country easily and have the returns we do.

[00:22:44] Gavin: But then that is part of your value add because of the size of the market. You do get to see the management. You do get to know them well. They come to visit you when they're coming through Montreal and you therefore are actually able to apply your skills in analyzing what they're doing.

And I suppose whether or not you can them to actually do a good job and do the things they say they're doing.

[00:23:03] Paul: Exactly. That's what it's all about. I mean, one of our big holdings is a Champion Iron today. CIA is the symbol and a fabulous company. We had the opportunity to invest back when it had a market cap of like 20 million bucks.

And we were so dumb. We passed. But we did manage to grab it when it was a $300 million company. And now it's 3 billion. We think it's going to 15 billion. We think it's going to be one of Canada's largest mining companies, period. And we liked the valuation now. But what we like is the management. These guys are world-class.

So they're in the iron ore business. High-end iron. You know, high purity iron ore which is what you need. Not the stuff Australia produces as much as what Quebec can produce. And so this is what's going to be used for the electric arc furnaces that are the future of the steel industry worldwide. But funnily enough, Ukraine exports a lot of high-end iron, or you have to search, you know, Brazil and Russia or Canada.

And this company trades at a, I dunno, it's about four times IBDA. They hardly have any debt and they just by the way, they just recently announced a dividend. Semi-annual dividend. But you're actually going to get three of those dividends this year. So the actual yield on the stock now is higher than that of the Royal Bank, just like that out of the blue if you got a higher yield.

And then they're buying back their stock. But it's all about management. And so if we hadn't known management as well as we do now, of course we would have gone in earlier and stuff. But that's what it's all about. Right? Finding people that want to build world-class companies.

[00:24:27] Gavin: And perhaps as a caveat to that world-class companies in politically stable jurisdictions, because obviously what's been happening with Ukraine, and you just mentioned it in terms of potential disruption to supply of high quality iron ore. Canada does stand out as being still a relatively friendly jurisdiction for people wanting to exploit, high-quality long life resources. Would that be a fair comment?

[00:24:48] Paul: Absolutely. Even to the point of, you know, the agri business, which we've been talking about for years. We were just struggling to figure out good investment opportunities in the space. But this is

becoming very clear, right? You need these essential materials that allow us to feed ourselves. So what does that mean? You need phosphate, nitrogen and potash. You need resources from stable jurisdictions and Canadas thankfully got all this stuff. You know, we're looking for investment opportunities in the agri space all the time.

The commodity cycle is going to be a super cycle. I think it's clear as could be. But it's also a hedge against inflation and it's also good value. There's lots of value in the commodity land. That's why we like it for multiple reasons.

[00:25:27] Gavin: Would you also, you mentioned a couple of companies internationally and with your international experience you're able to invest globally, but at the same time Canada is obviously the great bulk of what you do. About what percentage of the fund would be invested in non-Canadian companies? Because you mentioned, for example, Canadian healthcare companies that are selling in the U S but obviously they're listed in Canada. So they count as Canadian.

[00:25:48] Paul: That's the thing we basically don't touch any story that's only focused on Canada. We just don't do any of it. Right? So I'd say zero. If it's just a domestic only story, it's gotta be companies that are, you know, have global ambitions or mostly U.S. focused.. They trade up here.

They're covered up here. Management might be here, but it has to be a global business plan for us to get interested. Because that's where the most of inefficiencies are, right? That's where it gets a little more complicated and therefore the market may not really recognize the value as quickly as we might.

And then the market eventually comes around and figures it out. So there are hundreds of companies like this in Canada, right? That are doing very, very well all over the world, but they may not be all that, you know, well-recognized now.

[00:26:31] Gavin: That's a very interesting point you make in the sense of not investing in anything that's only focused on the Canadian domestic market. Presumably because it's relatively small.

[00:26:40] Paul: Well, if you're really good at what you're doing in Canada, you should be doing it probably in the U.S. pretty quickly. Why not? Shopify being a perfect example, right? The global ambitions, right? Become a big player in the U.S. like out of the gate. Good for them. That's how you create massive wealth.

[00:26:56] Gavin: Well, that's been exceptionally helpful, Paul. It's a very interesting story. Lots of really good and interesting details about individual companies, which I know are things that people like to hear about. I think you had the three word summary of the positioning of the fund at the moment, which was the three Cs. Was that right?

[00:27:12] Paul: That's right. Well, commodities we've talked about. Cannabis, we've got some views on cannabis, so we'll put sort of 15% of the portfolio into that and we'll go higher. And then Canada in general, right? We've been saying, I maintain it today. Canada as a market is going to outperform the U.S. I don't say that lightly. It has in the last year. It certainly is this week.

I think it's going to continue. When we launched the fund 16 years ago for eight years, eight, nine years, Canada outperformed so much that we barely referenced the U.S. markets. Of course it's been the opposite the last eight years. Owning the U.S. market has been a fabulous ride and good.

That's great. But it's all about the future. So we're quite bullish on the Canadian market.

[00:27:52] Gavin: And that would presumably, and again, I know you don't make macro calls, but presumably that's going to be good news for the Canadian dollar. I recall the last time when, again, you'd started in the late 2000s, and when you had the last big commodity cycle, we actually got above parity. I remember at BNN had the little ticker in the bottom corner of the screen, showing the Looney is now worth more than the U.S. dollar for the first time in what, 40 years or so? And now would that be a possibility without wanting to actually tie you down to a number?

[00:28:21] Paul: If the federal government changes its view on energy and maybe a couple of other commodities. Sort of adopts a more, you know, endorsing these assets that we have and frankly have created a whole lot of wealth and frankly pay the bills in Canada.

If we had a little more enthusiasm, I think at the federal level, at the provincial level, then I think the Canadian dollar, well, first of all, the industries would do better. And I think the Canadian dollar would actually rip, but I think foreign investors are struggling with the fact that it's very clear.

There's a conflict in this country over energy policies and stuff. It's got to to change, I think for us to get back to parity. But I'm not sure that the government wants parity. I think the plan is to keep the dollar low. But fundamentally Canada is one of the richest nations. We have everything I'm thinking in a commodity supercycle the Canadian dollar is a good place to be.

[00:29:10] Gavin: Well, that's a good note to leave on Paul. It's been extremely interesting and entertaining as always. Thank you very much. And we do certainly hope that the collaboration between SmartBe and BT will enable you to get a lot more money to put into these fascinating situations. Thanks very much.

[00:29:24] Paul: Thank you. Look forward to to working with you guys and thanks very much for having me on the show.

[00:29:35] Gavin: Thank you very much for listening to The Gavin Graham Show sponsored by SmartBe Investments. If you would like to learn more about the subjects discussed today, please go to our website at or @smartbeinvestments on any social media platform.

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