PODCASTS

PARTICIPANTS

Mark Brisley
Managing Director and Head of Dynamic Funds

Vishal Patel
Vice President & Portfolio Manager

PRESENTATION

Mark Brisley: You are tuning in to On the Money with Dynamic Funds, a podcast series that delivers access to some of the industry's most experienced active managers and thought leaders. We're sitting down to ask them the pertinent questions to find out their insights on the market environment and navigating the investment landscape.

Welcome to another edition of On the Money. I'm your host, Mark Brisley. Obviously, it's been a tumultuous start for market conditions in 2022 with tensions escalating geopolitically, continued havoc in global supply chains, and of course, inflation and rising rates. Over the long term, we know these issues will subside but in conditions that have not been seen in succession in close to a generation, many investors are asking will rapid inflation drive a deceleration in business and consumer spending, and should we worry about negative repercussions for corporate revenue and profit growth? Should I be favoring one investment style over another, like value over growth or vice versa?

The question of investing style really depends on many factors, since each style can perform better in different economic climates. As markets continue to grapple with volatility, a key area investors are turning to and we believe should continue to think about is sustainable quality growth. Today, we're fortunate to be joined by Portfolio Manager, Vishal Patel, who has over 17 years of industry experience in managing North American growth-oriented equities. Vishal employs deep fundamental analysis to select best-in-class sustainable growth companies run by strong business leaders and management teams that demonstrate sound capital allocation disciplines.

Vishal, it's great as always to have you on another edition of On the Money. I wanted to jump right in and go back to the comment I made in the opening about investors thinking about value and growth and the messaging that's out there right now. You're a growth manager so what's that mean in terms of your approach to managing client money?

Vishal Patel: Yes, different styles of management, and when they work in the cycle is extremely important. For myself, we deploy a strategy of quality growth, and so what does quality growth mean? We like companies that grow over time, but they don't need to grow 20%, 30%, 40% a year. We're happy with companies that can grow their top-line 5% plus every year, but they have to be durable, they have to be sustainable, they need to be able to do that for the next 5, 10, 15, 20 years.

The idea here isn't just keep growing, grow, grow, grow top-line growth, and never make any money, and one of the things that we've seen over the last 18 maybe even 24 months, there were a lot of companies that went public and generated a lot of sales traction but never had profitable growth. There were a lot of sparks, there was a lot of speculative access and small caps. This idea of just growing for the sake of growing, using capital markets to grow some financial engineering, that's not our style. Our style is quality growth and what quality growth means to us is companies that actually earn a return on capital, companies that can actually grow over a long period of time, companies with great strong management teams and brands.

You started off with this notion of inflation and rotation of value and growth but one of the big things that we look for in the companies that we invest in is this idea of pricing power. We like companies that can price their products and services and the ability to raise prices in an inflationary environment, and so that's one of the key characteristics that we would actually look for in a company that's high-quality growth is the ability to raise prices.

Mark Brisley: Investors are being bombarded right now with information about recent market volatility, tensions globally that are causing some of this volatility, but also market conditions have been created from us coming through what would be considered a recovery period out of a global pandemic. What are your thoughts on what seems to be the continuous stories that we're seeing in the markets and why do you think investors need to be concerned about the specificity of adding something like a long-term sustainable growth strategy right now?

Vishal Patel: Yes, that's a good question. Look, there's a lot of uncertainty and the big idea here is that the stock market does climb a wall of worry. It all started mainly year-to-date if you think about this, this rotation you're speaking of, this volatility, the VIX. The VIX is a volatility index, usually averages around 15%. This year, it spiked all the way up to 37% and now it's down closer to 20%, so volatility has come down but the question you need to ask is why do we have much volatility and why have we had much volatility year-to-date?

I believe it's one of the most volatile periods for over a decade, and so what's causing it? You got this war, so we should definitely touch on the idea of war, military conflicts, potential for recession. Let's not shy away from the R-word. Oil shock, everyone's feeling that at the fuel pump. You just talked about the pandemic. There's a lot of macro uncertainty and where we are in the economic cycle, are we actually late-cycle and potentially hitting a recession? These are all things to consider.

It's one of the reasons why we've had so much volatility. It's one of the reasons why stock markets year to date are down. A lot of individual companies are down. We didn't even talk about what we're seeing in fixed income markets, but fixed income you would think is an area where you have protection of capital, but with rising interest rates, clients have lost money in fixed income for the first time in a long period of time.

Definitely a lot of volatility but I've always viewed this volatility as opportunity and the reason I say that is this ability to think long term. It's very hard to think long-term, it's very hard to look out 5 years, 10 years, 15 years. Earlier, when we talked about quality, we talked about quality growth, we talked about durability, sustainability. These good things only work if you're willing to look out 5, 10, 15 years, and so one of the things I always do is step back.

I love Warren Buffett. Anyone that knows me, I've gone to the annual meeting for over 10 years. I'm looking forward to going at the end of next month, but there's a quote I want to share with everyone listening today, and it's very timely and it gives you a sense of why I believe all this volatility equals opportunity, why I think it's a great time to deploy capital, and I'm hopeful that you find this quote as helpful as I do. I try to refer to it anytime that the VIX spikes.

Warren Buffett: In the 20th century, the United States endured two world wars and other traumatic and expensive military conflicts; the Depression; a dozen or so recessions and financial panics; oil shocks; a flu epidemic; and the resignation of a disgraced president. Yet the Dow rose from 66 to 11,497.

Vishal Patel: Just step back and think about that. Military conflict, Depression, recession, flu, oil shock, financial panic, sounds like all the things that we're reading about in the newspaper these days, but look, the stock market has gone from 66 to 11,497. I believe this was from the 2015 or 2017 annual letter to shareholders, but this is why I'm optimistic on the long term. This is why I believe it's a good time to deploy capital, and this is why this notion of time in the market, it's not timing the market. We love the idea of Dynamic Funds, of invest with advice, so working with your financial advisor, sticking to your financial plan, not making those big macro calls, and focusing on the fundamentals.

I do like this idea of dollar-cost averaging in the market. It's what I recommend to friends and family, but this long-term idea of accumulating ownership in a business and thinking long-term is something that's important especially given all the volatility that we see in the marketplace today.

Mark Brisley: Yes, and if we rewind the clock to later in 2021, the bull case for growth was really stemming from a world that was going to be emerging from a pandemic, good economic growth, moderate inflation, gradually rising rates, but we've seen deviations on all of those things playing out the way we're currently witnessing, on top of having this geopolitical crisis on top. When we think of people that are saying investing styles, favoring one or the other, it's hard to do right now, isn't it? It's hard to reconcile.

Vishal Patel: Yes, no, absolutely, especially when you talk about style, and we didn't touch on value, but one of the characteristics of that value basket is this notion of financials, energy, materials, and one thing that we have seen, one of the areas that's actually really benefited, whether it's with rising rates or with the war, Russia produces a significant amount of commodities, especially with Ukraine as well. Whether it's wheat, oil, sunflower seed, the list goes on and on and we've seen it. If you look at potash prices, they're through the roof, oil prices are through the roof, nickel pricing. Nickel, palladium, platinum.

We've seen a substantial amount of - and price moves that we haven't seen. We're talking about 50%, 100%, 200% increases. Those shocks is one of the reasons why we're seeing VIX go up, one of the reasons why companies- this is input costs for all of these companies. Say you have this high-quality growth business that over time prices well and can raise prices, but in the short term, if you have all of these input costs, if you have all these commodity cost inflation, it becomes very hard to manage in the short term but this is why I keep going back to this notion of longer-term. If you have the ability to raise prices, pass it along.

There's opportunity and going back to your first, first question, you talked about value growth, the rotation. It's good to have a good blend. I'm not here just saying that all you need to own is high-quality growth and it works three out of the four parts of the economic cycle. It's important to have a good balanced portfolio of different styles and that's the beauty of Dynamic Funds. In a way, the market exists within the firm. I believe we have great value product, we have great growth product, we have great dividend product, so it's up to the client and their advisor to determine what's right for them. For me, I could focus and talk about what I do, but having that balanced approach is important as well.

Mark Brisley: You've mentioned a couple of times quality growth companies, but also this overlay of sustainable quality growth company. What do you mean by that?

Vishal Patel: One way to think about sustainable, and I'll link it up with we're talking about commodities and things of that sort, but I'll start with what's not sustainable. If you recall, there used to be, VHS tapes, then VHS tapes I think we went into, DVDs, and then now we're streaming. You're always on this treadmill and there's always version 2.0, 3.0, 4.0, and technology's changing. You have no idea what the next new technology is going to be 5, 10, 15 years from now. What does sustainable mean to me, what does durable mean to me?

Paint is an example of something like that. A can of paint is a can of paint is a can of paint, paint hasn't changed in a very long period of time. Maybe you might consider wallpaper. When you invest in paint, I believe something like paint is something that's going to be around for a long, long period of time. Another idea similar to this idea of what is long-term sustainable, we all have two feet so we're all going to need shoes. If you invest in a shoe company, as long as we're going to have two feet, you're going to need shoes. That's what we're thinking about when we're thinking about long-term sustainable durable companies.

It could be a shoe company or could be a paint company but those are some of the areas where we believe you can have a long-term sustainable growth as where, maybe what we saw over the last 12, 24 months, and we've seen a huge correction in that area of the market. This idea of, hey, we got a new technology, hey, we're going to change the world, hey, we got a new delivery system. The valuations for some of these companies went crazy but they never really made any money. That is not what we think about and how we think about high-quality growth and sustainability.

Mark Brisley: I wanted to ask you a little bit too about the importance you've always put on once you've found these companies and once you've become an investor in these companies, importance of consistency in performance. You act as a fiduciary with responsibility for client capital and you take that very seriously. How do you calibrate your portfolio so that an investor can own them throughout a full market cycle, which right now is something that I'm sure a lot of people find difficult?

Vishal Patel: The way to think about portfolio construction, and I do think about portfolio construction as an art form. Earlier, I mentioned this idea of paint, so you can have a paint company. I mentioned shoes, so you can have a shoes company. This idea of materials, consumer discretionary, but there's other areas and sectors in the market. The idea isn't just you being 100% in technology or being 100% in materials. Having a good overall sector and broad sector I try to be in at least 7 out of the 11 sectors in the marketplace. There is a lot of good financial services companies to invest in, there's good technology companies to invest in.

Then you talk about through the cycle. One of the ways to do through the cycle is also look at the end markets, look at the geographical exposure, and then look at things that we want versus things that we need. I think when we did the small-cap podcast, we talked about the difference between consumer discretionary and consumer staples. We're all going to need to eat and if you have some consumer staples companies, whether it's a food company, a lot of people have been going to big box stores. This idea of a high-quality portfolio that's diversified by different sectors and end markets and geographies, that's the art piece and weighing those correctly.

The same thing if we're investing in technology, it's not about just how having everything in software. We could have software, you can invest in semiconductors, you can diversify by investing in payment companies which are actually now, it's interesting because the gig characteristics, gigs is the global classification of sectors. Visa and MasterCard used to be considered technology companies, but starting next month, they're actually going to be in the Financials Index. This idea of having broad sector exposure is one of the ways how we can balance out the portfolio, round out the portfolio. Hopefully, that should provide a smoother ride from a high-quality growth perspective.

Mark Brisley: Let's talk about the big I. Inflation's on everybody's minds. I think you and I would agree, Vishal, that this is not a transitory period, we are experiencing real inflation right now, and it's impacting Canadian households. How does inflation, though, impact your thinking as an investor when it comes to selecting which businesses you want to own in your portfolios?

Vishal Patel: Yes. Inflation is a huge topic. We talked about fiduciary and how important it is to be a fiduciary, and the billions that we have fiduciary client capital, but I've always viewed that when you take capital right now, you're essentially delaying purchasing power now to have more purchasing power in the future. That's one way to look at investing. If you have $100 right now, you're making a case that by deferring that $100, purchasing a business, a share can be viewed as a portion of a business, the idea is that you should have more purchasing power in the future, and you'll be able to sell that business for higher.

I've always viewed that as one of my primary jobs is to help clients protect against inflation. I started off with this Warren Buffett quote, and he's always talked about inflation for a long period of time, whether the '70s, '80s. Look, inflation is a monetary phenomenon, inflation has always been present. I remember the chairman of Dynamic Funds, Ned Goodman, he used to always talk about inflation and shadow statistics.

The way we think about inflation, there's three people I respect tremendously in this business. We mentioned Ned Goodman. Ned was always inflation, inflation, inflation, buy gold. Prem Watsa is somebody I haven't talked about in the past. Prem was always about deflation, deflation, deflation, buy bonds. Then Warren Buffett, who's my teacher and has taught me pretty much everything I know in this business, his idea, and that's the idea that we're conveying here today, if you own a high-quality business and that high-quality business has pricing power, that's where you want to be. That's how you're going to compound wealth over time.

You need to find this business that's going to be able to price. Not every business can price. There's a lot of businesses that actually over time cut prices, so we need to find businesses that can raise prices. The way you do that is by having a very strong brand, by providing a product and service that the customer wants. One of the ways that you can actually judge pricing and pricing power is, again, ask yourself, is this something that you would actually pay more for?

I'll use the example of Nike shoes. If a Nike shoe goes from $100 to $120, are you going to pay $120? Are you going to pay 140? Would you actually, for a special shoe, pay $200? Are those $200 shoes going to become $300? These are the types of questions you need to ask. What are the brands that can actually raise prices?

Apple, another excellent example. I just got an iPhone 13, I think it cost $1,600. I remember when iPhones were $1,000. The iPhone's gone from $1,000 to $1,200 to $1,600. I believe iPods have gone from $200 to $300 to $400. Over time, I believe there's inflation, there's inflation in food, there's inflation in energy, there's inflation in housing, there's inflation everywhere I can see it but I believe that the best way that you can protect yourself on that is by owning a great business and by owning a great business that can raise prices over time because you're providing a good or service that's in demand, that's in need, and that you're going to want in the next 5, 10, 15, 20 years.

Mark Brisley: Thinking about where we are right now, what would be an example of a business like that that you're positive on?

Vishal Patel: Look, I mentioned what we're seeing in terms of devices and what we're seeing in terms of paint. Paint is an example of something that won't immediately be able to pass it on. There are examples of businesses like this where there's a transitory effect. Transitory is probably a new word everybody learned when we talk about inflation. There are certain businesses that you can't have the price to direct, it takes a little bit of time.

If you think about a can of paint, you have oil prices as an input, you have resin prices. The can of paint is actually made with steel, and steel prices have quadrupled, then you have the paper around. Here's an example of a great high-quality business. I just mentioned paint's going to be around for a long period of time but in the short term, a business like that will take a hit, margins will come down. Over time, you can slowly pass it along prices. This ability to pass along prices and raise prices and find that quality, it's not market to market always, it's not instantaneous. In some businesses it is but there are some businesses where it takes a little bit of time.

The other area where you find these businesses is this notion of monopolies, duopolies, and oligopolies. If there's nobody else doing what you need or want, you have no other choice. It sounds anti-competitive, but investing in monopolies, duopolies, and oligopolies over time has been a good strategy, but if you can find those areas of the market where there isn't a lot of competition, that would also be a good area to invest longer term with these companies that can over time raise prices.

Railroads is an example of that. You wanted one more idea. I would say railroads, there's only so many railroads. If you want to move anything, we're talking about, railroads move oil, railroads move wheat, railroads move potash, railroads move all of these commodities. Overall, you're not recreating railroads. We just talked about oil price. If you're going to move something by truck versus rail, it's cheaper by rail. Railroads, historically, have been one of the best places when you think about pricing power. Historically, a railroad has been able to raise prices by at least 3% to 4% every year. I don't need to tell you; railroads have been around for hundreds of years.

Mark Brisley: Vishal, another area that I think a lot of investors would be hearing about right now is the term economic cycle. I think we may be over-assuming that investors understand what an average economic cycle looks like. Probably, since around 1950, that's been between five and six years. Has that remained the case in recent times, and where are we now, would you say, in the economic cycle?

Vishal Patel: Economic cycle is something we definitely spend time thinking about. Earlier, when we talked about portfolio construction and the art of portfolio construction, it's important to know where we are in the economic cycle, where we're heading, especially, when you're trying to calibrate that portfolio to succeed through the cycle. Look, you're right, there's been short cycles, there's been long cycles. The case can be made that we had one of the longest economic cycles, 10 years, last cycle, so the question now, and one of the working theses is, that's possible. Could we now be one of the shortest cycles and have we actually gone very quickly from a COVID recovery, early cycle, bounce back, mid-cycle. Are we actually in the late cycle now, especially with the Fed raising rates with this oil shock. Could we actually be heading into a recession?

There's a couple of ways to think about this. Economists forecast, not because they know, but because they're asked. That's one of my favorite John Kenneth Galbraith quotes. I would say that there's a couple of different ways this can actually play out. Look, there's four parts to an economic cycle. The first is the early cycle, the second is the mid-cycle, the third is late cycle, and the last is this idea of recession, and the definition of a recession, to make things basic, is two negative quarters of GDP growth. Historically, you never actually know where you are in the cycle until the data comes out. There's a lot of economists out there and everyone is always trying to figure out where we are, and you only know after the fact.

Right now, there's a couple of things that can play out. This is one of the reasons why we're seeing so much volatility, why we're seeing so much rotation, why we're seeing the VIX go all the way up to 36. There is a potential scenario of a recession, right? If we had a recession, asset classes, including all stocks would go down, and they would go down meaningfully, but there's other scenarios that could actually be playing out. Maybe we're in the late cycle and the late cycle can be for a couple of years, or the rosiest scenario that can play out, this idea of a soft landing.

Everything we've seen is maybe geopolitical in nature. Maybe some of this inflation is transitory. You're seeing some used car prices come down, and so do you have this idea that this is a mid-cycle correction, and then you could expand this economic cycle. It's going to be interesting to watch and how it plays out but there's a couple of different ways. Are we actually going to have a recession? Are we actually going to be in the late cycle for a little bit? The best scenario would be if the Fed can work their magic and maybe we can have this idea of a mid-cycle correction and recovery and extend the cycle because if we hit recession right now, this could be considered one of the shortest economic cycles which is possible.

Whether we have scenario A, B, C, or D, this is why I like this idea of high-quality growth businesses and everything we do. High-quality growth, historically, has worked in three of the four parts of the economic cycle. It doesn't work all the time and you don't know the number of months or years that each part is going to be. Why do I like this idea of high-quality? Because A, I just said, nobody actually knows exactly how it's going to play out. What we try to do and where we spend a lot of time, and we haven't talked about that yet, is this notion of management and investing with entrepreneurs and founder-led businesses, and having this high-quality product, and allocating capital well.

For us, irrespective of the economic scenario, irrespective of how interest rates play out, irrespective of the amount of inflation we're going to see out there, you need to have that management team, that company, that culture, that executive team that's going to be able to manage through these different economic scenarios, that's going to be able to calibrate the business, and specifically, if you do have worst-case scenarios, these great strong management teams and leadership teams, they're going to use the economic down to recalibrate the business, but put potentially even allocate capital and take out maybe a weaker competitor, gain market share, and we saw that during COVID.

Some of the stronger companies, so this goes back high-quality growth business also has a strong balance sheet, so can you actually use your strong balance sheet to take out some of your weaker competitors when you have economic crises or maybe there's somebody that's got too much debt out there. I would say this goes back, why do I think opportunity? Why do I think longer-term? Look, capitalism works and this idea of owning a business and a business that can grow, and if it can grow irrespective of the economic cycle, and there are businesses that can grow irrespective of the economic cycle.

Say you have one store, and it goes to five and then 10 stores, a company like that, or you have a product, or a service and you go from 5% market share to 10% to 20% and you become the leader in that product or service. That's where my job comes in is to find those opportunities because they do exist and there are some great leadership teams and management teams that are very capable of managing through the cycle.

Mark Brisley: One of the more interesting topics I've heard you talk about, toilet paper economics. What do you mean by that?

Vishal Patel: If you recall, during the pandemic, everyone was going out and buying toilet paper, but it wasn't just toilet paper, it was toilet paper, it was bleach, it was hand sanitizer. When you look at all of these categories, it's not that you were going to the bathroom twice as much, all you did was pantry load, and you saw a huge demand spike for these products and services. These companies and stocks did extremely well, but they did well for a very short period of time.

Vaccine companies is also an example of something like this and you have this, what do you call the COVID beneficiary basket is maybe the Wall Street lingo, and now you've seen that some of those businesses are not long term sustainable, durable. Everything we're talking about today is sustainable, durable growth, and what we've noticed and witnessed is toilet paper is not sustainable, it's not durable, it doesn't have a lot of growth.

The same thing with areas like bleach, so when we're looking for these companies that can compound wealth and create wealth for unit holders longer-term, we're looking for areas that you have long-term sustainable, durable growth. We don't like this idea of toilet papers, but there are other areas in the market where there is shortages. You're reading about it in the newspaper, but it's a long-term, sustainable, durable demand outlook, and an idea that we have there, and what I share is this notion of semiconductors. If you look at semiconductor demand, whether it's in 2002, 2003, 2004, every year semiconductor demand year over year continues to rise.

You're seeing more and more semiconductors, whether it's being used in your iPhone, there's always the newer and newer version of the chip. Whether it's being used in your home, whether it's being used, whether it's Internet of Things, data centers, autonomous vehicles, gaming, the amount of chips and the need for chips and better and better chips is tremendous.

If you saw Biden's speech, this idea of passing the chip deck is extremely important. The US does want to produce their own chips and so you're going to see some fabrication facilities built in the US, and the reason for that is not only do you want to be not just reliant on Taiwan, but if you can have semiconductor manufacturing in the United States, and you've got some great semiconductor companies, but the need for semiconductors is continuing to rise year in, year out.

Look, recession, no recession, doesn't matter where we are going to be in the economic outlook, one thing I'm willing to say in the next 5, 10, 15, 20 years is we're going to need more and more semiconductors, we're going to have more and more chips and we're going to have more and more chips, whether it's in our cars or computers, and I think one of the new things you always hear is data is the new oil, but if you need to process all of this data, you're going to need more and more chips but I'm not sure we're going to be going to the bathroom twice as much, and so that's toilet paper economics 101.

Mark Brisley: Vishal, just wrapping up everything we've been talking about. What are some of the areas as, as you're looking forward, not just for opportunity but, even within your own portfolios that has you excited or that are of interest that you think are going to give you good opportunities in the year ahead?

Vishal Patel: Look, this is the notion today, deploy capital, look for those longer-term opportunities, dollar cost average, it's time in the market, not timing the market, so look, there's substantial opportunities and I do believe that when the VIX rises, that creates- that volatility. It's hard to do, right? Everyone's panicking, everyone's selling, they think the world's coming to an end. There's a war going on, there are shocks. How do you actually deploy capital with all of that going on?

The way that you're able to deploy capital with all this macro uncertainty is this idea that I keep going back to, is longer-term. What are the areas where you can invest long-term where capitalism works, where compounding works, where you can own a piece of a business, and it will do well? We just mentioned the long-term outlook for semiconductors looks very attractive, whether it's on a 5-year basis, a 10-year basis, or a 15-year basis.

The other area where we believe that there's significant opportunity, look, there's an aging population. The population is getting older, and as the population gets older, health care and the need for health care is an important area. Drug pricing is a cautious area, but I would say medical devices. If you want robotic surgery, minimally invasive. If there's a product or service, that will cause you to go to the hospital less or stay at the hospital less, if there's a product or service that can cause you to heal as you age, those are the areas where we see opportunity. I would say health care remains a long-term area as does semiconductors and technology.

Going back to this, deploy capital, I think deploying capital is the opportunity. It sounds cliche, but I'll use this example, quality on sale. Some stocks are down 20%, 30%, maybe from the November, not year-to-date. Year-to-date, some of these high-quality businesses are down 10%, 15%, 20%, but from the November high, some of them are on sale 33% off. What does 33% off mean to me, or in some cases 50% off? If you can buy a shirt that goes for $100, if it goes on sale during Boxing Day and you could buy for $50, you could buy two shirts. If you're willing to look longer-term and take that approach in the stock market, I believe that that's the true opportunity, and that's why I say volatility equals opportunity.

If you just think about a company, if it only had 100 shares and you owned one share, and if that one share went down by 50% because of all the things that are going on in the world, can you actually use that, deploy some capital and buy one more share in that company, then you own two shares? There'll be more volatile periods, I'm not saying volatility is over. There are always volatility spikes. Over time, taking the next 5, 10, 15 years, you slowly, slowly keep increasing dollar-cost averaging into this business. Over time, if you can actually own 5% or 10% of this business, the business's earnings are growing, their cash flows are growing, that's how the rich become richer.

This is the notion of capitalism and owning something for the long term and owning a piece of a business that grows. That's how a lot of wealth is created, and that's how compounding works.

Mark Brisley: Vishal, as always, we've covered a lot of ground today. There's so much to think about, and ultimately, so many opportunities to take action on. I also know, and for our listeners' benefit, you are a voracious reader and always make great book recommendations. What's on the reading list these days, especially in the current climate?

Vishal Patel: The book I actually have on the reading list these days, it's Lights Out. I believe I sent it to everyone on the executive team at the company. The reason I send that out is, some people, they say, "Vishal, all you talk about is long term, long-term, long-term investing, and long-term doesn't always work," and that's why I like this book. All you've heard me talk about is long-term investing, long-term investing works. If you own a piece of business over time, it does well.

The reason I recommend Lights Out is you got to buy the right business. Lights Out is the book I'm reading, recommending. Lights Out is a book about GE. GE actually did extremely well, and then it actually, you could make a case, has done extremely poorly, has not compounded well. GE at one point was the bellwether, one of the largest companies, could do no bad. The notion and why I bring this up and why I'm recommending the book Lights Out is earlier I mentioned the idea of management teams, capital allocation, brands and pricing power, returns on capital, growth, durability. The book shares a lot about the different management teams, the philosophy around capital allocation, bad M&A.

Look, when I say that long-term, compounding works, long-term, capitalism works, it works, but it works with the right assets. It works with the right companies. It's definitely worked with Apple, but look, it didn't work with GE. There's a lot of Canadians that are going to be listening today, it hasn't worked with Blackberry either. There are examples, whether it's GE or Blackberry. This idea of business failure, I believe there's a lot to learn from business failure. My job as portfolio manager is to avoid business failure and to find business failure early.

Look, there's probably businesses that we own right now that are not actually going to be around 5, 10, 15 years and it's going to be my job to figure out what businesses are going to succeed and do well and which aren't, and Dynamic Funds, we talk about active management but that's what active management means to me.

I did want to end on one thing. We didn't talk about this idea of founder-led businesses and entrepreneurs, but the reason I bring it up and how it's related to the chat today, some of these-- I got the Bloomberg Billionaires Index in front of me and you look at Larry Page, Sergey Brin, you see some of these billionaires, Bill Gates, they made their money whether it's in Google and Microsoft but they didn't do it timing the market, they held on to that business, they held it on for the cycle.

This is why I'm recommending that you own businesses long term, you take that longer-term approach. Don't try to call markets, don't try to time markets, time in the market, not timing the market. This is why I like those founder-led businesses, this is why I like those entrepreneurs because if you can co-invest with them, they're thinking multi-generational. This idea of multi-generational wealth creation is something I spend a lot of time on, especially as a fiduciary of client capital.

Mark Brisley: Vishal, as always, really appreciate your insights. You've unpacked a lot here for all of our listeners. I think the one thing you touched on more than anything was whether we're talking about growth or value or investment styles, all of it has to be evaluated in the context of an individual investor's time horizon and the amount of volatility and risk that they can endure, but most importantly that they take it with a long-term view overly. I wanted to thank you for your time and your insights and appreciate you being with us.

Vishal Patel: Thanks, Mark. Thanks for having me on.

Mark Brisley: Thank you to all of our listeners for joining us in another edition of On the Money. On behalf of all of us at Dynamic Funds, we wish you continued good health, safety, and peace as we move through the balance of 2022. Thanks again for joining us

You've been listening to another edition of On The Money with Dynamic Funds. For more information on Dynamic and our complete fund lineup, contact your financial advisor or visit our website at dynamic.ca.

Speaker: This audio has been prepared by 1832 Asset Management L.P. and is provided for information purposes only. Views expressed regarding a particular investment, economy, industry, or market sector should not be considered an indication of trading intent of any of the mutual funds managed by 1832 Asset Management L.P. These views are not to be relied upon as investment advice, nor should they be considered a recommendation to buy or sell. These views are subject to change at any time based upon markets and other conditions and we disclaim any responsibility to update such views.

To the extent this audio contains information or data obtained from third-party sources, it is believed to be accurate and reliable as of the date of publication, but 1832 Asset Management L.P does not guarantee its accuracy or reliability. Nothing in this document is or should be relied upon as a promise or representation as to the future. Commissions, trailing commissions, management fees, and expenses, all may be associated with mutual fund investments. Please read the prospectus before investing.

The indicated rates of return are the historical annual compound total returns, including changes in unit values, and reinvestment of all distributions does not take into account sales, redemption or option charges, or income taxes payable by any security holder that would've reduced returns. Mutual funds are not guaranteed. Their values change frequently and past performance may not be repeated.