Talbot Babineau outlines the investment strategy that has helped him double his AUM
With valuations rising and geopolitical uncertainty becoming the new normal, finding attractive investment opportunities is certainty a challenge. Noteworthy returns are increasingly difficult to find in the current environment and the trend is expected to persist for at least another decade. In times like this, developing a solid strategy and sticking to it is imperative.
When Talbot Babineau, CFA, founded IBV Capital in 2014 he did so with one definitive thought in mind: to follow a disciplined, value investment strategy. “We perform a lot of due diligence on individual names in an attempt to identify mispriced securities globally and we’ve had a lot of success with that strategy,” Babineau, who was a recent speaker at CFA Society Toronto’s Equity Investment Symposium, says. “We like to invest in businesses with thoughtful management teams for the long-term; we’ve held most of our portfolio for over a year. We have 12 investments around the world which speaks to our level of concentration.”
Babineau founded IBV Capital with just over $30m in assets under management, a figure which has now grown to over $60 million. Babineau sees the current climate of uncertainty and upheaval as an opportunity to invest in companies he's been observing for some time. “Around this time last year, we invested heavily into U.S. financials, specifically Bank of America and Citigroup, because they were so out of favour. They’ve done remarkably since then,” Babineau says. “It’s a combination of conducting deep research on individual names and then waiting for the right time. The approach resonates with me in terms of strategy around risk and returns.”
One sector that is looking particularly attractive to Babineau at the moment is the automotive retail space, which he likes for three main reasons: it’s a capital light business, it has regional barriers to entry, and many investors don’t truly understand where a car dealership’s profits originate. Babineau cites Vertu Motors PLC, the UK’s fifth largest motor retailer, as a recent investment that he is particularly happy with.
“We have a flexible, global investment mandate that allows us to reallocate to areas that are undervalued and that’s why we got into Vertu,” he says. “The UK auto retail space is undervalued relative to the American space and Vertu has tremendous benefits above and beyond the UK space overall. I’d encourage advisors look for managers who have the flexibility to look beyond Canada; that will allow them to get into some lesser known spaces like the UK auto retail space.”
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