December 10, 2024
This money manager is betting on a slow energy transition. Here are some stocks he likes on the way


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Lyle Stein, president of Forvest Global Wealth Management (Canada) in Toronto.The Globe and Mail

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Many investors have been surprised by the resiliency of the North American economy – and financial markets in general – during the past year, especially given forecasts for a recession.

Still, money manager Lyle Stein cautions investors against getting too excited about the future, anticipating slow growth ahead.

Instead, Mr. Stein, president of Forvest Global Wealth Management (Canada) in Toronto – a division of Geneva-based Forvest Group, the latter of which oversees more than $1-billion in assets – is investing in stocks and sectors he believes will benefit from macroeconomic trends, such as the slower-than-expected shift to a low-carbon economy.

“The world can’t go from where we’ve been to zero carbon by 2050. It isn’t going to happen – and there are ways to play that,” he says.

One of his top investing themes today is natural gas as an intermediate solution to decarbonization. It’s why his firm owns stocks such as AltaGas Ltd. ALA-T, Enbridge Inc. ENB-T and TC Energy Corp. TRP-T.

Mr. Stein also likes gold stocks as protection against rising inflation and currency erosion, and copper stocks for the metal’s critical role in the ongoing electrification and digitization of the economy.

About 50 per cent of his current equity portfolio is invested in Canadian stocks, 25 per cent in U.S. securities, and the remainder in Europe and Japan. His average portfolio has returned 8.6 per cent over the past 12 months and has an annualized return of 7.3 per cent since inception in June, 2021. The performance is based on total returns, net of fees, as of April 30.

The Globe and Mail spoke with Mr. Stein recently about his investing style and stocks he’s buying and selling:

Describe your investing style.

Our investment style begins with a macroeconomic perspective on the world. We start by asking, ‘Is the world going to grow faster or slower than expectations? And are interest rates going to be above or below expectations?’ From there, we ask ourselves, ‘What do we want to own and how do we position our clients’ portfolios?’

We don’t think about achieving an optimal asset mix in our portfolios. Instead, we think about client-specific requirements. We base this on what we call ‘the three Cs.’ The first is ‘comfort,’ or how much income a client needs to meet their living requirements. The second is ‘calamity,’ or protecting that comfort from inflation or market volatility. The third is ‘children/charity,’ or to whom clients plan to transfer their money when they’re no longer around.

What have you been buying?

Generac Holdings Inc. GNRC-N is a stock we bought in the first quarter of this year. It’s a world leader in small-scale power generation equipment and energy storage systems. The grid is under increasing pressure from demand, primarily from data centres and the growth in electric vehicles. Power outages are more likely to happen over the next five to 10 years, and this company has the dominant market share in backup power generation. The company was a momentum stock during the pandemic but ran into inventory issues and got beaten down. We bought it because we thought its valuation was cheap and believe it’s an attractive growth story.

We’ve also recently added to our holdings in Teck Resources Ltd. TCK-B-T. After selling its coal assets, Teck is one of the purest copper companies in the world. Its balance sheet is strong, and copper prices are high. We think the demand for copper will remain high in the long run.

What have you been selling?

Northland Power Inc. NPI-T is a stock we sold a few months ago. We bought this wind power company a couple of years ago as a green transition play. We sold all of our shares based on a belief that the energy transition will take longer than expected. Also, the cost of borrowing has increased, which means the risk of cost overruns on big projects will increase.

Name one stock you wish you owned.

Nvidia Corp. NVDA-Q is a stock we wish we owned. We didn’t buy it because we felt its valuation was too high. While we missed that one, our clients aren’t complaining as other holdings have done well.

What advice do you have for new investors?

It’s common advice, but time in the market is more important than timing the market. When starting, build a portfolio of good companies and take a balanced approach that includes both dividend-paying and growth companies.

This interview has been edited and condensed.

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