Five years after she founded Sky Investment Counsel Inc., Jennifer Witterick considers the relatively small size of her Toronto-based firm a competitive advantage.
"When we interview companies," says Witterick, "we think, what is the strength of this company and will their business model hold up in different kinds of environments. So we ask the same question of ourselves, what is the strength of Sky. We don't have 100 analysts, so what can we bring to the table?"
Sky currently manages roughly $2 billion in assets, including the $340-millionPH&N Overseas Equity D 
, a 3-star rated fund in the International Equity category with a large-cap value bias.
The firm currently has six partners, including four analysts. "You can be much faster, more agile, more creative, because you don't have the bureaucracy," adds Witterick, who is also president of Sky.
Witterick describes her firm's investment discipline as being focused on bottom-up securities selection. "But I would say, selectively," she adds. "We like infrastructure companies, especially the ones that have big backlogs for multi-year contracts. So the revenues are going to keep coming in, and there are not too many companies that have that certainty, so we like businesses like that."
A big component of Sky's fundamental value approach is frequent strategizing on what's going on in the market and how to take advantage of it. That strategy has worked in their favour.
"Brainstorming" during the financial crisis, they looked at history, the Great Depression, what transpired and what the firm would have done. "Long before it was announced," says Witterick, "we thought the governments would have to step in. So we thought, let's look for cheap companies, such as infrastructure, that were penalized before the government announcement of infrastructure projects."
Bargain-hunting in emerging markets was another strategic move. As a result of the "tremendous" opportunities, there has been some trimming back of some of Sky's gains.
A favourite top holding in the PH&N fund is India-based, ICICI Bank, Ltd. It's a prime example of an emerging-markets play. "Here you have a great bank, with great growth potential, selling at distressed prices," says Witterick. "So we continued buying the company into the first quarter but have now turned around and trimmed it because it's doubled since the beginning of the year."
The India bank epitomizes the approach at Sky. The firm's belief is that industry leaders will have the strength to withstand a downturn and to emerge stronger when the market recovers.
According to Witterick, the disruption in the market is giving them all sorts of opportunities to buy leading companies at cheap prices. "So we bought Adidas AG," says Witterick, "a world-brand sportswear company whose stock got decimated. We could buy this company at 1.4 times book, so basically just over book value, and the company has double-digit earnings growth for the last eight years."
Witterick considers hands-on research essential to gain an understanding of the business model of a company. She recently returned from Hong Kong, while one of her firm's analysts continued to travel to Singapore to meet with other companies.
The increase in partners from an in-house team of two in 2004 has resulted in seeing more companies, so they now meet two companies a day on average. To complement her expanded in-house research team, Witterick continues to draw on her wide network of more than 30 analysts worldwide.
Sky's investment philosophy is to be mostly fully invested and to be broadly diversified. PH&N Overseas Equity currently holds about 78 names. For an individual stock to exceed 8% of the portfolio, it has to be truly exceptional, and with an extremely strong balance sheet, Witterick says.
A Rhodes Scholar nominee, the 48-year-old Witterick is a graduate of the University of Western Ontario, where she received an Honours BA from Western's business school in 1984. Upon graduation, she joined IBM Canada in Toronto as a financial analyst.
In 1985, she became an analyst at Confederation Life Insurance Co., where she advanced to assistant research manager. In 1988, she obtained her CFA designation and in the fall of that year, joined Hamblin Watsa Investment Counsel Ltd. as an analyst.
She subsequently became a portfolio manager and partner of the firm. In the winter of 1993, she moved to Foyston, Gordon & Payne Inc. as international equity manager and partner. She remained there until leaving to found Sky in August 2004.
Vancouver-based Phillips Hager & North Investment Management Ltd., which subsequently became a wholly owned subsidiary of the Royal Bank of Canada, is a 35% owner of Sky. The remainder is held by Witterick and the firm's other five partners.
Over the past five years, there have been significant changes and growth at Sky. Initially, Witterick's former employer Foyston held a 5% ownership stake. But in May 2007, Foyston took back its assets to manage in-house.
As well, Foyston's Brian Goldstein -- who Witterick worked with at Confederation Life and who also brought Witterick into Foyston -- left the firm and joined Sky in May 2008.
"This is the personal side of it," says Witterick, "I had no idea that many years later, he [Goldstein] would be joining Sky. Isn't that something? You know, business is largely the result of the intangibles, but people only see the tangibles."
