After licking his wounds following last year's savage bear-market mauling, Bradley Radin believes it's better to stay the course and positionTempleton Global Smaller Companies
for better times.
The fund lost 38.8% for the year ended Dec. 31, slightly ahead of the 39.7% median loss in the Global Small/Mid Cap Equity category. Last year's poor performance is mostly attributable to market conditions. But there were also some ill-timed stock bets, as Radin took profits in some names and invested in companies that he believed showed good upside potential.
As it happened, they did the opposite. "I was too soon in certain sectors, such as consumer discretionary and non-bank financial services," says Radin, adding that those two sectors were among the most battered. To compound matters, as small-caps received an even harsher drubbing than large-caps, the fund's emphasis on companies with market capitalizations of less than US$2.5 billion exacerbated the pain.
One of the consumer discretionary names that he acquired is Tempur-Pedic International Inc. ( TPX/NYSE) The maker of high-end mattresses has long benefited from pricing power and been one of the top suppliers in a highly concentrated industry.
Yet, after years of stable revenues, consumers held back in 2008 and the firm's sales dropped precipitously. The stock has stayed around US$7, the average price that Radin paid. But he believes it could be worth $30 within several years, given its earnings power and resumption in consumer spending. "It's a great business to be in," says Radin, noting that the industry is not vulnerable to offshore imports, since most mattresses are manufactured in the United States.
A Windsor, Ont. native, Radin is a 17-year industry veteran. He attended the University of Western Ontario, graduating with a bachelor of science in biophysics in 1988 and an honours business administration degree in 1990.
In search of offshore experience, Radin spent four years in Hong Kong. At first, he worked as an account executive for Dentsu, Young & Rubicam, with a focus on the Holiday Inn account. Then, he spent two years as a junior analyst in institutional equity research at Credit Suisse First Boston, where he sharpened his analytical skills.
Upon returning to Canada in 1994, Radin enrolled at Western and completed an MBA in 1995. He joined Templeton as an assistant research analyst and was promoted to portfolio manager in 1998.
Radin, who took over the fund in April 1999, works with Templeton's worldwide network of more than 30 analysts and portfolio managers. He maintains about 80 names in the fund and limits holdings to about 3%.
Since February 2001, he has also managed the 3-star ratedBissett International Equity. A large-cap oriented fund, it fared somewhat better than the median within the International Equity category in 2008, losing 32.6% versus 34.5% for the median.
But small-caps are Radin's métier, and he is convinced that area will deliver strong returns once market conditions are more favourable.
One non-bank financial services firm that he's counting on is Canaccord Capital Inc. ( CCI/TSX). "I got in too early, because the fourth quarter was the worst by a country mile," admits Radin, who bought the stock last summer at $7. It has subsequently sunk to under $4.
Canaccord has long been an underwriter of Canadian resource companies and a retail broker. However, it has been hurt by the 2007 asset-backed commercial-paper crisis that took a very long time to resolve.
"It's got a simple business, advising small resource companies and raising money. But as small firms are not raising money, it's had a real dry patch," says Radin, who believes Canaccord stock could be worth around $18 in better times.
Although Radin admits he's acquired companies that are considered "high-torque," he also maintains that he will be vindicated in due course. "Getting in too early [in these stocks] has been more painful than getting into 'steady-Eddie' areas which would have hurt less," Radin says.
"But, in terms of where you will get the best bang for your buck, it's more likely to be in the former. I'm highly confident that I will be able to sell some of these stocks for multiples of what they are trading at now."
. A large-cap oriented fund, it fared somewhat better than the median within the International Equity category in 2008, losing 32.6% versus 34.5% for the median.
But small-caps are Radin's métier, and he is convinced that area will deliver strong returns once market conditions are more favourable.
One non-bank financial services firm that he's counting on is Canaccord Capital Inc. ( CCI/TSX). "I got in too early, because the fourth quarter was the worst by a country mile," admits Radin, who bought the stock last summer at $7. It has subsequently sunk to under $4.
Canaccord has long been an underwriter of Canadian resource companies and a retail broker. However, it has been hurt by the 2007 asset-backed commercial-paper crisis that took a very long time to resolve.
"It's got a simple business, advising small resource companies and raising money. But as small firms are not raising money, it's had a real dry patch," says Radin, who believes Canaccord stock could be worth around $18 in better times.
Although Radin admits he's acquired companies that are considered "high-torque," he also maintains that he will be vindicated in due course. "Getting in too early [in these stocks] has been more painful than getting into 'steady-Eddie' areas which would have hurt less," Radin says.
"But, in terms of where you will get the best bang for your buck, it's more likely to be in the former. I'm highly confident that I will be able to sell some of these stocks for multiples of what they are trading at now."
