Reposted from The Globe and Mail
By Larry Macdonald
Brian Langis, 29
Investment manager and consultant
Positions in American International Group Inc., Bank of America Corp., Citigroup Inc., SNC-Lavalin Group Inc. and other companies.
Brian Langis manages a private investment company and serves as a consultant for a frontier (or “pre-emerging”) market fund. He is a candidate for the Chartered Business Valuators membership exam in 2014.
How he invests
Mr. Langis uses his business valuation skills to estimate how much a company is worth. If the amount is greater than the company’s stock-market capitalization, Mr. Langis may be interested in buying its shares (after factoring in a margin of safety).
“The one particular metric I really put emphasis on is free cash-flow generation,” he adds. “With excess cash, they can pay me a dividend, reinvest in the company, pay some debt, or acquire a company. In general, if a company can increase their excess cash capabilities, that can translate into higher stock prices.”
At the moment, his portfolio is mostly concentrated in U.S. financial stocks – one of the “few sectors that remains undervalued.” As for SNC-Lavalin, the “ethics scandal is keeping the company down, but underneath there’s a going-concern company with great assets.”
“As you can see, I have a penchant for companies that make it on the most-hated list,” sums up Mr. Langis. “To find value, you sometimes have to look where others are not, and usually you end up in undesired places.”
Mr. Langis recently “hit a home-run” with World Wrestling Entertainment Inc., registering a 100-per-cent return over a seven-month holding period. He had read the company’s filings and “knew that if somebody wanted to buy the company” they would have to pay a lot more than the market capitalization. Also, there was no debt, and a stable 5-per-cent dividend yield.
“With the bull market over the last couple years… [it was] not pulling the trigger at certain opportunities that I found undervalued.”
“Focus on the value of a company and its relation to share price.”