Paul Carter, the Chief Investment Officer at Capstone Asset Management, is navigating expensive Canadian market conditions by targeting undervalued, fundamentally sound companies. Operating out of Langley, British Columbia, Carter manages roughly $700 million in assets using a value-driven approach informed by specific ethical guidelines.
The 22.3% annualized return since 2022
Capstone Asset Management has demonstrated significant momentum through its Canadian equity composite. As reported in the source, the composite has achieved an annualized return of 22.3% since its inception on November 1, 2022. This perfrmance includes a 16.9% year-to-date return as of September 30, 2023, and a one-year return of 23.7%.
Many investors are currently wary of high valuations across the Canadian landscape, but Carter’s strategy focuses on identifying businesses that the market has temporarily overlooked. The firm’s current positioning leans heavily into financials, which comprises 29% of the portfolio, and energy, which accounts for 17%.
Strategic moves into Premium Brands and Pet Valu
Paul Carter has recently added specialty players to the Capstone Asset Management portfolio to capitalize on market dips. The firm purchased Premium Brands Holdings, a Richmond, B.C.-based specialty foods company, in March. Despite facing higher beef costs and integration challenges, Carter views the company's portfolio of over 100 brands—spanning meats, seafood, and baked goods—as a driver for long-term growth.
Capstone Asset Management also added Pet Valu Holdings to its holdings in July following a drop in its share price. Although same-store sales have seen some weakness,the report notes that the retailer contnues to grow its revenue and free cash flow through a robust loyalty programme. Carter’s thesis relies on the idea that pet ownership remains a stable consumer habit that can withstand various economic cycels.
Absorbing Intact Financial’s $660 million loss estimate
The decision to enter Intact Financial Corp. in August highlights Carter's willingness to buy into companies facing short-term turbulence. The Toronto-based insurer recently reported a $660 million loss estimate for the third quarter, largely due to severe weather and catastrophic events.
Capstone Asset Management builds its investment strategy on looking past these temporary setbacks to focus on fundamental economics. Carter maintains that Intact Financial possesses a fundamentally sound business model, characterized by strong underwriting and a robust balance sheet that provides ample capital reinvestment opportunities.
The uncertainty of U.S. tariffs and macro volatility
Several macroeconomic variables, including U.S. tariff exposure, remain significant uncertainties for Canadian equity investors. While the source highlights opportunities in public infrastructure, defense, and critical resources like minerals, the actual impact of shifting trade policies remains a variable.
The exact threshold for "responsible stewardship" in the energy and mineral sectors also remains an unverified detail of the firm's ethical screening. While the firm excludes alcohol, gaming, and tobacco, it is not explicitly clear how it navigates the intersection of resource extraction and its Christian investment principles.
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