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The portfolio managers invited to comment on the results were first asked to assess the process that led to the construction of the portfolios.

“The first blind spot is you,” replies Mathieu Bouthillier, founder, president, and portfolio manager at Bouthillier Capital. He argues that the history of queries made using the free version of ChatGPT ended up influencing the outputs. “The application wants to give you results it thinks you’ll like,” he says.

“The environment of high interest rates has greatly influenced investor preference,” argues Mathieu Bouthillier, President and Founder of portfolio management firm Bouthillier Capital (B-CAP). “There is clearly a preference for higher-quality companies that have higher profit margins, barriers to entry, and the ability to raise prices, thus protecting their margins.”

According to him, companies in the tourism and travel sector can essentially be classified into two main categories: those with significant tangible assets (such as airlines and cruise lines) and those with few or none (such as online booking services like Booking Holdings [BKNG, $3,795.35 USD] or Airbnb [ABNB, $144.47 USD]). “Companies with few or no assets are clearly the ones that have performed the best,” he says, as they have not been as affected by the rise in borrowing costs. (…)

Our research demonstrates that to optimize long-term total returns for investors, it is vital to carefully assess the future dividends that companies can prudently afford. Companies with robust and expanding profit margins typically offer a steadfast and well-supported return on equity. Retaining a significant portion of earnings enables companies to finance new investment opportunities, thereby maximizing their growth potential. The combination of these two considerations lies at the core of the concept of sustainable growth (designated as g*). Moreover, it is crucial to highlight the growing importance of share buybacks directly undertaken by companies to reduce their outstanding shares. Hence, it is essential to consider the overall distribution accruing directly to the benefit of investors, encompassing not only dividends but also share buybacks.

“The companies at the forefront of the data center industry form an oligopoly between Amazon Web Services (AWS), a subsidiary of Amazon (AMZN, US$133.26), Microsoft Azure (MSFT, US$322.98) ) and Google Cloud, a subsidiary of Alphabet (GOOGL, US$129.88),” maintains Mathieu Bouthillier.

These companies, like all other data center operators, have cost reduction goals and are working to design custom-made processors for their infrastructures. To achieve this, they need software specialized in digital design. “On this side, two companies, Cadence Design Systems (CDNS, US$232.51) and Synopsys (SNPS, US$442.24), control 70% of the global market,” says the B-CAP manager.

The pandemic has shown better than anything before it the importance of promoting local economies, which is an indispensable value for B-CAP. While many local businesses have taken advantage of the very positive impact of the crisis, the firm leverages this momentum to enhance its reputation in Montréal and in the province of Québec by joining forces with local programs and business partners.

“Being able to talk to one’s portfolio manager directly has a lot of value for many investors”, B-CAP’s Founder says. Also, Mathieu notes how the Québec institutional sector seems to be supporting local companies more and more. It’s in Québec’s cultural DNA to recognize and promote local success stories and talent.

“It is getting difficult to justify choosing investments that are sold by people who don’t know the strategy being used, and in other words can’t describe it to you with true transparency”, he explains.

Mathieu’s diverse experiences and breadth of perspective culminated in a bold vision: an independent, unbiased and educated investment approach. “I wanted to be able to leverage my expertise in research and analysis and my breadth of experience to help people achieve their financial goals.”

At a large organization, this vision would be difficult if not impossible to achieve. In the wealth management divisions of Canadian banking institutions, for example, stocks are sometimes limited to a pre-determined list, which would typically be large cap stocks. Bond inventory available for trading may be in short supply. As for more exotic discretionary strategies incorporating options and warrants, it’s mostly impossible, and certainly frowned upon.