Jeff Stacey was waiting for me in the Gold Room at the Royal York Hotel, reading the Financial Times and sipping coffee from a white china mug. Nobody else was around him in the classically appointed room that brought to mind images of captains of industry from years past congregating to shape Canada’s economy. It’s hard to fathom now that the Royal York was once downtown Toronto’s tallest building.
It wasn’t officially spring just yet, but the sun was piercing the window onto the table at which Jeff and I would sit and chat. It was so bright that I would later draw the blinds. Jeff was visibly eager to talk to me about his passion: value investing. I was eager, too, as Jeff has been successfuly practising value investing since founding Stacey Muirhead Capital Management in 1994, and is a friend of Prem Watsa, a notable value investor. Days after our interview, he would host the question and answer segment of Prem Watsa’s Fairfax Financial Value Investing Dinner Gala.
Jeff Stacey has learned value investing from both the experiences and writings of super investors such as Benjamin Graham, Warren Buffett, and Sir John Templeton. Over time, he has identified the following enduring value investing principles, which he judiciously applies to all of his long-term investment efforts:
Jeff looks for companies with outstanding business economics that are run by capable and honest managers and that are available at attractive prices. He describes this concept simply as “Great Business, Great People, Great Price.” Jeff also has some great stories on event-driven investments. Specifically, he explained how he profited from Starbucks’ acquisition of Teavana amidst the threat that that deal could have blown up.
Annual Report: a financial account sent on an annual basis to shareholders.
Default: when a company or person fails to or chooses not to repay their debt obligations and are unable to repay their debt obligations in the future.
Event-Driven Investment: an investment prompted or triggered by unique situations in the market that occur within a certain time frame (example: risk arbitrage).
Forward P/E: measures the price that investors will pay today for a company’s future earnings per share. Current stock price divided by future earnings per share projection.
Risk Arbitrage (Merger and Acquisition): when an investor purchases stock in a company that is to be acquired, in anticipation of a gain from the spread in the current market price and final purchase price once the deal finally closes.