Avenue Investment Management’s office is situated on a quaint street in downtown Toronto. It feels tucked away, but the office is only a five-minute walk away from the hustle and bustle of the financial district on Bay Street. The “Three Amigos” who run Avenue Investment Management — Paul Harris, Bill Harris, and Paul Gardner — seem to have so much fun working together that I almost imagine them tap-dancing to work every morning. Their office exudes a general sense of happiness, with bright, open spaces, light brick walls, and long wooden floors. Their main meeting room’s wide windows allow the sun to shine through. It was in that meeting room that all Three Amigos came together to answer my questions, and share both their individual and collective experiences in the market.
This is the only multiple-interviewee format in the book. At times, I felt like a referee, guiding the conversation, switching between talkers, and handing out penalties to any of the three who started to dominate the conversation. This interactive format worked, however, as each of the three investors had lots of great information to share. All Three Amigos are masters in their own right, but overlay their niche knowledge with one another to make final investment decisions. This process works a bit like the sounding board that exists between Warren Buffett and Charlie Munger at Berkshire Hathaway, in which both partners reach an investment decision after a constructive process. Paul Harris focuses on financial institutions, technology, and telecom. Bill Harris’s areas are resources, utilities, and infrastructure. Paul Gardiner covers bonds, real estate, utilities, and telecom.
While their mandate is to double portfolios’ values every 10 years, which implies a 7.3% annual compound rate of return, their flagship Avenue Equity Portfolio has exceeded that mandate by tripling over a 10-year period. Paul, Paul, and Bill are as much focused on risk management as they are on their upside returns. As we discussed in the interview, the Three Amigos managed to save their portfolios from a complete crash before the financial crisis in 2008 that decimated banks around the world. They witnessed weakness in the global financial sector and then quickly took action to eliminate that risk from their portfolios.
Paul Harris was actually my first point of contact at Avenue Asset Management. After years of watching BNN’s Market Call, I’ve come to respect Paul’s no-nonsense advice to callers. Also, his fashion sense and swagger rival those of Norman Levine, who you’ll hear from later (but a winner is just too close to call). Paul usually wears a colourful bow tie with a brightly coloured shirt and thick-framed circular glasses to accentuate his face. And his buttery smooth voice makes listening to Paul talk about the markets comforting and reassuring, especially during a period of market turmoil. Unfortunately, family man Paul Harris had to step out halfway through the interview to pick up his daughter, but later supplemented the transcription with additional comments. As well, Paul Gardner was slightly late to the interview, so his answers don’t appear in the first few questions. I was so involved in this conversation that I lost track of time as our conversation went late into the morning.
To clear things up before we get started, Paul Harris and Bill Harris are not related; their identical last names are simply a matter of coincidence — just as it is a coincidence that the other two are named Paul. Perhaps they were fated to be a team.
Downside: the amount of risk, and possible weakness, inherent in an investment.
Moving Average: a trend line that is based on the average of past prices, notably 50-day and 200-day averages, that some investors use to compare to current market prices.
Real Estate Investment Trust (REIT): an investable fund that contains real estate or mortgage investments. The Canadian government’s taxation changes (2006) did not affect this form of income trust.
Sector: an area of the stock market, such as technology, telecom, or consumer staples.
Support: a lower price level in a stock chart that makes it difficult for a stock price to break under to re-price itself to previous lows.