Best Stocks

Investor 500 2014: Top stock picks from Mawer Investments’ Vijay Viswanathan

“We think boring works”

Vijay Viswanathan with his top stock pick, CN Rail

All railways are benefiting from the U.S. recovery, but to Vijay Viswanathan, CN offers the best value. (Colin Way; CN Rail)

Get him on the phone and Mawer Investments’ director of research and portfolio manager Vijay Viswanathan will talk your ear off about how boring he is. “We think boring works,” he says from his Calgary office. “We think that we’ve made money for our clients for 40 years” by being boring. It’s no surprise then that when asked about his investing philosophy, Viswanathan doesn’t offer any mind-blowing tips—no seven secrets to market success. Instead, he falls back on the three-pillar strategy Mawer uses when picking stocks: 1) Find wealth-creating companies; 2) Make sure they’re well run; 3) Don’t overpay. Doing that can be harder than it sounds, though. “It’s tough to be boring,” Viswanathan says. The temptation is always there to chase instant returns and bubbling stocks, but Viswanathan sticks to what he knows—to solid effect for his clients. Last year, Morningstar named Viswanathan’s Mawer Canadian Equity Fund the country’s best in its class.

Vijay Viswanathan’s Picks

CN Rail

Chart showing trailing 12-month stock performance for CN Rail

P/E: 19.6
Yield: 1.7%
1-yr total return: 23.5%

Viswanathan likes companies that operate in hard-to-enter businesses. And CN certainly qualifies by that standard. More important, he believes the railway industry in general in Canada has improved markedly in the past decade. “We’ve seen less government regulation. We’ve seen the management teams improve significantly,” he says. Viswanathan is also bullish on CP Rail. But at the moment he thinks CN is available at a better price. “We think the valuation is decent,” he says. “And we think the management team is decent. They’re just really solid railroaders.”

CCL Industries

Chart showing trailing 12-month stock performance for CCL Industries

P/E: 24.3
Yield: 1%
1-yr total return: 60.3%

A global packaging company headquartered in Toronto, CCL was controlled for decades by the family of founder Gordon Lang. But in 2008, the Langs turned CCL over to an outsider, president and CEO Geoffrey Martin. “He’s done a great job running that business and essentially helping build a world-beater in packaging,” Viswanathan says. “It’s a packaging business now that has global scale. It’s one of the few companies in the world—if not the only company—that can meet the needs of multinationals like Procter & Gamble and Unilever.” On the valuation side, the stock has been creeping up. “But our take on it is it’s still reasonable,” Viswanathan says.

Manulife Financial

Chart showing trailing 12-month stock performance for Manulife Financial

P/E: 13.4
Yield: 2.6%
1-yr total return: 43.7%

The worst is long behind Manulife, the Canadian insurance and financial services giant, Viswanathan believes, and good years are on their way. “We like how they de-risked the business. We like how they’ve got some natural tailwinds around bond yields and equity markets,” he says. “They’ve got some growth drivers ahead of them, and the stock’s not that expensive.” Another plus for Manulife: the company’s growing wealth-management business in Asia. “They’ve got a pretty good franchise there,” Viswanathan says. “And if you look at where the growth is going to be…over the next 10, 20 years, Asia seems like a good place for that.”