Research Process

The investment process at Canso is focused on fundamental research and security selection. Cheap investments are not popular and the buyer must do independent research to find undervalued securities.

Our prime focus is on our internal credit research. With 5 credit professionals on staff, we have greater resources than most other investment managers and Canadian investment dealers. We conduct extensive research on issuers before making an investment and we continue to update our research on an ongoing basis for each issue in the portfolio.

The investment process begins with a thorough fundamental review of the issuer of a security. An internal quality rating is then assigned to the issuer. At this point, the merits of the particular financial security are examined with particular regard to the structure and ranking of the security. Once this is done, the future cash flow stream is identified and the risks associated with it are determined. Securities are only purchased at a discount to their determined intrinsic value.

Extensive fundamental analysis is used to identify the credit risk of an issuer. At Canso, our credit analysis is thorough and objective. Before any security is purchased, the issuer is fully analyzed with respect to financial strength, management capability, and business environment. In addition to analyzing the issuer, the terms and conditions of the security (including covenant package, priority in a default, position of the banks) are assessed. If we are comfortable with both the issuer and the security, a risk/return profile is determined.

We keep extensive files on all issues, whether we participate in them or not. This allows us to keep our work up to date and move quickly when there is opportunity. As new information becomes available on the prices of issues or the prospects of issuers, we meet to evaluate the implication for our portfolios and strategies.

It is easy to buy a bad investment at a low price or securities of an excellent company at very steep prices. It is very difficult to find a good investment at a reasonable price, which is what we constantly endeavour to do.