When Canada’s market crashed, Avenue Investment Management Inc. found itself looking down the barrel of a gun. One company in particular was an example of how quickly and unexpectedly fortunes were turning. Teck Mining Company, Canada’s largest diversified mining company, saw its stock drop from $50 to $3. Although the partners at Avenue did not own Teck for their clients, they saw it as a clear example of the unprecedented market uncertainty that existed. The partners at Avenue had their share of sleepless nights as they scrambled to find profitable solutions in what seemed like a bleak investing landscape. “When you find yourself in a hole, the first thing to do is find a way out,” says Bill Harris, a partner and portfolio manager at Avenue. That’s exactly what the firm did.
Believing in its own philosophies and sticking to its standard practices, Avenue turned its sights to strategic planning and analysis. The team recognized the value of the Westshore coal terminal that Teck was operating on, which yielded 12 percent returns and $75 million in cash. Avenue took immediate action, purchasing the coal terminal at $7 a share and selling it at $24 a share 18 months later. This was a major boon for the investment firm in a time of economic turmoil. “China’s always going to need coal,” Harris says. By 2009, the company was up 33 percent as the market turned, taking the lowest hit of any other company in the country.
Avenue operates under two very specific philosophies: client services and strategic investments. The four partners are personally committed to achieving the long-term financial goals of their clients by creating, preserving, and protecting their clients’ wealth. In its simplest form, they follow the golden rule: treating clients how they would like to be treated. The partners are 100 percent invested alongside Avenue’s clients, so their rate of return is contingent upon client success. If the firm doesn’t make a positive return, it cuts its rate in half the following year. This may seem risky to some, but to Avenue, this strategy has successfully guided the firm since its inception.
The company believes in an investment philosophy of capturing a solid rate of return to its clients with as little risk as possible. To achieve this, only companies with solid profit margins and a proven track record of doing business are chosen to invest in.
“[We find] well-managed companies that we believe have a dominant or unique competitive advantage,” Harris says. “We focus on quantifying the intrinsic value of these companies and buying ownership interests in them when they are selling at a fair valuation.”
Today’s economic environment is good for Avenue. The investment industry has seen increased stability and solid return rates as individual businesses seek to become more stable through cost-control methods.
“Owning a high-quality, well-managed business is how you get through a financial crisis,” Harris says.
Weathering the storm of the market crash proved to the partners at Avenue that sticking to their investment strategy and business philosophies, despite external factors, is key to survival. Harris’s story is a triumphant one, and it shows that having confidence and determination can be the difference between success and failure. By staying true to its principles, the company will continue to grow its portfolio by investing in credible businesses to achieve its clients’ long-term financial goals.