Copyright © 2018
The Contra Guys
Buys & Sells
"This is a business where we tend to get caught all doing the same thing at the same time." When others are selling, Mr. Gallander and investment partner Ben Stadelmann are more likely buying. They specialize in finding unpopular stocks poised for a big comeback.
"We buy companies that nobody likes," says Mr. Gallander.
But some of their best moves have been the stocks they didn't buy.
When others dump
His hybrid background allows him to draw on "the right and left hemispheres of my brain," as he is fond of putting it, while keeping him free of the group-think that can stymie others.
While his Dalhouse University classmates headed off to work in finance and industry, Mr. Gallander''s first job after graduation was a minimum wage job as manager of the international youth hostel in Toronto.
He makes a point of travelling, finding inspiration in unusual places.
Last year it was Costa Rica and Panama to catch an eclipse and learn a little Spanish.
A few years before, it was the Czech Republic, ostensibly to do some business consulting. He ended up teaching English to a group of factory workers and high school students.
In a play called Pseudopod Rejects, Mr. Gallander wrote the media is reshaping people's minds through an ever increasing bombardment of print, TV and online information.
"And that actually goes back to the stock market and how I learned to ignore tiny moves," he says. "When you sit in front of a computer screen for six or eight hours a day, everything starts to take on substance, when in reality, it's just a minor blip."
In his latest play, six people who have committed suicide meet in the after life. The characters include a wealthy stockbroker and a homeless person. "They lived in two completely different worlds, but yet they end up in exactly the same place," says Mr. Gallander, who donates 10% of Contra's profits to charity every year.
The cast of The Suicide Parlor also includes a security guard who lived vicariously through the paintings that were exhibited in the gallery where he worked.
"He would enter into the paintings and almost become what they were. And I think when you're investing in the stock market, you have to almost go inside the market to understand what's happening and try to predict what's going to happen next."
Mr. Gallander is viewed with something approaching awe in some quarters for the savvy moves he and Stadelmann made with their Contra the Heard investments, which have a five-year annualized return of 33.9%.
They bought shares in Mitel Corp. at $3 and sold in April at $19. They picked up Grubb & Ellis Co. on the New York Stock Exchange at $2.55 (US) and sold as high as $16 (US). They got Journey's End Corp stock at a couple of bucks and sold last year for $11.
Not every move works out. Mr. Gallander says he wishes they'd sold more stock before the markets took a dive. He figures they're about breakeven for the year.
Among the Contra investing rules is that they won't buy stock in companies that are less than 10 years old, a hard lesson from an investment Mr. Gallander made in Northland Bank in the mid-80s before it went bankrupt. While the rule cost them some opportunities, it also kept them out of Bre-X.
But risk is still the name of the game. "If you're going to invest along with Benji, you have to pick five or six of his choices, not just one or two, because a couple of them probably won't work out, " says Sean Wagman, a financial planner at Royal Bank of Canada, who subscribes to the newsletter.
"But the bottom line is that overall, his portfolio will outperform anything out there."
Mr. Wagman says he'll never forget the first time he met Gallander after dealing with him over the phone for about six months. Jaws dropped in the posh office where he worked when Mr. Gallander strode in "wearing a torn pair of army surplus pants and a T-shirt," he says.
"It throws you off when you first meet him, I mean, I'm a blue suit, red tie type of person, and when you speak to him without meeting him, that's who you think he is," says Mr. Wagman.
It didn't take him long to get over it." You deal with the individual not because of how he looks, but what he has to say. And what he says counts."
Mr. Gallander says they've only bought three new stocks so far this year, and they don't plan to look for any more until year-end.
"In December, a lot of people dump their losers because they have to get out to offset their gains for tax purposes."
"That's when we'll be jumping in."
The newsletter Contra the Heard is limited to 1,000 subscribers and includes only those stocks Gallander and investment partner Ben Stadelmann have bought themselves.
The newsletter portfolio's annualized returns are 27% over 10 years and 33.9% over five years. Last year, it was 52.3%.
Some rules of Contra investing:
Gallander lives by the motto: "Money's important, but so is a walk in the woods once in a while."
Copyright Notice: Copyright © 1998 Peter Boisseau Reproduction of this article in whole or in part is prohibited without permission of the author.