Money is Randy Oliver’s business.

But the man behind one of Canada’s most successful investment firms, Calgary-based Hesperian Capital Management, does more than manage money.

Oliver also strives to balance his own life with a diversity of life passions.

When the 55-year-old Timmins, Ont., native isn’t balancing portfolios and managing the Norrep Funds that rank among the top funds in the country, he may be found astride a Harley-Davidson, reading Robertson Davies’ novel The Rebel Angels or touring the Glenbow art gallery.

Mike Sturk, Business Edge
Randy Oliver says he isn’t driven by winning, but by a competitive streak.

Oliver is a candid interview, pulling no punches in discussing the hot issues in the investment industry. What was your boyhood passion?

“When I was 12 years old, I was six-foot-one and 120 pounds, so that sort of led me to basketball. When I went to university, I was on the Waterloo Lutheran Golden Hawks (basketball) team in my first year. I also played hockey and rugby. I was a bit of a sports junkie. So there is a competitive streak in me, which is usually something good on the investment side. I’m not driven by winning, but it feels darned good. I’ve also always been interested in the museum world. That interest came about through my Toronto Star paper route. I used to give out free tickets to the Royal Ontario Museum. By going a couple of times, that became a lifelong passion. Because of the paper route, I was always conscious of the financial pages of the Toronto Star and that’s what got me interested in investing.”

Did you have a boyhood idol in sports?

“I actually worked for Tim Horton (former National Hockey League star) when he had his first doughnut shop. I worked in one of his first shops in Scarborough, Ont. I remember him well. He was a very good offensive defenceman, he was rough and tough, and it was too bad he died drinking (in an automobile crash).”

Who’s the investor you most admire?

“Me. I know that’s not fair, but I’ve learned an awful lot. I’ve learned to avoid a lot of mistakes, I know how to read people and I think I’ve developed a track record that is the envy of most. Of course, early on I read a lot about . . . the Berkshire Hathaway guy (Warren Buffett). And my style of diversifying less than normal probably reflects on Buffett’s style. But I’d rather really think we’ve developed an eclectic approach to investing where we use things we have used from many sources over the years.”

Have you always had good fortune investing in the stock market?

Mike Sturk, Business Edge


“For whatever reason, I would say that it was something that came to me relatively easily. I could always remember a balance sheet better than a name or a face. My mind just seemed to work in a mode that was successful for recognizing value and understanding processes in business.”

What’s the best investment you ever made in the stock market?

“My best investments have been in recent years. Two that stand out are identifying BW Technologies (BWT-TSX) when it was six bucks (the Calgary company now trades in the $23 range). Another one is Progress Energy (PGX-TSX), which our clients own at an average cost of about a buck and I still own it at $1.42 and it’s about $8.40 today.”

What’s the worst mistake investors make?

“They don’t do their homework, they don’t read the prospectuses and they trust that their information provider has done that. All the information is always there but, I’ll tell ya, the industry loves seeing 140-page prospectuses because they know none of the investors will attack them. The way the industry is regulated forces so much information that none gets distributed.”

What in your mind is the most important aspect of the investment industry that needs to be improved in the best interests of the investor?

“This is going to sound blunt. But I would like to see the investors, especially in mutual funds, react against deferred service charges and the fee structures that they are forced to pay that are ludicrously high relative to the service they get. If you do the mathematics, if you’re making 10 per cent a year instead of 12 per cent a year because of the fees, that makes a huge difference. We’re a typical mutual fund. We’re at about two per cent (management expense ratio), and we watch it very closely. On our Norrep II Fund, we can be rewarded handsomely, but only if we significantly outperform our competitors and typical passive indexes. We don’t mind getting big fees, but only if clients have been very well rewarded.”

What inspired you to establish Hesperian Capital Management in 1995 after spending most of your career as an investment manager with Mutual Life of Canada?

“I was frustrated. For 25 years, I was in a big organization managing large-cap (funds) and other funds and I thought it was inefficient. I had the idea to be narrowly focused on things we could do measurably better at than the rest. We decided to concentrate on small-cap securities and oil and gas securities. We focused on oil and gas because we’re in the heartland of the oil and gas industry, and small capitalization stocks because we can have better knowledge than our competitors, and there’s very little research done there. I felt that our skills would be very well reflected in small caps because of the lack of competition in that area.”

Why does it take Bay Street so long to discover huge winners such as BW Technologies or Forzani Group (FGL-TSX)?

“It’s very simple. Bay Street doesn’t care about winners. They care about trading. So a company with 100 million shares outstanding going nowhere is way more attractive to them than a stock like BW Technologies with five million shares outstanding where you won’t get (significant) trading commissions. It’s almost a mantra here that we will only do things where we believe we can be measurably superior. The industry always tries to expand for volume’s sake, and we’d rather be superior in performance and, as a result of that, we think the money will come to us.”

What investing strategy has produced the phenomenal returns with your Norrep funds in a bear market?

“We use three different methods. My partner, Evan Spiropoulos, who co-manages the funds with me, and I have different experience in portfolio management. I’m more of a value investor and Evan is more of a growth investor, so we look for different things. My other partner, Keith Leslie, does computer analysis every day of 700 companies, ranking them on characteristics we like.”

What are the three most important questions you ask when researching a company?

“In some ways, it depends on the industry, but I will try to give you a generic answer that would cover all industry. This is going to sound rather mundane, but the key questions are: How much experience do you have at what you’re doing? Do you have access to other financing? Do you have a need to be successful? You don’t ask the last question, but you want to get an answer to whether they are driven to be successful however they define it.”

What’s your perspective of the corporate scandals that have rocked the public markets in the past couple of years?

“I honestly think it is disgusting. I will come out very bluntly on this issue. People in the business world are so well rewarded, it’s stupid to cheat. I can’t even figure out what motivates people to mislead and cheat when the world treats us so well.

In some ways, it’s not even a question of morality. It’s a question of how stupid it is.

I cannot figure that out. Anyone who has the edge up, has the raw skills to perform so well and gets so wonderfully rewarded, not just in dollars but in life experiences and opportunities, I cannot figure it out because stupidity does not register well in my head.”

Has the erosion of investor confidence affected your business?

“Actually, no, because we don’t go out and market in a big way. I believe very strongly that people rightfully trust me and trust that I will be thinking in terms of their best interests, and I believe the same is true for my partners. But I don’t believe that is a consistent theme in the financial services industry.”

What is the stock market going to do this year?

“We’re probably one of the most successful firms in the country, and I don’t have any clue. The reason I say that is that we’re successful because we try and find companies that are undervalued relative to their peer group and growing faster than their peer group and we constantly invest in them. We don’t make a market call. We make a call in the retail industry and find a Forzani’s that is growing faster and undervalued, and goes up 100 per cent in a year when the market’s going down 30 per cent. It’s also important that, while so many portfolios overdiversify with 70 to 90 names in them; we always try to keep around 30 to 32 names. We find we can pick winners even in a down market with a smaller inventory of securities. I always argue that my 30th best idea is always better than my 90th best idea.”

What’s your best idea today?

“We’re looking at two or three names right now. My favourite idea in the portfolio right now, that has been in our portfolio for a while but I think is timely right now, is Major Drilling Industries (MDI-TSX), which works in the mining industry. If there’s going to be a continuing rebound in the mining industry and a boom in financing, a firm like Major Drilling will have just huge growth. We don’t see a sector theme showing as being the best this year. It’s a hodgepodge of good companies in various industries. It’s a stock picker’s market still.”

What character trait do you think has had the most to do with your success at investing?

“Curiosity. You have to be as curious as can be and read an awful lot of different things. I read extensively, from (Canadian author) Robertson Davies, a favourite author of mine, to a lot of other things to help identify situations. You have to be curious and diverse. You think of the successful financial mind as totally sitting there on the screen, but you’d better have an awful lot of inputs in your head or you’re not going to be successful. I’ve always argued that I’d rather hire an archeologist than an MBA, if that gives you an indication of the type of mind I think makes for a successful investment person.”

Describe your investment psychology?

“You almost hate it to come out, but it is almost games theory. It is the responsibility of managing money, and you have to take it very seriously. What you have to figure out when you’re dealing in an auction market is how to be smarter than the other person in what you sell and what you buy. And there is games theory about it that is very relevant.” How important is money to you?

“It is not particularly important. I would relate back to the games theory. It is as much the game as dollars that is intriguing to me. It’s also very rewarding to do other things, like giving back to the community. I think more people would find that life is more fulfilling if they had a philosophy that for everything you take, you have a responsibility to give.”

As a motorcycle buff who has travelled cross-country on your Harley-Davidson, where do you go from here?

“I’ve jokingly said that I’d like to do Canada north-to-south sometimes, but for relaxation, I’ll take off two hours in any direction, have dinner and come back. It’s a wonderful escape from the office.”

What do you see in your life’s crystal ball?

“I’d like to continue to grow with my two kids (Derek and Jillian). My greatest ambition would be to continue to have more new and interesting experiences, however it relates to my family, my business, my lifestyle and my community work. It would be very easy to retire because of so many other interests, but people would look at me and say: ‘You’re not retired.’ I’d probably be spending a certain amount of time managing my own funds.”

IN PROFILE: Randy Oliver
* Born/raised/age: Timmins, Ont.; Toronto; 55.
* Title: President, senior portfolio manager, Hesperian Capital Management.
* Education: Wilfrid Laurier University, bachelor of arts, economics; Charter Financial Analyst designation, 1978.
* Family: Children Derek & Jillian.
* Career: Before establishing Hesperian Capital in 1995, Oliver led the Western Canadian operations for Mu-Cana Investment Counselling, a subsidiary of Mutual Life of Canada, and built its Western Canadian investment portfolio from nothing to $1 billion. He has also held management positions with Mutual Life and Mercantile Bank.
* Moonlighting: Oliver is a member of the investment committee and a board member of the Calgary Foundation, a charitable organization with more than $175 million in assets. He is also chairman of the Glenbow Alberta Institute and past-president of the institute’s Glenbow Museum Acquisition Society.
* Passions: Robertson Davies novels, art,
Harley-Davidsons.

THE COMPANY: Hesperian Capital Management
* Brass: Randy Oliver, president; Evan Spiropoulos, chief financial officer; Keith Leslie, partner.
* Profile: Hesperian is an investment firm specializing in North American small-cap equities and Canadian energy equities. The company manages approximately $70 million in investment assets, including the Norrep mutual fund, two public energy-based flow-through limited partnerships, an endowment fund and individual portfolios. Hesperian also provides
individual investors with investment counselling.
* Claim to fame: Hesperian recently made Maclean’s magazine’s hottest Canadian funds survey in two
categories. Its Norrep fund was ranked first in Canada in the small-cap category for its five-year annual compound return (23.26 per cent), and the same fund ranked second in Canada for its three-year annual compound return (29.21 per cent).
* Website: www.hesperiancapital.com
* Address: #1500, 510 5th St. S.W., Calgary, T2P 3S2.
* Phone/Fax: 403-531-2650 (toll free 1-877-531-9355); 403-508-6120.