In the coming weeks, with registered retirement savings plan season kicking into high gear, mutual fund marketing machines will be pitching for your hard-earned dough.
Beware of the hype and remember: Good things come in small packages in the mutual fund industry.
Some of the unheralded mutual fund companies without the glitzy advertising campaigns should also garner some attention from investors, as they're often among the best long-term performers.
Although your investment adviser may have neglected to tell you this, it pays to dig deep for a fund manager with a track record that extends beyond one year - and one with reasonable fees.
The biggest mistake mutual fund investors make is chasing the hot money in mutual funds. Hot funds rarely stay hot in back-to-back years.
The trick is in identifying funds with stellar long-term track records, and that often involves digging deep to unearth fund managers who operate under the radar screen.
One such fund manager is Francis Chou.
You've probably never even heard of Chou, yet he's the Canadian fund manager with some of the best returns over the past decade.
Chou is a lousy promoter and doesn't spend money on advertising, but investors who hold his funds could care less. All Chou does is shoot out the lights with an astonishing record that is the best advertising for fund companies.
Chou's cover was blown last month when he was introduced at the 2004 Canadian Investment Awards in Toronto as the Morningstar Fund Manager of the Decade, a special award presented to commemorate the 10th anniversary of the awards.
Chou runs Chou Associates Management (www.choufunds.com), a tiny Toronto boutique. This firm's RRSP Fund had a 10-year compound annual return of 17.3 per cent or a cumulative return of almost 400 per cent for the 10 years through Oct. 31. In comparison, the Morningstar Canadian Equity Mutual Fund Index was up 7.8 per cent during the same 10-year period.
The Chou Associates Fund, which invests in U.S. equities, has also recorded eye-popping results with a 10-year cumulative return of 350 per cent through Oct. 31.
For those stunning results, investors paid below-average management expense ratios (MERs). In fact, Chou has actually lowered his MERs in recent years on his RRSP and Associates funds.
The Chou RRSP Fund's MER was 2.12 per cent in 2000, but then it was lowered for three successive years - to 2.01 per cent in 2001, to 1.83 per cent in 2003 and finally to 1.79 per cent (the current rate) in 2003. Chou's only losing year in the past decade was 1999 when he and many other top fund managers were humbled by a goofy market that forgot fundamentals. In 1999, Chou's RRSP fund was down 6.7 per cent, guilty of carrying too many real companies with real earnings.
Chou manages four funds - Chou RRSP, Chou Associates, Chou Asia and Chou Europe. The Chou Asia fund was his best performer in 2004 with a return of 18.8 per cent.
So what's Chou's secret?
In accepting his award, Chou told the audience: "The major factor that contributes to the higher-than-average returns and lower-than-average volatility is the principle we follow - that principle is called the margin of safety. Simply put, we buy a company for 50 cents when it is worth a dollar."
Remarkably, Chou has garnered these stunning returns while essentially moonlighting as a fund manager.
His main job is as vice- president of Fairfax Financial Holdings (TSX:FFH.SV). To avoid a conflict of interest, his funds do not trade in Fairfax stock.
Among other award- winning portfolio managers honoured at the Canadian Investment Awards was Calgarian Martin Ferguson, whose Mawer Investment Management New Canada Fund was the 2004 Canadian Small Cap Equity Fund of the Year.
Ferguson, like Chou, also sports a formidable long-term record and it's the second time in three years that Ferguson's New Canada Fund has copped top small-cap honours.
For Ferguson's top picks, see Pro's 3 Stars this week.
* CHEERS: To Edmonton drugstore magnate Daryl Katz, who is not only the richest Albertan but somehow amassed more than a billion dollars in wealth the hard way - without an oil well.
Katz tries to keep a low profile but his fortune keeps getting in the way. The media-shy owner of Katz Group Canada moved up to 20th on Canadian Business magazine's list of 100 richest Canadians and topped all Albertans with a net worth estimated at $1.32 billion.
That's no small feat, considering the surging wealth in the oilpatch. But, with two newly minted billionaires in Calgary's oilpatch hot on Katz's heels, don't be surprised if he loses the distinction as the richest Albertan a year hence.
Clay Riddell, founder of Paramount Energy, saw his wealth soar to $1.25 billion, ranking him 23rd, while Murray Edwards, a major stakeholder in Canadian Natural Resources and Penn West Petroleum, was 27th with $1.16 billion.
Ken Thomson and his family topped the list of richest Canadians with $22.03 billion as Thomson Corp. had another banner year.
* JEERS: To James Balsillie, the co-CEO of Research In Motion (TSX:RIM), who managed to turn a recent CNBC interview into a Blackberry commercial.
Balsillie, interviewed on CNBC's Kudlow & Cramer, offered little insight into the market for handheld gadgets and downplayed a patent infringement lawsuit that could prevent RIM from selling Blackberry products in the U.S.
While answering questions, the unabashed Balsillie also looked silly as he held up one hand for the cameras, clutching a Blackberry as if he were doing a commercial for a new and improved toilet bowl cleaner.
He appeared flushed with pride.
Of course, that was before RIM's shares kicked off the New Year by taking an awful pounding.
* SAGE WORDS: "Anyone who thinks he must be in the market all the time can never make any money," - R.W. McNeel, author of Beating The Stock Market, 1929.
HOT STOCK: CV Technologies TSXV:CVQ $3.77 Up 72 cents (+23.6%) on 2.3 million shares (for week ending Jan. 7) CV stock has been nothing to sneeze at. With the Calgary company's lead product, Cold-fX, flying off store shelves, shares are up more than 700 per cent in the past six months. But CV isn't resting on its laurels. The company is also doing a pre-clinical study on the efficacy an ingredient in Cold-fX in treating some forms of cancer.
COLD STOCK: Nexia Biotechnologies TSX:NXB $0.72 Down $0.44 (-37.9%) on 695,600 shares (for week ending Jan. 7) Nexia has been using guinea pigs to test Protexia, a product being developed to guard against a terrorist chemical weapons attack. It seems the guinea pigs are doing quite well. They didn't own any shares. As for the shareholders, they might be feeling like guinea pigs after the cash-strapped Quebec company threw in the towel, selling off its assets to U.S.-based PharmaThene for $18 million US. Nexia shares peaked at $8 four years ago.
(Gyle Konotopetz can be reached at gyle@businessedge.ca)