Felix Narhi presented his in-depth investment thesis on ONEX (TSX: OCX) at Wide-Moat Investing Summit 2016.
ONEX, founded in 1984, is one of North America’s oldest and most successful private equity investment firms. Its investment platforms are focused on private equity (PE) and credit securities (CLOs). Despite its enviable performance in private equity (28% gross IRR since 1984) and the long-term outperformance of its stock, Onex remains an “under the radar” story in the US and is often misunderstood even by Canadian investors. Onex provides investors an opportunity to own a stake in a diversified group of market-leading private companies and credit securities alongside an aligned investment team with one of the best long-term track records in the industry. Onex manages its capital at no cost to stock holders because the fees generated from its fast growing third party capital exceed the cost of its corporate overhead. In addition, Onex shares 40% of the carried interest it generates from its third party investors with OCX shareholders. Taken together, OCX’s long-term potential for compounding wealth is compelling. The math of Onex’s per share NAV growth model, targeted at +15% annualized pace, should be achievable. The stock trades at a modest 10% premium to “hard” net asset value. Dave and Felix view this akin to buying a basket of well-managed, market-leading companies trading at price-to- tangible book value of 1.1x, with ample internal reinvestment opportunities at +15% ROIC. Onex’s track record suggests that such a “portfolio” has market-beating potential.
About the instructor:
Felix Narhi, CFA is the Co-Chief Investment Officer of Pender. As such he works alongside David Barr, Pender’s President and Co-Chief Investment Officer, in setting the direction of Pender’s overall value-based investment strategy. Felix is the Portfolio Manager of the Pender US All Cap Equity Fund and the Pender Strategic Growth and Income Fund, and Co-Manager of the Pender Value Fund. He has over 16 years of experience of analysing and investing in US equities. Before joining Pender Felix spent nine years at an independent and value-oriented investment firm in Vancouver. As a Director and Senior Equity Analyst he contributed thought leadership and primarily US investment equity ideas to its Model Portfolio, a concentrated equity portfolio that has outpaced North American benchmarks since its inception in 1994. Felix holds a Bachelor of Commerce degree from the University of British Columbia. He earned his Chartered Financial Analyst (CFA) designation in 2003 and is a member of CFA Vancouver.
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