By Tom Bradley

Lori and I attended a Celebration of Life for Art Phillips last Friday. (There was a wonderful obituary in the Globe and Mail last week.) Art founded Phillips, Hager & North in 1965 with the help of Bob Hager and Rudy North. It was Art’s reputation and wallet that got the firm through the early years, as he was the oldest of the three and had already built an excellent track record.

I had the good fortune of overlapping with Art at PH&N for 5 years before he retired, a period when he managed the firm’s U.S. equities. I didn’t work directly with him, but through observation and conversation, he taught me a lot.

Art kept it simple. There was no analysis paralysis with him. He read extensively (4 or 5 newspapers each morning) and used the Value Line research service to look for stock ideas. He rarely talked to brokers or analysts.

As was evident throughout his storied life, Art was his own man. In the case of investing, this meant he wasn’t ever beholden to market indexes or what people might think about his choices.

When Art bought a stock, he would give us a rundown of his thesis in our daily meeting. At times, his reviews were quite passionate and his conviction was high. That isn’t unique in our industry, but what was unique about Art is that he could turn around a week or two later and sell the same stock. He didn’t let his previous pronouncements and others’ perception of him get in the way of doing the right thing. If he came across new information or just changed his mind, he sold the stock and moved on.

I regularly read articles and books on behavioral finance, all of which point out how fallible and consistently flawed we are in our decision making. I often think of Art when I’m reading, because more than any money manager I’ve met, he was the least prone to letting personal and mental baggage get in the way of sound decision making.

Art traded a fair bit, mostly small adds and trims to existing holdings, but one of his strengths was getting on a good stock and riding it. The nineties was a great time for growth stocks, which were Art’s specialty, and he rode a number of them for a long time. I think it was with Art that I first heard the expression ’10 bagger’ (a stock that’s gone up 10 times - i.e. $5 to $50). We were talking about Home Depot at the time (which ended up being a 20 bagger), but he had many more including Intel, The GAP and GE.

Like the famous Fidelity fund manager, Peter Lynch, Art particularly liked companies that he knew and favoured as a customer.

Art used ‘relative strength’ charts (which don’t track a stock’s price, but rather it’s performance relative to the overall market). I never considered him to be a technical analyst or chartist, but he always wanted to know how his portfolio was trending. He didn’t want to have too much invested in stocks that were trending down. Not every holding had to be in an up-trend, but momentum certainly played a role in his portfolio construction.

Art built an enviable track record and had traits we should all look for in a money manager. He wasn’t always right, but he was never lacking in confidence and decisiveness. He was well informed on a broad range of topics. He didn’t get caught up with benchmarks, but rather, stuck to good companies that made or sold stuff he could understand. And he didn’t let his previous moves or other investors’ perceptions limit his decisions.

As John Montalbano, CEO of RBC Global Asset Management and former colleague of Art’s on the U.S. equity team, said at Friday’s celebration, “If Phillips, Hager & North was headquartered in Eastern Canada or somewhere in the United States, there is no doubt in my mind that Art would have been celebrated as a pioneer and visionary in the investment management business.”