Prairie Investors Do It Better

If you haven’t visited Winnipeg, Manitoba, well, put it on your list of places to go. Smack dab in the geographical middle of nowhere, some 450 miles…

If you haven’t visited Winnipeg, Manitoba, well, put it on your list of places to go. Smack dab in the geographical middle of nowhere, some 450 miles (735 km) north of Minneapolis, flatter than the proverbial pancake, the 8th largest Canadian city is the antithesis of La La Land; gritty and real, its people genuine and down-to-earth.

And the sky! Oh man, the immense prairie sky is reason enough to visit. Perennially blue, sometimes painted with light, fluffy clouds, home to sunshine more than 300 days each year, the sky is truly Awesome with a capital ‘A’; it’s size, it’s scope evoking a sense of wonder, mystery, and boundless freedom.

That’s what I experienced when visiting last weekend. Walking about town, I couldn’t stop myself from repeatedly looking up, marveling at nature’s deep blue canvas. And as I daydreamed, I wondered how the Winnipeg sky affected people. I mean, is the sky’s awesomeness related to the sense of humility typical among prairie folks? Does it transmit power to its residents in the form of industriousness, creativity and ambition, all characteristics unusually common in North America’s bread basket region?

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Billionaire Peg

For short, locals call Winnipeg ‘the Peg’. And its here, in the Peg, where an unassuming billionaire named Bruce Flatt was born and raised. You probably haven’t heard of Flatt. Outside of corporate Canada and America, few investors know the name.

But if you are familiar with Flatt, the CEO of Brookfield Asset Management (TSE:BAM.a) (NYSE:BAM), then you know that his investing acumen has been favorably compared to that of Warren Buffett. Not least because, since 2002, BAM shareholders have taken comfort in average annual returns of 19%! Phenomenal.

The extraordinarily refreshing thing about Flatt, which may have to do with living his formative years under the great Prairie sky, is that he’s not looking to make headlines or go for rides to St. Barts with the cool kids on their $50 million private jets. In fact, the guy is so self-assured that he often takes the subway to his office whereas financial peers are driving their Bentley or being chauffeured.

Despite his being a member of the billionaire club, like Buffett, Flatt sees no need to accumulate stuff, to artificially inflate his sense of worth by surrounding him self with expensive toys. Whereas Buffett has lived in the same stucco house in Omaha since 1957, Flatt lives in a modest two-story brick house in Toronto.

As for his office? Given that he runs a $38 Billion (USD) company, you might be thinking corner office with all the trimmings. But you’d be wrong. Instead, Flatt is content with a cubicle set near a window. Well then, surely the office is outfitted with expensive art work, like so many other wealthy corporations? Nope. None. Unless you count a cartoon showing white sheep heading toward a cliff as a lone black sheep moves in the opposite direction.

Smart, humble, determined, focused, Buffett and Flatt both know who they are. They’ve done the inner work. They know their values. And they act in accordance with their values, not wasting time or money running with crowds or building an image. Nah, with these two, what you see is what you get. How refreshing.

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Humble Investors Rock

We learn best by doing. And we can learn faster, with fewer mistakes, by learning the ways of exceptional investors. So, without further ado, let’s check in with the man called Flatt and consider his wisdom.

  • Long Investment Horizon

Every successful investor has a long-term outlook, including Flatt. Here’s a quote, “We’d rather earn a 12% – 15% net return over twenty years than a 25% return over three.”

What Flatt is getting at is that the 12% – 15% return is sustainable over a long time period whereas 25% returns are not. He’s not investing for the short term, looking to make a killing fast. He’s well aware that the turtle wins the race. And the race is a marathon, not a sprint.

  • Positive Perspective

When global financial markets were tanking in 2007-2009, Flatt acknowledged the difficulties ahead. At the same time, he was looking ahead to opportunities for the next 25-60 years.

Then he went ahead and started investing in infrastructure plays – pipelines, wireless towers, power generation, alternative energy, ports and toll roads – areas where he saw tremendous long term growth, based on a tea leaf reading predicting upward global productivity and growth. So far, his reading is proving to be prescient.

For us non-billionaires, the takeaway here is to not get caught up in doom and gloom when markets fall. Rather, focus on your next opportunity; focus on moving forward.

  • Buy On Sale

Buffett said,

“Price is what you pay; value is what you get. Whether we’re talking about socks or stocks, I like buying quality merchandise when it is marked down.”

Excellent investors patiently wait for buying opportunities; they buy quality companies on sale. Flatt has taken a page from Buffett’s playbook in this regard.

He bought Australian construction and real estate giant Multiplex at a bargain price once it was teetering on bankruptcy; purchased a significant piece of infrastructure behemoth Babcock and Brown when it was in bankruptcy; in 2010, acquired 26% ownership of bankrupt mall operator General Growth for a tidy $2.6 billion (USD) which, today, has generated more than $10 billion (USD) profit for BAM.

While the non-billionaires among us don’t have this kind of pocket change lying around, we can wait for stock market opportunities in the form of share price pullbacks among quality companies. Instead of being fearful when stock prices drop, shift perspective and recognize opportunity.

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Blue Sky Ahead

Confident enough to follow your instincts, sensibly maintaining healthy skepticism about crowd behavior, wise enough to live in accordance with your values, understanding that simply because you have money doesn’t mean you have to spend it, perceptive enough to recognize opportunity where others lock into fear … these are a few worthy traits of excellent investors. Traits that Flatt and Buffett possess. Traits that you too may develop, with or without exposure to a colossal prairie blue sky, although Flatt [Manitoba] and Buffett [Nebraska] certainly make the case for a Prairie advantage!