We are still in the early stages of a sector rotation, says one Canadian market veteran.
Doug Johnson, CEO and Founder of Pathfinder Asset Management, looked over at the rows of booths lined up at his own conference this past weekend in Kelowna, and took the pulse of the Canadian equity markets.
While some at the second annual conference, which had expanded and featured a range of public and private companies, spoke of a full-blown swing back to tech, Johnson struck a cooler tone.
“Tech and healthcare have been building for two years,” he said. “In Canada, we have been spoiled for an incredible commodity market for fifteen years. When you talked to brokers about tech or special situations in the past they weren’t interested, but that is now changing.”
While a newly attentive Bay Street will no doubt focus attention on a tech IPO scene that is more vibrant than it has been in more than a decade, Johnson says his gaze is squarely on companies that have improved even as they were ignored.
One such example, he says, is Calgary-based FLYHT Aerospace Solutions (TSXV:FLY), which changed its name from AeroMechanical Services last year. FLYHT has developed a product called AFIRS, an acronym for Automated Flight Information Reporting System, which increases the safety, service and profitability of airlines with on-demand streaming of black box data, letting those on the ground know exactly what is going on with their in-air assets.
The company, which has struggled through an airline industry fraught with red tape, appears to have turned prohibitive timelines into a sizable barrier to entry for others who might want to play in its potentially lucrative space. The good news comes on a more regular basis for the company these days, including last week’s announcement that it had received final certification to operate AFIRS on Boeing 777s, which followed the thumbs up on Boeing 747s.
Johnson says FLYHT encapsulates a dominant theme to his investing, in that it is a disruptive technology with recurring revenue and a big barrier to entry.
Vancouver-based Pathfinder Asset Management was formed in 2010, and is an evolution of a family office that began more than three decades ago. The company now operates the early-stage venture focused Partners Fund, the Partners Real Return Plus Fund, as well as segregated blue-chip equity and fixed income portfolios for high-net worth clients.
Pathfinder’s second annual conference, which was co-sponsored by Navigator Capital Partners and produced by Capital Event Management was held this past weekend at Kelowna’s Delta Grand Hotel and featured a “speed dating” style format in which dozens of buy-side pros met with public and private companies for twenty-minute meetings. Attendees included FLYHT, QHR Technologies, First Growth Holdings (Wine Online), Cortex Business Solutions, Bellus Health and SoMedia Networks.