Richard Fogler, Chief Investment Officer, Kingwest & Company
Focus: North American equities
Top Picks: TMX Group, Citigroup, Smith & Nephew
MARKET OUTLOOK:
We are long-term investors. We own companies for five years on average. Sometimes a lot longer. Since market cycles typically last four or five years, we are likely to hold virtually every company through a bear market or a recession.
We don’t fret about trying to predict them. We aren’t going to do it successfully and consistently anyway. Almost no one does.
Our strength is recognizing companies going through positive change that will compound their value over a few years, not quarters. Positive change creates value.
If you look at a chart of the market over the past 50 years, one thing stands out: it goes up and to the right, compounding at eight per cent to 10 per cent per year.
For most investors, the trick isn’t trying to outsmart the market; it’s taking advantage of what the market offers. Excellent returns over long periods and a comfortable night’s sleep throughout.
We’ve been fortunate to outperform that market over the past 30 years. US$100,000 invested in the index grew to US$1.75 million in that time. Invested in our Avenue Fund, that same US$100,000 grew to US$3 million. These numbers show the true power of compounding. As Einstein is often credited with saying, ‘Compound interest is the eighth wonder of the world.”
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TOP PICKS:
TMX Group (X:TSE)
TMX Group operates the Toronto Stock Exchange, the Montréal Exchange (Canadian derivatives, futures, and options), NGX (North American gas and electricity trading), Trayport (the global software running European energy markets), and the Canadian Depository for Securities (clearing every Canadian equity and bond trade).
TMX is the critical infrastructure behind multiple Canadian markets and one of the world’s most important energy trading platforms.
TMX has pricing power. Once clients integrate into its systems, switching costs become prohibitive.
This isn’t just a trading platform. It’s a toll road. Competitors may be able to replicate individual pieces, but not the fully integrated ecosystem spanning trading, clearing, and data.
Strategic acquisitions periodically expand TMX’s network. Last week, TMX Group acquired CBOE Canada and CBOE Australia. CBOE Canada eliminates the main alternative trading system taking share from its equities platforms. The acquisition removes price competition and further entrenches TMX’s dominance.
TMX already has nearly 50 per cent of global mining listings. Adding Australia — the second most important market for mining and natural resources financing — solidifies TMX’s position as the global network for resource finance.
We’ve owned TMX since its IPO in 2003 at US$3.50. Our investment thesis has only strengthened over time. Twenty-two years of holding a regulated monopoly that keeps finding new ways to grow. That’s exactly the kind of compounding machine we look for.
Citigroup (C:NYSE)
Citigroup is the most misunderstood large bank in the U.S.
The market’s pricing the old Citi, a sprawling, complicated conglomerate that’s disappointed investors for two decades.
Jane Fraser is doing what no previous CEO managed to do. She’s shrinking the business to expand it.
Citi has exited consumer banking in dozens of countries, focusing on what it does best: services for global corporations, securities and asset management firms, high-net-worth investment clients, and a small U.S. consumer bank anchored by one of the largest credit card businesses in the country.
The treasury and trade solutions business serves multinational corporations with infrastructure that took decades to build. It’s virtually impossible to replicate. A bank that can facilitate cross-border liquidity across 90+ countries is a utility, not just a lender.
The simpler Citi is showing up in the numbers. Return on tangible common equity hit 13.1 per cent in the first quarter of 2026, beating the 10 to 11 per cent target and up from 9.1 per cent a year earlier. Fee income is growing. Capital returns are meaningful.
For years, Citi was structurally inefficient. It spent 65-70 cents to earn a dollar. Now, operating below 60 per cent proves the ‘sprawling conglomerate’ has been streamlined into a leaner, services oriented machine.
Citi is finally delivering the profitability and stability investors have long demanded. Yet, the stock still trades at a substantial discount to its peers. The restructuring is working. The market hasn’t fully caught up yet.
Smith & Nephew (SNN:NYSE)
Smith & Nephew is a high quality medical devices franchise that has been mismanaged for years. Three good businesses: orthopedics (knees, hips, trauma), sports medicine (arthroscopy, joint repair), and wound care (dressings, advanced wound devices) all benefiting from the aging population.
Deepak Nath took over the CEO job in 2022. He’s tightening commercial execution, simplifying the supply chain, and accelerating product launches. The improvements are showing up across the business. Sports medicine is growing strongly, orthopedics is recovering, and margins are improving as a result. Operating margin reached 20 per cent last year, well behind Stryker at 26 per cent, but catching up.
The improvements are just the beginning. The franchise has real advantages: decades of clinical relationships with surgeons, brand strength built over generations, and an embedded position that’s nearly impossible to replicate
Smith & Nephew trades at about half the earnings before interest, taxes, depreciation and amortization (EBITDA) multiple of peers like Stryker. Same end markets, same demographic tailwinds, very different multiples. The gap reflects two decades of disappointment. As the operations improve, the gap should close
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| X:TSE | Y | Y | Y |
| C:NYSE | Y | Y | Y |
| SNN:NYSE | Y | Y | Y |
PAST PICKS: SEPT. 5, 2025
Brookfield Corp (BN TSX)
Then: $92.16
Now: $62.19
Return: 1%
Total Return: 2%
Secure Waste Infrastructure (SES TSX)
Then: $16.60
Now: $23.30
Return: 40%
Total Return: 42%
Amrize (AMRZ NYSE)
Then: US$53.64
Now: US$57.55
Return: 7%
Total Return: 8%
Total Return Average: 17%
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| BN TSX | Y | Y | Y |
| SES TSX | Y | Y | Y |
| AMRZ NYSE | Y | Y | Y |
