Pierre Lussier, a retired Portfolio Manager and Consulting Strategist who has managed equity portfolios ranging from $300 million to $1 billion, shared his best practices for managing equity portfolios and the 36 key criteria for selecting companies to invest in at Sasin Research Seminar. “A good portfolio manager, if he is right at least 65-75% of the time, is a good portfolio manager,” said Lussier, confidently asserting that he falls within this category, citing frequent client consultations as a testament to his expertise. One of the most crucial strategies Lussier employs in equity portfolio management is thoroughly understanding a company’s business plan. “I need to understand what their business is about—their process, input, and output,” he explained, emphasizing that the best investment opportunities lie in companies with superior return potential over a 3-5-year period and strong leadership. Among the 36 criteria Lussier considers, he places the most weight on management as the critical factor. He advised that it is not necessary to conduct detailed research on companies but to gather enough information to assess whether they have more positives than negatives based on these criteria.” Within the management category, Lussier assesses:

• Culture
• Skills (business acumen, conservative accounting, employee management)
• Motivation
• Lifestyle
• Compensation
• Communications
• Financial involvement
• Recent transactions

“[When it comes to lifestyle] we prefer managers who are actively working in the office rather than spending excessive time on unrelated relations,” Lussier noted. He also prioritizes companies where CEOs and executives have significant personal stakes, demonstrating belief in their own businesses. “If you find a company run by competent, distinctive management, you can buy it at a good price and hold onto it as long as strong leadership remains in place,” he added. This principle extends to the board of directors in the company, which should be complementary, dynamic, and actively involved in company management.  

“The first method for estimating the intelligence of a ruler is to look at the women and men he has around him.” – Niccolò Machiavelli, Italian Renaissance political philosopher and author of The Prince

 

Additional Key Criteria for Investment Decisions

Lussier elaborated on other essential factors for evaluating companies: Products/Markets

• Growth potential
• Market share
• Product pipeline
• Barriers to entry (e.g., railroads require high capital investment, creating strong barriers)

Competition Competitive advantage: What does the company do better than its competitors? Lussier gave an example of Beyond Meat that has low barriers to entry, however there were many competitors leading to a 39% decline in value over the past year (Simply Wall St., 2024). Strategy Lussier noted that a company should have a sound, long-term planning with clear objectives. CEOs should provide precise corrective strategies and five-year revenue and profit margin goals. Focus on Core Business Lussier pointed out that companies should avoid “diworsification,” meaning they should not stray into unrelated industries (e.g., a chair manufacturer should not venture into hotel management). Valuation & Financial Health Key drivers of stock price

• Profits, profits, profits
• Earnings per share (EPS) trends
• Long-term investors should focus on sustainable earnings growth

Other financial factors

• Margins
• Productivity
• Quality of Assets
• Capital intensity
• Leverage
• Dividend policy
• Share buyback strategies

Governance & ESG Considerations

• Category of shares (one vote per share preferred)
• Avoiding legal disputes
• Companies should have ESG in their strategy

Lussier avoids companies exhibiting generalized bullishness or those unable to generate profits within two years. As an example, he pointed to Lion Electric, which disclosed having no prior manufacturing experience and deriving 50% of its revenue from government grants—a major risk factor in his assessment. Moreover, Lussier strongly believes in earnings as the foundation of investment decisions. He aligns with Warren Buffett’s philosophy: “it’s wise for investors “to be fearful when others are greedy and to be greedy only when others are fearful.” His contrarian approach leads him to seek opportunities in stocks others deem risky. “The moment somebody says it’s very risky is the moment it becomes attractive to me,” he concluded.