Video description:

A man in business attire walks through an office lobby and stops at a reception desk. Upbeat music plays in the background through the whole video.

Rui sits in an office with a glass wall behind him. Computer screens are visible in the background.

Rui Cardoso: My name is Rui Cardoso. I'm a portfolio manager here at Beutel Goodman and also part of an analyst team that oversees the U.S. and global investments here at Beutel.

Description: A text banner appears stating Rui Cardoso, MBA, CFA. Vice President, U.S. and Global Equities. Beutel Goodman & Company Ltd. American Equity Fund.

Rui Cardoso: Beutel Goodman was started in 1967. We've been around for over 50 years, very established in fixed income, Canadian equities and global equities and U.S. Equities, with over 40 billion in assets under management. Very deep investment team, the average 10 years, over 14 years.

Description: A text banner appears stating What makes Beutel Goodman unique?

Rui Cardoso: One unique aspect of Beutel Goodman is no one really gets promoted above the role of analyst. So even though we're portfolio managers on different funds and take on different roles, we spend most of our time analyzing companies as analysts.

Description: A text banner appears stating What sets you apart?

Rui Cardoso: So we take a very unique approach to investing. What really sets us apart, it starts with our opening mindset that we're looking for 25 to 30 gem businesses we can own forever. And that's very liberating. It doesn't matter what we don't own. We just focus on our 25 to 30 gems. And our view is very simple. If we can get most of those 25 right and limited downside on the ones we get wrong, we're going to do very well for unit holders over the long term. And that's showed up very well in our portfolios over time.

Description: A text banner appears stating What does your focus on downside protection mean?

Rui Cardoso: Capital preservation to us is paramount and it's not just a tagline, it's ingrained in everything we do here at Beutel. So for example, for any new investment that we make, we have an upside and a downside target that's set. And we spend more time trying to figure out the potential downside in a stock than we do the upside. So the reverse of most typical managers. So an example of how that plays out, a lot of managers, if they find a new investment opportunity where they can have 30% potential upside, they'll be very excited about that. We'll look at that and say, if there's 30% upside and 30% downside, we're not interested. We absolutely need 50% upside on any new investment to qualify for a Beutel portfolio.

Description: A text banner appears stating Describe your investment universe.

Rui Cardoso: So our investment universe is very broad, but it's really focused on the highest quality companies with great returns, conservative balance sheets, and where management is aligned with us as shareholders. A key thing for us as well is sustainability of free cash flows over time, so we're not afraid of cyclical businesses, as long as over a cycle they can generate very strong free cash flows. So we focus on those key attributes. So the overall broad market could be quite big, but we can get it down to around 200 Beutel worthy investible ideas.

Description: A text banner appears stating How do you identify companies to invest in?

Rui Cardoso: There's a lot of ways we sift through and find the best ideas for the portfolios. One is meeting companies that come through town or attending conferences. Another is we do some quantitative screening where we look at attributes like free cash flow yield, balance sheet strength, sustainability of free cash flows over time and returns.

Description: A computer monitor appears onscreen showing Bloomberg Terminal information with benchmark data

.Rui Cardoso: But probably the most important approach is we use our experience.

Description: Rui appears onscreen in his office.Rui Cardoso: It's a very deep team. The average tenure is around 15 years of experience. So we know the great businesses out there and it's about being patient and disciplined, waiting for the opportunity where we can take those stocks and put them in the portfolio where we have good margin of safety on the downside.

Description: A text banner appears stating How does a stock enter the portfolio?

Rui Cardoso: In terms of how a stock makes it into the portfolio, it's a pretty gruesome process and that's by design and so there's very high hurdle rates for how a stock enters. The first step is what's called the one-pager where someone on the team has an idea and we'll meet two or three days later and discuss the idea in a one-page format. And any one of that meeting can kill the idea. And so everyone has to be unanimous as to whether that idea moves onto the next stage. If everyone gives it the thumbs up, the next stage is the analyst will spend two or three months doing a deep dive on the industry, the company, the financials, the valuation, and come up with an in-depth report. And then once that report is done, the third stage is that it gets presented to the investment committee. And once it clears all those three levels, then it's worthy of being in a Beutel portfolio.

Description: A text banner appears stating How do you decide to sell a stock?

Rui Cardoso: So the next part of our process is once a stock is in a portfolio, how we manage the weights within that. And so if the stock works and everything goes according to plan, the stock will run through our target price within a three-year window. And once that happens, we automatically sell a third of the position and those funds get recycled into newer ideas and the stock price is reviewed upon that. And if there's still good upside in the stock we'll likely hold onto the position. And if not, we'll sell the rest of the position after the run-through sale. Same thing on the downside. We really try to take emotions out of decisions. And so if a stock goes through the downside, someone else on the team will take it on and do a fully independent review and have a new recommendation as to whether we should sell the remaining position, hold onto it, or potentially even add to it if there's still very good upside. And if the issue seems to be more sentiment driven rather than fundamentally driven. But typically our turnover is around 25%, so we're looking for four or five new gem ideas per year. But some years it'll be two ideas as in a couple of years ago, some years it'll be seven or eight ideas. It really depends on the market dynamic at the time.

Description: A text banner appears stating What does risk mean to you?

Rui Cardoso: So risk for us is absolute, it's a permanent loss of capital. So we really focus on mitigating risk on a stock-by-stock basis. And our view is the best form of risk control is knowing what you own and knowing what it's worth. And so if we take a portfolio of 25 gems each with limited downside, the risk characteristics of our portfolio will be much better than the broader market that has very expensive stocks that look expensive, potentially also has very cheap stocks that are very expensive because they're not great businesses in our view. And so if we manage risks on a stock-by-stock basis, the overall portfolio will have great risk constraints as well.

Description: Rui and a colleague walk through the office and stop to talk.

Rui Cardoso: So we want to make sure that only the best ideas qualify for any Beutel portfolio. And so we'll run through a lot of ideas and if they're not good enough, we can have the ability to move on to the next idea, given our level of concentration, how picky we are.

Description: Rui and colleague walk offscreen.

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Description: Text appears onscreen stating The views expressed in this video are those of the speaker and do not necessarily reflect the view of The Canada Life Assurance Company or any other party. Nothing in this video is intended to be legal, tax or financial advice. Canada Life and designs are trademarks of The Canada Life Assurance Company.