Construction manager blends contrarian and ‘coattail’ investing

John Polomny

Occupation

Construction manager

The portfolio

Includes Alterra Power Corp., Amaya Inc., Input Capital Corp., Altius Minerals Corp., Fairfax India Holdings Corp., Agroton Public Ltd., Astarta Holding NV and the Market Vector Russia exchange-traded fund.

The investor

John Polomny has invested in stocks since the 1980s. “Like many others, I made my share of mistakes,” he says. “But I persevered, and learned what works and doesn’t work from painful experience and other successful investors.”

Mr. Polomny applies his technical knowledge and managerial experience to the commissioning of power plants.

How he invests

“I am a contrarian by nature, so I look for situations that are out of favour — yet have a catalyst for change that will lead to a revaluation,” Mr. Polomny says. “I also look for situations where there is forced selling or non-company news that drives down the stock. When the forced selling or non-company event dissipates, the market can go back to focusing on company-specific fundamentals.”

He also likes to ride the coattails of smart operators.

As he remarks: “I also follow serially successful people and invest along with them.”

Alterra Power is a renewable energy company. Its chairman, Ross Beatty, is “a serially successful promoter … I made quite a bit of money as he built up Pan American Silver and Lumina Copper, so I am a fan of his.”

Fairfax India Holdings Corp. was created by Prem Watsa’s Fairfax Financial Holdings Ltd., to tap into India’s long-term growth prospects.

Agroton Public Ltd. and Astarta Holding NV are two “Ukraine-based agricultural stocks that trade in Poland.” The troubles in the Ukraine make these contrarian plays; interestingly, Fairfax Financial just bought a 10-per-cent stake in Astarta.

Best move

“Hurricane Hydrocarbons, which became Petro Kazakhstan, was eventually bought by the Chinese National Petroleum Company. The stock went from 25 cents to over $50.”

Worst move

He suffered a 45-per-cent drawdown in 2008 because he got too greedy in 2007, abandoning his position-sizing rule (the riskier the trade, the smaller the amount of money that should be invested) and his stop-loss rule (place sell orders 15 per cent or so below the price of a stock, to cut losses early).

Advice

He recommends following risk-control rules mechanically, without emotion.

Want to be in Me and My Money? Contact Larry MacDonald at mccolumn@yahoo.com or his website

Want to be in Me and My Money? Contact Larry MacDonald at mccolumn@yahoo.com or his website

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