Steal These 5 Timeless Investing Lessons From Canada's Wealthiest Families

I’m a huge fan of biographies — on both people and businesses.

I think it’s absolutely wonderful that a lifetime of someone’s experiences can be summarized in a single tome, just waiting there for me to read, for under $20 (or free from the library). All it takes is a little bit of your time.

It truly is a gift.

As a Canadian, I’m partial to Canadian stories. I love reading about the people and businesses that made this country great. There have been some truly great men (and women!) in Canadian history, who have built impressive empires and lived fascinating lives.

Related: Nelson’s 25 favourite business books

I recently got a nice stack of Canadian business biographies for my birthday, and I was thrilled. The only thing better were the fireworks at the end of the day.

I’ve already made a good dent in these books, and I’m looking forward to reading the rest of them. Why touch grass when I can touch those pages, baby?

In today’s edition of the newsletter I’d like to share some timeless lessons I’ve learned from Canada’s top business families, strategies that enabled these dynasties to build truly remarkable wealth.

Let’s take a closer look.

Jim Pattison — diversify into excellent businesses

Jimmy Pattison might be my favourite Canadian business mogul. The man is funny, down-to-earth, and obviously incredibly intelligent. I also admire his work ethic — he reportedly still goes into the office most days even after he’s turned 90.

Pattison got his business start when he acquired a General Motors dealership in 1961. That was followed by his entry into automotive leasing the same year, then the media business in 1965, the billboard business in 1967, and supermarkets in 1968. It then exploded from there.

These businesses — plus many more — are still part of The Jim Pattison Group today, a sprawling empire of 50,000 employees and 20+ operating divisions, which combine to generate more than $16B in revenue.

In a world where seemingly every investor wants to overweight their portfolio into technology stocks, Pattison shows us how a portfolio full of boring old-school businesses can succeed over the long-term.

When looking for a new business to add to the collection, Pattison wants:

• Strong management teams

• Significant market share

• A relentless pursuit of excellence

• A commitment to exemplary service

I’ll add another few qualities that will be of interest for investors, including:

• A focus on boring, old-school businesses

• Solid businesses with good economics

• Purchased at a reasonable valuation

• That have clear moats

One of the many interesting things about Pattison’s empire is he’s more than willing to purchase cyclical businesses. He owns car dealerships, forestry companies, billboards, and other assets that suffer when the underlying economy is bad. Because they’re balanced with other assets — like grocery stores and food processing companies — that are counter cyclical, the whole portfolio works pretty effectively.

Coming in September: The Canadian Dividend Investing Podcast. Available everywhere you get your podcasts.

(Paid subscribers will get episodes 4 weeks early)

Is there someone you’d like to see interviewed for the podcast? Hit me up on the Tweeter app (@cdinewsletter)

The Desmarais family — hold for the long-term

Paul Desmarais took control of Power Corporation (TSX:POW) in 1968 after the sons of the founding shareholders sold their stake.

Desmarais was in his early-40s when he took over, but he was already a business veteran. He left law school early to take over his family’s ailing bus service. He successfully turned it around and then acquired other bus lines in Ontario and Quebec.

He then turned his focus into diversifying into other investments, so he made a share exchange deal with Power Corporation. He instantly became the controlling shareholder, and Power owned the bus company.

Desmarais had his eye on financial services, and pounced. Power made a large investment in Investors Group in 1969 — known as IGM Financial (TSX:IGM) today — and via Investors Group he took a controlling stake in Great-West Financial (TSX:GWO).

And here’s the important part. Even more than 50 years later, Power Corporation hasn’t sold a single share of Great-West Life. In fact, they’ve slowly purchased more to consolidate their position.

It’s not easy to hold a position for decades. In fact, it’s incredibly hard. There will always be a reason to sell, and both Great-West Life and IGM Financial had long periods of underperformance against some sexy new thing.

The story behind IGM is especially interesting. Led by its largest shareholder, IGM has transformed the business over the last few years, investing in alternate asset managers and pivoting the strategy of Investors Group from high-fee mutual funds to a more financial planning approach. Power chose to slowly change the business with the times rather than selling out — an especially powerful lesson considering selling out would’ve been easier.

I covered the IGM transformation (plus a really interesting “hidden” asset it owns) on the premium part of the newsletter.

The Weston family — be relentless

I’ve long had an admiration with the Weston family, who are the majority owner of Loblaws, Shoppers Drug Mart, and Choice Properties through their holding company George Weston Limited.

Their history is recalled in Bread Men, which traces the family’s journey from the bakery to British cookie to retail businesses, a quick read that’s filled with fascinating anecdotes and entertaining stories.

But the part of the book I enjoyed the most was when the family realized their grocery operations were a problem. Loblaws was almost bankrupt in the 1970s, losing its position atop the Canadian grocery marketplace amid price wars from its competition, too many unprofitable stores, and a regrettable expansion into the United States.

A young Galen Weston was put in charge of the ailing chain and immediately made big changes to save the business. Hundreds of stores were closed and warehouse operations were consolidated. Stores were renovated and redesigned. And when things started turning around, Weston went on the offensive, including investing $40M into private label development.

The rest, as they say, is history. Loblaws once again gained the title of Canada’s largest grocer, and it hasn’t looked back. But what I really admire was young Galen was willing to make huge changes to make Loblaws work. This is a family serious about staying on top.

That’s what I like about the Weston family. They have a demonstrated history of doing what needs to be done in order to succeed. They’re not worried about hurting anyone’s feelings or making any friends.

The Boycott Loblaws embargo has made headlines over the last few months, a grassroots movement from frustrated shoppers who are tired of paying too much for groceries. Since Loblaws is the largest grocer in the country, they’re the natural target.

Do you think the Westons are losing any sleep over this? I doubt it. Besides, the stock price has recently hit a 52-week high. The founding family is richer than ever.

If y’all aren’t doing it already, follow me on Twitter and Seeking Alpha.

I also wrote about TD Bank over at Seeking Alpha($), rating it a Strong Buy.

The Irving family — minimize taxes

K.C. Irving started a small service station in rural New Brunswick in the 1920s, He eventually grew that into Irving Oil, a massive energy empire with gas stations along the east coast of both Canada and the United States, as well as one of Canada’s largest oil refining operations.

That was eventually leveraged into a massive conglomerate with economically dominates Eastern Canada, including holdings like forestry, shipyards, trucking, and even a junior hockey team.

Together, the empire is said to be worth at least $10B. And it has largely been kept intact too, even amid a public feud between K.C.’s descendants. Brothers J.K, Arthur, and Jack Irving essentially split the company up as a solution, but the company remained in the family.

Probably my favourite part of learning about the history of the Irving family was the company’s desire to avoid taxes. K.C. Irving would keep a close eye on how much money the company had made throughout the year and order capital expenditures to be completed closer to the end of the year. This would both grow the value of the business over time and depress current profits — thus avoiding the tax man for another year.

He also made use of tax havens, creating a holding company in Bermuda to hold the assets.

In fact, when the fighting brothers finally agreed upon how to split up the company in the early 2010s, a big part of the reason why it finally got done was due to taxes.

There are many ways for regular investors to avoid taxes too. One way to do it is to utilize RRSPs and TFSAs, which should have enough room for many Canadians’ savings needs. You can also build up a portfolio which spits out tons of dividend income — like my buddy Jim who earned $130,000 last year (along with his wife) and barely pays any taxes at all.

Speaking of my buddy Jim… here’s the story of how he built a $3M+ portfolio and retired before turning 50. It’s one of the favourite things I’ve ever written.

Mitch Goldhar — Real estate with growth

Mitch Goldhar was a young real estate developer when he started working with Walmart in the early 1990s. The world’s largest retailer was then just operating in the United States, and Goldhar eventually became the developer of choice for Walmart’s Canadian expansion.

Fast forward some 30 years later and most of that Walmart-anchored real estate is owned by SmartCentres REIT (TSX:SRU.un), with Goldhar as a major shareholder.

What drove Goldhar to work with Walmart was two-fold. Firstly, he was attracted to the opportunity of partnering with a true behemoth. But he also wanted to make real estate that allowed Walmart to keep prices down, which would help the average Canadian consumer.

Not subscribed to the free edition of the newsletter yet? Then what are you waiting for? Good stuff like this in your inbox, each and every Sunday.

The beauty of real estate is someone looking to build an empire has virtually limitless growth potential. They can buy residential property or commercial. They can take the active route or load up on passive REITs. The sky really is the limit.

It’s also easy to use leverage to grow a real estate portfolio, and since each REIT has a leveraged balance sheet you get the benefit of debt there too.

There’s a reason why so many Canadians have gotten wealthy building up their own real estate empires. It’s “getting rich on easy mode” as one person once told me. As long as investors don’t go too fast or take big risks, it’s almost foolproof.

Goldhar was smart enough to hop on a rocket ship right at the beginning of its journey, and it made him a billionaire. I don’t have aspirations nearly that high, but I can still invest right alongside him in SmartCentres REIT.

One more thing…

Tired of investing services that only highlight one stock a month?

Looking for something a little more… substantial than the latest sexy growth stock that only pays a 0.3% yield?

We can help. Our premium newsletter is written by someone who retired on dividends, someone who knows exactly what it takes to build and maintain a portfolio that spins off tons of sweet passive income.

We cover dozens of Canadian dividend payers each month. For instance, in June, we took a closer look at:

• Chartwell REIT

• Alimentation Couche-Tard

• A&W

• Telus

• ATCO

• Waste Connections

• GFL Environmental

• Empire Company

• Algoma Central

• Mainstreet Equity

• Dollarama

• BSR REIT

• National Bank

• Canadian Western Bank

And probably a dozen more. Many of these offer excellent yields, potential for capital appreciation, and decades of successful history behind them.

But which ones fit into your portfolio? That’s where we come in. We analyze each stock and tell you whether we like it or don’t, plus we tell you whether we own it. 

There aren’t many other dividend newsletters in Canada that offer that.

We have a no-BS approach… just what you need to know about each of these Canadian dividend payers.

A premium subscription nets you all that, plus so much more. Just $200 per year; upgrade your subscription today!