Peter Hodson: Five Unusual Tales from My Investment Career

As we celebrate the holidays, it's a good time to reflect on the lighter side of the investment and portfolio management industry. Here are five unusual stories from my journey in this field.

If They Smoke, Don’t Buy the Stock

Back in the late 1990s, I embarked on a road trip to visit a plastics company in eastern Ontario. Their stock was performing well, and I wanted to uncover the reasons behind it. As a representative of a significant fund company, our interest in the stock would likely boost its value. Upon arrival, I met with 11 senior executives in the boardroom. While their financials appeared solid, I was taken aback to find that 10 of the 11 executives were smoking during the meeting. This was before smoking bans were enforced in offices. I believe in individual rights, but smoking in a boardroom felt inappropriate, especially considering they were in charge of a company involved with highly flammable plastics. This negative impression led me to decide against investing in their stock. Interestingly, 18 months later, the company declared bankruptcy — perhaps a result of being distracted by their smoke breaks instead of focusing on the business.

No, I Don’t Speak Kazakh

At a hedge fund where I worked, we had invested in Petro-Kazakhstan Inc., an energy firm with a history of stock volatility. One day, out of the blue, the stock price plunged without any news. My boss was understandably concerned and insisted I find out the reason. Since there were no press releases or rumors, he jokingly suggested I call the Kazakh government. I couldn't help but laugh, as I neither spoke Kazakh nor had contacts in the government there. Furthermore, I doubted they would share any insights even if I did. Frustrated, my boss leaned on me more until several months later when the company was acquired at a premium by a state-run Chinese oil company. It turned out our lack of communication with the Kazakh government wasn't as detrimental as my boss had feared.

Dad, Your Job Sounds Kind of Boring

When my children were little, I often described my job as managing other people's money. One day, my daughter Justine, then 12, revealed that she had always thought of my job as incredibly dull. In her mind, managing money equated to sitting in a room all day and merely watching cash accumulate.

The Big Break via a Fax Machine

My journey as a portfolio manager started unexpectedly. Following an exodus of senior employees at the insurance company where I worked, I found myself inheriting a fund without its own manager. I was quite young and a little insecure about this sudden responsibility. My boss hinted they would soon hire a seasoned manager. On the manager's start date, he inexplicably faxed our chief executive to say he had accepted another job. This left me as the official portfolio manager, all thanks to that quirky turn of events!

The Drug Smuggling CEO’s Firm Went Bankrupt

In the early dot-com boom, I had the task of researching a marketing and advertising company that was garnering attention and seeing stock price increases. While reviewing the regulatory filings, I stumbled upon a shocking detail: the CEO had a drug smuggling conviction. While he wasn’t necessarily transporting drugs himself, he did allow them to be trafficked using his plane. After presenting this information to my boss, we decided against buying the stock. Despite its rallying price — even doubling at one point — the company was eventually halted over missing funds, and the CEO resigned. Shortly thereafter, the company went bankrupt. This experience highlighted how investors sometimes disregard serious red flags, especially when the stock price is on the rise.

Peter Hodson has made it his mission to help investors navigate their financial journeys. Currently, he is the founder of 5i Research Inc., which supports independent investors in achieving their investment goals. He also manages the i2i Long/Short U.S. Equity Fund.

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