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Up and To The Right The Story of John W Dobson and Formula Growth Second Edition Craig Toomey Full Chapter PDF
Up and To The Right The Story of John W Dobson and Formula Growth Second Edition Craig Toomey Full Chapter PDF
Up and To The Right The Story of John W Dobson and Formula Growth Second Edition Craig Toomey Full Chapter PDF
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Up and to the Right
UP
and to the
RIGHT
The Story of John W. Dobson
and Formula Growth
Second Edition
cr aig toomey
Greed and fear. Many people cite these as the two main driving forces
behind the stock market. But a successful investor should know that
qualities such as vision, knowledge, discipline, risk tolerance and
patience are much more important.
John W. Dobson mastered all of these qualities to become one of
Canada’s greatest growth-stock investors. He launched his Formula
Growth Fund on 27 June 1960, with a small group of investors who
put up a total of $134,000 (CAN), including $20,000 from Dobson,
to buy units in the fledgling fund. John’s initial investment would
have been worth some $24 million as of 2020 – an increase of an
incredible 1,200 times! This represents a compounded rate of return
of 12.67 per cent a year over roughly sixty years of successful invest-
ing. In contrast, the same amount invested in the S&P 500 Total
Return index would have been worth just $9.2 million (CAN).
This is the kind of performance that has earned the long-term
loyalty of Formula Growth clients, who include some of Canada’s
most prominent businesspeople and entrepreneurs. It has also drawn
the attention of several of the world’s savviest investors, such as the
late Sir John Templeton, who at one time was one of the largest
Formula Growth Fund unit holders.
xii preface
John passed away on 30 July 2013, just five days after his eighty-
fifth birthday and a few months before the first edition of this book
was published. But we continue to practice his brilliant investment
precepts, creating wealth for our clients, who include high net-worth
individuals, family offices and, increasingly, institutions. We are also
assiduously managing money held in our founder’s estate and the
John Dobson Foundation to ensure it will be around for many years
to promote entrepreneurship, investment and free-market thinking.
Indeed, Formula Growth has lost none of John’s magic. Since
the first edition of this book was published in 2014, Formula
Growth has tripled its assets under management, to some $1.6
billion (CAN). We have also successfully broadened our product
offering to give our clients more choices to meet their investment
objectives and risk tolerances. In addition to our legacy, long-only
Formula Growth Fund, we have a growing hedge fund platform
that employs an additional investment tool – shorting – to drive
down some of the risk in what we do and reduce volatility. This
platform has been very well received, attracting strong asset flow
from institutional investors and other risk-averse investors who
want to sleep easier at night with lower-volatility funds that are
less correlated to the markets.
At the same time, we have applied our time-proven investment
process to a new market in Asia with a talented team in Hong Kong
that manages a range of products for us. We are hopeful that this
business will grow significantly in the coming years by taking advan-
tage of the many exciting investment opportunities that are emerging
in China and other parts of Asia.
Meanwhile, since the first edition of this book was published,
the performance of our funds – including Formula Growth Fund,
Formula Growth Hedge Fund and Formula Growth Alpha Fund –
has been on target. This is thanks to the exceptional stock-picking
and bottom-up growth stock investing skills of our portfolio man-
agers, as well as continued strong stock markets in North America.
Our Asia-focused Formula Growth Global Opportunities Fund has
preface xiii
Randall W. Kelly
Chief Executive Officer, Formula Growth Limited
Even when he was a little boy, John Young John with a grapefruit — a
Dobson’s forthright personality was rare treat in 1934 — and his family’s
obvious to see. big car.
John is on the right of this picture, together with his sister, Virginia, and his
father, Sydney Dobson.
Since you cannot play golf in a
Montreal winter, young John turned
his attention to hockey.
To the end of his life, golf remained one of John Dobson’s passions.
Up and to the Right
Chapter 1
An Uncommon Man
• Punctuality •
Dobson’s energy was legendary – few could keep up with him. “He
was always the last one in the room, looking for something to do,”
an uncommon man 5
minutes. He’s late!’ I don’t know what happened to him, but I don’t
think he made the meeting.”
Even though Formula Growth made many successful investments
in technology firms, Dobson displayed a complete lack of interest in
computers, mobile phones, or other modern communication devices.
“John didn’t keep up with information technology systems and never
had a cellphone,” noted Ian Soutar. “He was always quite resentful
of the fact that when he’d come into the office people had no time
to sit and talk to him. They’d be looking at their screens, emailing
people, the kind of stuff that goes on in the real world. The whole
information flow has changed now. It’s so much quicker and so much
more intense. Whether it’s better or not, I don’t know, but it’s the
way people operate today. His view was that we’re really wasting our
time too much, and there’s a whole load of information that we can’t
process anyway.”
Dobson, who never married, had a somewhat conflicted relation-
ship with women. While relying on their support, especially from
Formula Growth colleagues such as Barbara Ellis, Bette Lou Reade
and Kim Holden (Bette Lou’s daughter and a one-time portfolio
manager), when push came to shove, he preferred to deal with men,
even on social occasions. “All John’s stuff did not involve wives, so
if we went to a hockey game or something, it would generally not be
with wives because he didn’t have one,” says Peter Mackechnie. “He
was all into business, growth, opportunities, and free enterprise, that
kind of thing. He really didn’t have time for women, but he enjoyed
their company nevertheless.”
Ian Soutar recalled that his former partner, the late Neil Ivory,
once invited Dobson to have dinner with him and his wife. Dobson
had a girlfriend with him, and he was going to a hockey game that
evening. “They got through the main course, and the dessert was
about to come. But John looked at his watch and said it was time to
go to the hockey game. His date said it was impolite to leave, and she
was going to stay for dessert. John said that was fine. He got up, left
his date there and went to the hockey game by himself.” Soutar said
an uncommon man 7
that this story reveals a lot about Dobson’s character. “I think that if
you are going to get married, if it’s going to last, you’re going to have
to compromise. And he was not fond of compromising.”
Dobson’s unusual temperament was a source of bemusement
among those who knew him well. “You could never foresee how John
would react,” says René Catafago, Formula Growth’s former CFO
and executive vice-president, who was also Dobson’s personal finan-
cial and tax advisor. “He was very unpredictable. One time he gave
me hell for ordering a new desk, saying it was a waste of money. Yet
he could be so generous. He was also absent-minded. I remember one
day he was in the boardroom and my office was not too far. I heard
him scream for me, so I immediately jumped up and said, ‘Yes, John?’
He responded, ‘Not now, I’m busy!’”
Sometimes Dobson’s meticulousness and attention to detail, so
critical to his success as an investor, could be maddening, according to
Catafago. “I once was at a meeting, giving John spreadsheets of com-
panies I had analyzed. Everything was so neatly done, with columns,
ratios, and cash flow. It was a nice sheet per company. Everything
was pluses and minuses, which were in brackets. I saw John looking
very perplexed about the whole thing. He turned around and showed
the sheet of paper to Ian Soutar and said, ‘Ian, don’t you think the
way he does his brackets is funny?’ I got so mad, I said, ‘John, after
all the work I have done, all you have to pick on is my brackets?’”
• Generosity •
Despite his quirks, Dobson is fondly recalled for his generosity and
concern toward others. “He genuinely cared about people in this
organization and keeping everyone together,” says Kim Holden.
“He fostered this culture of togetherness, always asking how the
day was going, how the evening and vacations were, and so on.
He was very good about it.” Dobson’s generosity, often sponta-
neous, is legendary. “I had no money at all when I started, and the
banks wouldn’t give me a mortgage,” says Bette Lou Reade, who
8 up and to the right
was anxious to buy a home. “As soon as John heard about it, I got
my mortgage.”
“In the 1970s, John started providing financial assistance for
youngsters, including the children of his friends who were attending
university,” said the late Robert Paterson, a boyhood friend. “No one
knows how many he helped. He seemed uncomfortable with people
being aware of his generosity, as this was a private matter with him.”
Jim Durrell, a businessman and former mayor of Ottawa, knew
Dobson since the 1950s when his father worked with Dobson at
Dominion Engineering Works in Montreal. Durrell likes to tell
a remarkable story about Dobson’s impromptu approach to giv-
ing. It happened a few years ago after a game of golf at the Cape
Breton resort of Baddeck, where John was having dinner with
Kelvin Ogilvie, then president of Acadia University (and a retired
member of the Canadian Senate), and Harvey Gilmour, an Acadia
fundraiser at the time. “The maître d’ came over after we had
eaten and said he hoped we enjoyed the meal,” Durrell recalls.
“Kelvin mentioned that the waiter had done an outstanding job.
The young fellow came over later to thank us for the compliment,
and we asked him where he was going to school. He said he had
wanted to go to Acadia, where his father had gone, but his family
didn’t have the money. He was working to save up for next year.
Ogilvie gave him his card and said, ‘I’m the president of Acadia.
Your marks are all right?’ He said yes, his marks were great. Then
the Dobber [as Dobson is known to some intimates] chirped in:
‘If your marks are good, then you have a four-year ride at Acadia
courtesy of me.’ The fellow graduated a couple of years ago and
did exceedingly well.”
Durrell suggests there’s a moral to this story. “I’ve since said to
my kids, ‘Treat everybody you deal with respectfully because you
never know who they may be.’ My dad would always say, ‘The world
should be a better place because you’ve been here.’ That’s been a
guiding principle for us throughout life. And there’s no question the
world has been a better place because the Dobber’s been here.”
an uncommon man 9
• Philanthropy •
me, ‘Don’t ask questions. Just keep him happy. He’s one of our big-
gest donors.’ I do not know if I managed that, but it was the begin-
ning of a long, close friendship.”
The late William I.M. Turner Jr, a board member of the John
Dobson Foundation for many years, said that what Dobson did with
his money was selfless, and helped to influence generations of new
entrepreneurs throughout North America. “He was a very good
judge of people,” said Turner, a prominent businessman who passed
away in 2015. “On occasions, he was a little impatient of stupidity.
He deserved his good friends. He worked hard for them.”
“He was a loyal man, so he had very many loyal friends,” agrees
former Canadian prime minister John Turner, who could rely on
strong support from Dobson throughout his political career. “I was a
friend of his for nearly seventy years. We shared a lot of confidences.
We saw eye to eye on most issues.”
wasn’t already committed. How many people could have had such
an encounter?”
On another occasion, during a game at Lake Nona in Florida,
Dobson ran into Denis Thatcher, husband of then British prime min-
ister Margaret Thatcher. The Canadian prime minister at the time
was Brian Mulroney. “We had met several times before,” Dobson
recalled. “Anyway, he says to me, ‘That boy you have up there is
not very smart. He’s managing everything wrong when it comes to
South Africa.”
Dobson also recalled playing golf with Robert Lowry, the Lord
Chief Justice of Northern Ireland, at a course in Ulster. “We were on
the ninth hole, and he had his bodyguards around. Suddenly, this golf
ball comes bouncing around and hits Baron Lowry right in the face.
I turn to a bodyguard and say, ‘You’re supposed to protect this man.
What kind of a guard are you?’ He thought it was pretty funny.”
Golf was the centre of Dobson’s social life, and it soon deter-
mined what he would do with his vacation time as well. For almost
three decades, from 1968 to 1997, Dobson was a member of the
Roger Bacon Golfing Society, a loose grouping of eighteen fanat-
ics dedicated to playing “good” golf courses and meeting golfers
“everywhere other than in Montreal.” The society took its name not
from the famous philosopher, but instead from a legendary nine-
teenth-century Scottish golfer of the same name.
During the Roger Bacon Golfing Society’s history, members par-
ticipated in thirty annual tours, during which they played 210 rounds
of the game at 131 golf courses in Canada, the United States, England,
Scotland, Wales, Ireland, Northern Ireland, and the Channel Islands.
Golfers included members of the Royal Montreal Golf Club as well
as Mount Bruno. Many were also members of the world’s most pres-
tigious clubs, thanks in large part to access facilitated by involvement
in the Roger Bacon Golfing Society and the multiple connections of its
members. Over the years, members played a total of forty-one matches
against teams from twenty-five clubs and three societies, beginning
at Royal Aberdeen in 1970, and the last one at Elie in 1996, both
an uncommon man 17
May 4, 1862.
May 5, 1862.
BATTLE OF WILLIAMSBURG.
Thus they came, swifter than it can be told, until their line, now
broken and irregular, was within two hundred yards of the
unwavering columns. Then Hancock showed himself the coolest and
bravest of the brave. Taking off his hat, and using the courtly prefix
of the olden time, he said: “Ready, now! Gentlemen, CHARGE!” The
whole line swept forward, as the reaper’s sickle rushes through the
grain. Its keen edge had not yet touched the enemy, when his ranks
broke simultaneously, fled in confusion to the rear, and the field of
Williamsburg was won.
About five o’clock P. M. some excitement was caused in the rear,
and soon an officer, with his staff, rode to the opening in the woods
where he could get a view of the field. It was General McClellan. The
moment he was seen, loud and deafening cheers rose up along the
lines of the centre, and rolled away to the right and left, imparting a
new enthusiasm to the forces. The chief officers were quickly
consulted, and reinforcements were sent to the aid of Hancock and
Hooker. Hancock’s brilliant and successful charge had already won
the day on the right, and the effect of it in the panic and rout of the
rebels was becoming sensibly felt in front of Hooker’s division, when
the long-looked for assistance came to his side. The rebels promptly
retired, and the desperate struggle of the day closed on a splendidly
contested field. The men were compelled to bivouack on the ground,
with the rain still falling, in proud anticipation of a renewal of the
conflict in the morning.
The rebels had been reinforced as late as five o’clock, and it was
expected that General Johnston would command them in the
morning in person, but the opportune appearance of the Federal
reinforcements, together with the successful movements of General
Hancock, created a panic among them, and they fell back on
Williamsburg, and commenced their hasty retreat from that place. At
two o’clock on Tuesday morning the Federal forces began to move.
As they approached Williamsburg they found the way clear, and on
coming up to the city the rear guard of the foe were flying on the road
toward Richmond, leaving the town to be occupied by the Federal
troops. General McClellan appointed General Jameson Military
Governor of the place, and the troops marched through the main
street of the city to the homely, but glorious and soul-stirring strains
of “Yankee Doodle.”
The houses, churches, barns and stables were found filled with the
wounded of the rebel army, as well as the Federals whom they had
taken prisoners. It was a sad, heart-rending scene, those brave
soldiers mangled, dying and dead. The Federal troops immediately
commenced the work of burial, while the surgeons found incessant
occupation in the discharge of their duties. The battle field presented
a frightful scene of carnage, and several days passed before all the
dead and wounded stragglers were found in the woods and among
the underbrush where they had fallen.
The loss of the Federals was about 500 killed, 1,600 wounded, and
623 prisoners. That of the rebels was somewhat greater in killed and
wounded. Five hundred prisoners fell into Federal hands. Some
hundred of the rebel dead were buried on the day following the
battle. Lieutenant-Colonel Irwin, of the Eighth Alabama, formerly
United States Senator, was found dead on the field.
Thirty-five regiments of the rebels were engaged in the action, that
number being represented by the wounded men left after the battle.
BATTLE OF WEST POINT, VA.
May 7, 1862.