A choppy trading week
At the end of the year, our portfolio managers write a review for each of the mandates they manage. Contained in the reports is a section that presents investment results and a section on the analysis of how the portfolios have changed over the year, including a discussion of the performance of specific companies: both with respect to corporate operations and price action on exchanges. There is also an outlook section, which gives a preview of potential major adjustments to our investment themes. However, the overarching theme that runs through each of the reports, as a whole, is our investment management process. It is our process that provides our investment team with the guidance to react to an ever-changing investment and geopolitical environment. Recently, there has been a substantial amount of market volatility in reaction to three major events: increasing structural inflation and central bank reactions, the Russian/Ukraine war, and potential global growth risks emanating from China (COVID & politics). We thought it would be useful to note how our process played out this week.
- As you can see from Figure 1, financial assets have been volatile since the beginning of the year. The Pathfinder North American Equity Portfolio has ranged between 10-20% cash over this period and we have been buying when opportunities present.
- This week, we were able to execute a number of switch trades, changing what we believe are expensive companies for cheap companies. Note that over the past few weeks, we have had extreme up days and extreme down days. On a day when all stocks were up, we lightened our positions in CNR, CP, and UNP and removed GWW. Note: Figure 2, the prices are close to our sell targets.
- On a day when all stocks were down, we initiated new positions in DIS and WWD. Note: that these stocks are at or below our buy targets.
“This means that” we have price ranges for just under 150 companies and we are continually adjusting our valuation opinions (process) based on how the companies are operating (earnings season analysis), and how industry and economies are changing (daily news flow). This regular discipline allows us to make quick decisions in volatile markets to improve the operations of our portfolios, which are collective ownership in what we consider to be the best companies in the world.
National Instrument 31-103 requires registered firms to disclose information that a reasonable investor would expect to know, including any material conflicts with the firm or its representatives. Doug Johnson and/or Pathfinder Asset Management Limited are an insider of companies periodically mentioned in this report. Please visit www.paml.ca for full disclosures.
*All returns are time weighted and net of investment management fees. Returns from the Pathfinder Partners’ Fund and Partners’ Real Return Plus Fund are presented based on the masters series of each fund. The Pathfinder Core: Equity Portfolio and The Pathfinder Core: High Income Portfolio are live accounts. These are actual accounts owned by the Pathfinder Chairman (Equity) and client (High Income) which contain no legacy positions, cash flows or other Pathfinder investment mandates or products. Monthly inception dates for each fund and portfolio are as follows: Pathfinder Core: Equity Portfolio (January 2011), Pathfinder Core: High Income Portfolio (October 2012) Partners’ Fund (April 2011), Partners’ Real Return Plus Fund (April, 2013), and Partners’ Core Plus Fund (November 2014).
Pathfinder Asset Management Limited (PAML) and its affiliates may collectively beneficially own in excess of 10% of one or more classes of the issued and outstanding equity securities mentioned in this newsletter. This publication is intended only to convey information. It is not to be construed as an investment guide or as an offer or solicitation of an offer to buy or sell any of the securities mentioned in it. The author has taken all usual and reasonable precautions to determine that the information contained in this publication has been obtained from sources believed to be reliable and that the procedures used to summarize and analyze such information are based on approved practices and principles in the investment industry. However, the market forces underlying investment value are subject to sudden and dramatic changes and data availability varies from one moment to the next. Consequently, neither the author nor PAML can make any warranty as to the accuracy or completeness of information, analysis or views contained in this publication or their usefulness or suitability in any particular circumstance. You should not undertake any investment or portfolio assessment or other transaction on the basis of this publication, but should first consult your portfolio manager, who can assess all relevant particulars of any proposed investment or transaction. PAML and the author accept no liability of any kind whatsoever or any damages or losses incurred by you as a result of reliance upon or use of this publication.