Comments from Managements
Recall that the companies that we invest in report their earnings every three months. Financial statements are released to the investing public and those are often followed by conference calls where management discuss the results and analysts ask questions. We are most of the way through earnings season. In addition to the data, comments from company management can give us closer insight and there has been a lot of activity with the companies that we own or follow, as well as central bankers.
As we have said before, the US Administration’s tariffs have disrupted the economy, leading to deteriorating business confidence and rising uncertainty. This seems to be a common theme in the financial press. What is also interesting is that it has yet to show up in the hard data. Below, we have presented commentary on both sides of the discussion but nonetheless we believe soft data is coming. The CFO and CEO of WalMart Inc (WMT) was on various news shows this weekend and both stated that prices will be increasing within a month. They said their business model allows for them to absorb a 1-2% price increase but not 30%. We think everyone should expect to see this in the hard data in coming months. Below is the commentary that we found interesting:
“I would say any data, any hard data that you look at is still pretty early days, but everybody is hypersensitive to changes in the economy that may or may not come as of yet, things are carrying on at a pretty good level.” – Markel Group ($MKL ) Co-CEO Thomas Gayner
“…in the U.S, consumer confidence declined sharply in Q1, and it declined another 11% in April. That’s all driven by inflation fears. People see their income slowing — we see the pressure — or the prioritizing of Essentials, which is pressurizing snacking.” – Mondelez International (MDLZ) CEO Dirk Van de Put
“So, people are feeling stress and concern, but unemployment hasn’t gone up, job creation is fine. Wages are in good shape. You know, people are not — layoffs — people are not getting laid off at high levels. Initially claims for unemployment are not increasing in any kind of impressive way. So, the economy itself is still in solid shape.” – Federal Reserve Chair Jerome Powell……
“Uncertainty about the macroeconomic outlook has increased.… we’ve yet to see a pronounced pullback in employer hiring” ZipRecruiter (ZIP) CEO Ian Siegel
“This means that” in the coming months, we expect volatility and view that as an opportunity. We have raised cash in a number of our portfolios so that we can take advantage of the cheaper prices when they come.
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.
Changes in Leverage. We are increasing the asset ceiling to 2.0 times the market value of equity for Pathfinder International Fund and Pathfinder Conviction Fund to be consistent with Pathfinder Partners’ Fund and Pathfinder Resource Fund.
For more information, please follow the links above to review the fund term sheets.
*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.