Companies in the same industry are not the same!
As I typed the date above, I couldn’t believe that we were already at “back to school” (sort of). Where did the time go? It was a strange summer indeed and I suspect that the fall will be even stranger with oscillations between COVID-19 therapeutics, second waves, vaccines, economic stagnation/recovery and what is bound to be a hotly contested US election. I hope the fall goes as fast as the summer! Last week, we wrote about the end of earnings season and this week I wanted to write about “meetings” season. There is a period of about 6 weeks after earnings season where meetings often take place between companies and investors. These can be either in person at the investor’s office, at the company’s office/plant/mine etc., in groups at a stockbroker’s office or in some cases in a conference setting. The Pathfinder Investment Team meets with more than 500 companies a year, so we engage in all of the above. What is interesting in the current environment is that much of the in-person meetings have stopped for obvious reasons, so now most of these meetings are done via video conference. I suspect this type of format will continue. This past week, we “attended” an Infrastructure Conference and were able to have management meetings (CEOs & CFOs) with a number of companies that we invested in and follow. I wanted to highlight one of those companies today.
- WPT Industrial REIT (TSX:WIR.U) is a company that owns industrial buildings in mainly the eastern US economic corridor. They have always focused on leasing their purpose-built properties to logistics, ecommerce and consumer staples companies, which as you can imagine is paying dividends now. They have no vacancy, no bad debt, no clients in distress and have actually been able to increase both rental rates and gross leasable area by expanding their buildings.
- Other real estate firms have had a significantly different experience. Retail has had to struggle through mall closures, significantly reduced traffic and bankruptcies. Office has had to deal with vacancies, sub-leases, valuation impairments and a future change in work habits, while Residential has seemed to fare well but that could change if government support programs are reduced. Furthermore, within the Industrial sector, it is the focus on logistics and e-commerce that have really provided value. E-commerce is booming and inventory & supply chain management needs have made logistics companies indispensable. The other specialized industrial businesses are not as strong and have not seen the same boom as logistics.
“This means that” we will continue to spend the time and energy to deeply understand the businesses that we own. We have owned WIR.U for years and have been able to reinitiate and increase our position during the stress of the pandemic because of the time that we had previously taken to understand the business and management’s operating philosophy.
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 Pathfinder Real Fund are presented based on the masters series of each fund. The Pathfinder North American Equity Portfolio and The Pathfinder North American 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 North American Equity Portfolio (January 2011), Pathfinder North American High-Income Portfolio (October 2012) Pathfinder Partners’ Fund (April 2011), Pathfinder Real Fund (April, 2013), and Pathfinder International Fund (November 2014).
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