Company Comments so far...
We are a good portion of the way through earnings season. Everyone on the investment team either listens to management conference calls or reviews transcripts and commentary for the companies we own. We also follow general news for firms that we do not own, as it helps us identify different trends or issues that we do not see in our portfolio companies. Below, we point out some of the themes that we have noticed so far.
- “We see a stable economy. We don’t see signs of a recession… Our pipeline was strong. The other things that you would typically see that would be more recessionary, we’re not seeing mass layoffs… What we’re seeing is openings, vacancies, troubled hiring, and businesses being cautious in who they’re bringing into their workforce.” – Paychex ($PAYX ) CEO John Gibson
- “… The U.S. consumer and our customers remain broadly resilient. Employment remains at historic levels, which is a positive for consumers and customers.” – Equifax ($EFX ) CEO Mark Begor
- “US customers are confronting considerable pressure from multiyear inflationary trends and depleted household savings with US household debt at record levels and delinquency rates on the rise. Our shopper is making deliberate choices to seek value resulting in channel shifting behavior.” – Walgreens Boots Alliance ($WBA ) CEO Tim Wentworth
- “Most importantly, we achieved all-time high booking volumes at considerably higher prices. In fact, our North American and European brands, both set booking records in the first quarter with pricing strong across all core deployments and across all quarters. Prices ran up double digits on limited inventory left for Q2. They ran considerably higher for our peak summer period in Q3, and they were also considerably higher for Q4, while still building on our occupancy advantage…” – Carnival ($CCL ) CEO Joshua Ian Weinstein
- “Obviously, inflation has slowed, but we’re still in an overall inflationary environment and some things more recently have inflated. We are seeing inflationary pressures across a number of our input costs, including commodities, packaging, and transportation. As a result, we have had to take selective price increases to offset these higher costs.” – Conagra Brands ($CAG ) CEO Sean M. Connolly
“This means that” we continue to see limited risk of recession but clearly recognize that certain sections of the North American economy are under pressure from inflation and some consumer retrenchment. We particularly like the comment from the Carnival CEO. We believe that the cruise option is actually a cheaper vacation choice when compared to hotel, rental car and restaurant food prices. It is a little counterintuitive that a cruise would be considered a “value” purchase, but we think it is illustrative of where the marginal North American consumer is choosing to allocate their discretionary dollar (i.e. they are spending but with a cheaper option).
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.
*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).
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