Completed Quarterly Results
As regular readers of the Investment Outlook know, our writing follows the calendar of quarterly earnings reports. The companies that we invest in report financial data and management commentary on a regular basis. This is colloquially called “earnings season”. Following earning season is an important part of our investment process because we can check-in on the progress of the companies that we own, as well as management’s expectations for the future of their business operations.
In addition to the company information, we study aggregate sales data (Figure 1) as it is harder to manipulate than earnings. We also focus on “all listed companies” in North America, rather than a widely used index, like the S&P 5oo for example, because we find the large global companies in those types of indices can skew a significant portion of what would consider to be “Main Street”. We previously updated the partial Q4 results for this table, and they were quite strong at the time. Since then, the war in the Middle East has taken most of the headlines so we thought with the recent cease fire, it is a good opportunity to complete the review.
- As the quarter is now complete, all firms have reported, and the results finished just as strong as we previously reported, with all sectors broadly positive. Paradoxically, Energy was the weakest, which we think will have a dramatic shift over this and the next few quarters. Indeed, we think high energy prices are here to stay for some time.
- Technology companies posted even better results than last quarter, at just under 20% and Health Care and Financials were also very strong at just over 10%. This continues to be very impressive and as we mentioned at the beginning of the quarter, a bit of a surprise.
“This means that” we are puzzled with the strong corporate results. The macro data that we review on a daily basis does show some weakening, but this has clearly not shown up in the company data yet. The war in the Middle East is a game changer, especially if energy and commodity prices continue to remain elevated in the medium term. We continue to remain laser focused on the developments and disciplined in our process.
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 Pathfinder Conviction Fund are presented based on the master’s 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 Conviction Fund (April 2013), and Pathfinder International 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.