Fall Earnings Season and sign off for 2021

Michael Rudd, CFA | President, CEO and Portfolio Manager

As regular readers of the Pathfinder Investment Outlook know, our writing follows the calendar of quarterly earnings reports. The companies that we invest in report financial data on a regular basis, which is colloquially called “earnings season”. This is an important part of our investment process as we are able to check in on the progress of the companies that we own, as well as management’s expectations for the future of their firms. We informally view the end of earnings season is official when the Canadian banks report. That happened this morning when the Bank of Montreal (TSX:BMO) released its results, so we thought it timely to comment. Canadian banks continue to look strong in the face of interest margin compression, showing the power of the Canadian oligopoly. The major banks announced dividend increases and stock buybacks, indicating that they have excess capital after excellent results with more recent economic normalization.

Readers will recognize the aggregate sales data for North American companies noted in Figure 1. This quarter, the data shows the continued strength of the economic recovery compared to the same quarter last year, when the global economy was still reacting from government mitigation measures to COVID-19.

  • So far 2,966 companies or 96% of North American companies have reported results and, as you can see, the numbers are very strong.
  • It is rare to see every industry posting positive results, but this has happened before during this recovery. It speaks to both the severity of the drop but also the strength of the recovery.
  • It is also worth noting that cyclical sectors (Energy, Materials, Technology, Real Estate and Industrials) continue to lead, which is what one would expect during an expansionary phase of economic growth.

“This means that” the global economy continues to recover from the pandemic. What remains to be seen is the impact from inflationary pressure and supply chain issues that we continue to hear about in the press, however, earnings have also remained robust, so we will have to wait and see next year’s data to determine if the expansion has staying power.

This is our last week of the Investment Outlook series for 2021. We will spend the rest of the year analyzing, evaluation and writing for our Annual Reviews and Outlooks, which we will begin publishing January 7, 2022. Happy New Year and best of the holiday season from the entire Pathfinder Investment team!!


Pathfinder Asset Management Ltd. | Equally Invested™
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Sources: Pathfinder Asset Management Limited

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).

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