Fall Earnings Season and sign off for 2022
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 view earnings released by the big Canadian banks as the informal end of earnings season. Canadian banks continue to look strong given recent interest margin expansion, even with the potential for credit deterioration. The major banks announced dividend increases, stock buybacks and mergers, indicating that they have excess capital after continued excellent results.
Readers will recognize the aggregate sales data for North American companies noted in Figure 1.
- So far, 3,004 companies or 97% of North American companies have reported results and the numbers remain strong.
- Again, every industry has posted positive results. It speaks to both the severity of the drop but also the strength of the recovery… we are surprised that we are not seeing softness yet in the aggregate data.
“This means that” the global economy continues to remain resilient to the aftereffects of the pandemic and so far, to the impacts of higher inflation and subsequently restrictive central bank policy. What remains to be seen is the ultimate impact from inflationary pressure and central bank reactions. Earnings and employment have remained robust, so we will have to wait and watch the coming data carefully.
This is our last week of the Investment Outlook series for 2022. We will spend the rest of the year analyzing, evaluating and writing for our Annual Reviews and Outlooks, which we will begin publishing January 6, 2023.
I want to congratulate our Small Cap Team on winning another award. They have placed 2nd in the Best Fund category over the 10-year period ending June 30, 2022. Please see our announcement here. This is a remarkable achievement and am I very proud of the team. While getting good numbers over the short-term is difficult, what I am most impressed with is the consistency that Doug, Rob, Mark, Jared and Gary have demonstrated. I really hope they can do it for another 10 and beyond!!
Happy New Year and best of the holiday season from the entire Pathfinder Team.
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).
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.