Fall Earnings Season and sign off for 2023

Michael Rudd, CFA | President, CEO & Portfolio Manager

As regular readers of the Pathfinder Investment Outlook know, our writing follows the calendar of quarterly earnings reports. “Earnings season” 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 firm. We view earnings released by the big Canadian banks as the informal end of earnings season. The banks are starting to show signs of the deteriorating Canadian economy, which is expected. Depending on the bank, credit losses are elevated and the read through on earnings quality is lower (i.e. based on expectations of credit losses or capital markets revenue). We are also staring to see layoffs, which have resulted in restructuring charges.

Readers will recognize the aggregate sales data for North American companies noted in Figure 1.


  • So far, 96% of firms have reported, and the results are more mixed than previous quarters. Total sales on aggregate has also decelerated from 10+% to almost 0%.
  • Energy, Materials, Utilities, and Real Estate have all had negative sales growth this quarter. While several sectors remain positive, they are sequentially lower from previous quarters.

“This means that” it will be interesting to see if the trend continues and more cyclical sectors (consumer discretionary, for example) turn negative in the coming months. Our anecdotal management commentary from previous issues of the Outlook which identified a slow-down in the economy seems to be confirmed by the data.

Special Note: Charlie Munger, Vice Chair of Berkshire Hathaway, and an investing legend passed away this week. Mr Munger was known to have great “quips and quotes”. It is hard to pick a favorite, so we have reproduced a list here. There are some good nuggets for investors and thinkers alike. One, that we particularly like, about how to live a long life is below:

“… is easy because it’s so simple. You don’t have a lot of envy, you don’t have a lot of resentment, you don’t overspend your income, you stay cheerful in spite of your troubles, you deal with reliable people, and you do what you’re supposed to do. All these simple rules work so well to make your life better.” — 2019 CNBC interview

This is our last week of the Investment Outlook series for 2023. We will spend the rest of the year analyzing, evaluating, and writing for our Annual Reviews and Outlooks, which we will begin publishing on January 12, 2024.

Happy New Year and the best of the holiday season from the entire Pathfinder Team.

Pathfinder Asset Management Ltd. | Equally Invested™
1450-1066 W. Hastings Street, Vancouver, BC V6E 3X1
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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.

Changes in Leverage. We are increasing the asset ceiling to 2.0 times the market value of equity for Pathfinder International Fund and Pathfinder Real 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).

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.