First Half Earnings

Michael Rudd, CFA | President, CEO & Portfolio Manager

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. Earnings Season is an important part of our investment process, as we can check-in on the progress of the companies that we own. Readers will recognize the aggregate sales data for North American companies noted in Figure 1 below.

  • So far, 2,982 companies or 96% of North American companies have reported results and sales growth data has gone negative. This is the first time since the pandemic that this has happened. In fact, we previously had multiple periods where all sectors were positive. This has now clearly changed and the slowdown that we saw last quarter appears to be entrenched.
  • It will be interesting to see if this continues over the coming months. This may give us some indication of the end of central bank tightening and a real potential for a recession or “soft landing”.
  • It was the Commodities, Utilities and Real Estate sectors that showed weakness this quarter. Given all of the headlines in the Technology sector, it is also interesting to see that it has slowed somewhat as well.

So far, in the first half of the year, stock markets have been very strong. Indeed, US equities, as represented by the S&P 500, are up 14.3% from January through June, while international stocks, as published by Bloomberg, have been up 10.6% in Europe and 3.0% in Asia. Canadian, stocks as represented by the S&P/TSX Composite, have not done as well vs. US or Europe and are up only 5.7%. It is important to track the difference between the quoted market price stocks vs. the actual operations of the businesses that we invest in. The two can become quite disconnected at times and this is where opportunities present themselves, either for selling overvalued positions or adding to cheaper positions.

“This means that” while the companies that we own continue to post good operating results, the investment team at Pathfinder continues to hold our excess cash (as previously noted in the last two Outlooks). By inference, this means that as a generalization, we believe valuations are high and have become too disconnected from operating results.

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 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.