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 and management commentary on a regular basis. This is colloquially called “earnings season” in the securities industry. This is an important part of our investment process because we are able to check the progress of the companies that we own, as well as management’s expectations for the future.

The end of earnings season in Canada traditionally comes when the banks report, which happened last week. Generally, we were pleasantly surprised by the results of the Canadian banks. We expected that, given the current economic situation, their results could have been more negative, but it appears that loan operations have been performing better than both investors and management had expected. Banks take reserves against income if they believe that certain clients are potentially not able to pay back their loans. While there were large reserves taken at the beginning of the pandemic, the actual performance of the loan portfolio has been much better than expected. This is positive for the banks and a constructive indicator for the Canadian economy.

• Figure 1 presents sales data for all North American companies for the fourth quarter of 2020. As of today, 92% of companies have reported and aggregate sales have rose 2.2% which is almost a mirror image reversal of last quarter. This is good news.