Recap & Outlook: Earnings Season Still Strong

Michael Rudd, CFA | President, CEO & Portfolio Manager

This week, the Canadian banks reported which brings an official end to our earnings season. Earnings season is always a busy time for the investment team. We take the opportunity to review financial results for our portfolio companies. We also listen to management conference calls (or read the transcripts). We adjust our financial models, which drive company valuations and potentially make portfolio changes. The rhythm of the quarterly reporting cycle provides some interesting data to think about. First from the companies that we own, as we hear from management about how they are doing and second from aggregate data for all companies that reported. This week, we review those aggregates for Canada and the US.

  • The United States continues to post quarter over quarter sales growth. This quarter in aggregate US companies grew just over 2.6% with 90% of all companies reporting. We noted that only Energy, Materials and Industrials contracted. This lines up with our overall investment thesis that the economy is generally doing well but that trade wars are having a negative impact.

  • Canada was strong this quarter with sales up just over 6.4% with 77% of companies reporting. We have long held the believe that the US was a better place to invest over the medium term. The Q2 results were a little weaker so this could just be the result of a bounce back but in either case it is a surprise to us.

“This means that.” Although we believe asset prices are high (or priced to perfection as the case may be), we do not see much weakness in the data. However, industrial slow down in the US remains a concern and causes us to question if the expected “US Industrial Renaissance” previously mentioned in this note has been impaired by the recent trade wars. However, we continue our ever-present search to look for new opportunities to invest existing cash.

We will take a break for the rest of this month from the regular note in order to prepare our annual portfolio and mandate reviews. We expect to start releasing those in the first week of the new year. In the meantime, have a wonderful holiday season from everyone at Pathfinder.


Pathfinder Asset Management Ltd. | Equally Invested™
1320-885 W. Georgia Street, Vancouver, BC V6C 3E8
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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 North American: Equity Portfolio (January 2011), Pathfinder North American: High Income Portfolio (October 2012) Pathfinder Partners’ Fund (April 2011), Pathfinder Real Return Plus Fund (April, 2013), Pathfinder International Fund (November 2014) and Pathfinder Resource Fund (May 2018).

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.