Welcome to Volume 12

Michael Rudd, CFA | President, CEO and Portfolio Manager

Welcome back to the Pathfinder Investment Outlook. We are now in our 12th year writing this note for Pathfinder and this note has been in various formats since 2007 (15 full years!). By now, you have received our year-end mandate reports. Regular readers will note that we did not make any mention of the geopolitical events that have been taking headlines in the regular and the financial press (pandemic variant risk (again), Ukraine / Russia concerns (again), and continued political dysfunction, etc.) While we pay attention, we do not let these narratives drive our investment process. Over the years, we learned that the fear and greed that come from these events is usually exaggerated. Instead, we have been spending our efforts focused on the earnings of the companies that we own in our portfolios. On the other hand, increasing inflation, labour shortages, supply chain concerns and equity volatility are important and we have been tracking this data closely.

We are currently in “mid-earnings-season” and have found the results quite interesting (Figure 1). We also present updated inflation and interest rate data (Figure 2), which we believe will be an important focus going forward over the medium-term.

  • So far, 809 or 26% of North American companies have reported results and, as you can see, the numbers are very strong. As I noted at the end of last quarter, it is rare to see every industry posting positive results, but it has happened again. We will watch to see if the trend continues for the rest of the quarter.
  • It is also worth noting that cyclical sectors (Energy, Materials, Technology, and Industrials) continue to lead (again), which is what one would expect during an expansionary phase of economic growth.
  • Also, please note in Figure 2 that the increased inflation expectations and the resulting interest rate reactions will continue to be an important focus for us this year.

“This means that” we can see the economy heating up. There are many variables that need to be considered with respect to this change: economic and logistic constraints, the pandemic‘s ultimate evolution to an endemic state and various government reactions will be material drivers for our portfolios and the businesses that we invest in.

Pathfinder Asset Management Ltd. | Equally Invested™
1450-1066 W. Hastings Street, Vancouver, BC V6E 3X1
E info@paml.ca | T 604 682 7312 | www.paml.ca
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 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.