Welcome to Volume 16
Welcome back to the Pathfinder Investment Outlook. We are now in our 16th year writing this note for Pathfinder. We have been writing in various formats since 2007 (we are almost 20 years old!). Over the years, people have asked why we continue to write these notes week-in and week-out, given the time commitment and effort from both the Investment and Wealth Advisory Teams. I am of two minds with respect to this:
First, we are Equally Invested ®. We think that it is important for our clients to understand our investment view and why it is the way it is. All of our collective capital is invested the same way, and personally, if I was a client, I would want to know. We find that those people who take the time to understand our investment thesis generally have better conversations with the Wealth Advisory and Investment Team during our regular meetings. Second, I have found, over the years that the discipline of “putting pen to paper” forces reflection. This reflection has clearly helped with the evolution of our investment thesis. With a formalized investment thesis, portfolio and wealth management are just a matter of execution. However, it all starts from the regular discourse we have as a team, which includes writing the weekly Outlook.
As regular readers of the Outlook know, earnings season is an important part of our investment process. We wanted to update the results of the quarter so far. Readers will recognize the aggregate sales data for North American companies noted in Figure 1. We prefer to review broad sales data, as it is harder to manipulate than earnings.
- So far, 70.0% of firms have reported, and the results continue to be broadly positive. This quarter is just as strong as last quarter (8.7% vs 7.9%), which was the strongest in memory.
- Only Energy and Consumer Staples have flattish growth. Technology companies posted even better results than last quarter, at just under 20%. All other industries are quite strong as well. This continues to be very impressive and is a bit of a surprise. We thought that some deacceleration would be appropriate given how fast everything has grown over the past year.
“This means that” we will update this data again as we get close to the end of earnings but so far, corporate performance continues to take us by surprise and causes us to somewhat rethink our conservative bias.
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 Conviction Fund to be consistent with Pathfinder Partners’ Fund and Pathfinder Resource Fund.
For more information, please follow the links above to review the fund term sheets.
*All returns are time weighted and net of investment management fees. Returns from the Pathfinder Partners’ Fund and Pathfinder Conviction Fund are presented based on the master’s series of each fund. The Pathfinder North American Equity Portfolio and The Pathfinder North American 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 Conviction Fund (April 2013), and Pathfinder International 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.