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A View From Here September 2012

September 11, 2012 • Print This Article

It is very strange that the years teach us patience - that the shorter our time, the greater our capacity for waiting - Elizabeth Taylor

Time, Cash & Patience

Not much is expected to occur during the summer months as most market participants take their thoughts of investment on vacation, only bringing them out in moments of hope or anxiety. It is one of the reasons why the old Wall St. adage, "Sell in May and go away" exists.

True to that fated quote, this summer has brought out nothing new as markets continued to struggle with the same macro economic concerns that have been plaguing the world for so long now. In fact, the outlook is so murky that concerned investors fear another 2008 autumn. It is my belief that as long as we all anticipate this dreary point of view, it is less likely to occur.

We instead remain focused on our investments and the consolidation in our holdings in recent months reflected what ultimately occurred. Earnings releases have been lackluster…so much so, that in our concentrated universe, there hasn't been much reaction one way or another to the ho-hum results. None of them however, have changed our investment stance and I would add that we look for continued catalysts to make further commitments. There has been a method to our lack of activity in recent months as large cash balances remain on account. While it challenges our short term income, we believe that only making prudent adjustments provide us with increased valuations in due course.

Our strong performance continues, especially when comparing the results to pretty much any market metric.

We have been consciously absent from the prevailing investment themes, avoiding names like Research In Motion (and Apple for that matter - oops!), Mining and Energy shares, which continue to be depressed. Instead we remain committed and focused instead on companies who are able to provide a margin of safety through strong balance sheets, hidden assets and outperformance in their given industries.

Softchoice Initiates Dividend Policy

It has long been our assertion to the senior management of Softchoice that given their steady cash generation and strong balance sheet with over 20% of each share in cash, that they should pay a dividend. On the heels of their earnings release in early August, the company announced that they will be paying a $0.07/share quarterly ($0.28/annually) dividend. We are encouraged by this event and given the potential strength in the business going forward, we believe there is a lot of room for that to increase.

The Zurich Axioms

I recently read a book that was published 27 years ago called The Zurich Axioms by Max Gunther. A friend had mentioned this publication some time ago and I finally took up reading it over the past month. The synopsis follows a group of intelligent and very successful stock market participants and their view of what it takes to win the losers game. The book is available for free online and you can use any search engine to download it. There are some very powerful insights and many examples are drawn from the early 1980's investment climate that strangely mirror today's market setting.

Gunther's book drives home a collection some of my very deep beliefs which include; investing is another word for speculation; diversification is akin to shopping for investments in a supermarket - you end up with a basket of overpriced stuff you don't need; in order to be successful you must concentrate your investments to as few positions as possible. These are steadfast beliefs deep in my investment soul and would happily challenge anyone who can produce successful returns from a 'diversified portfolio.'

Lastly, we have been asked to provide a monthly contribution to Eligible Magazine on the topic of wealth management. Please see our column at http://eligiblemagazine.com/2012/08/27/do-you-sincerely-want-to-build-real-wealth-2/

Thanks for taking a look, and as always...

All Good Things

Adam

Filed under: Uncategorized

The opinions, estimates and projections contained herein are those of the author as of the date hereof and are subject to change without notice and may not reflect those of Mackie Research Capital Corporation ("MRCC"). The information and opinions contained herein have been compiled and derived from sources believed to be reliable, but no representation or warranty, expressed or implied, is made as to their accuracy or completeness. Neither the author nor MRCC accepts liability whatsoever for any loss arising from any use of this report or its contents. Information may be available to MRCC which is not reflected herein. This report is not to be construed as an offer to sell or a solicitation for an offer to buy any securities. Member-Canadian Investor Protection Fund / member-fonds canadien de protection des Ă©pargnants.

Mackie Research Capital Corporation (MRCC) makes no representations whatsoever about any other website which you may access through this one. When you access a non-MRCC website please understand that it is independent from MRCC and that MRCC has no control over the content on that website. The content, accuracy, opinions expressed, and other links provided by these resources are not investigated, verified, monitored, or endorsed by MRCC.

 

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