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A View From Here November 2012

November 16, 2012 • Print This Article

Same as it ever was...

The American presidential elections are now history and it was surprising to see comments that linked the outcome to the stock market. It is interesting to note that there is no historical evidence that an election of any candidate by itself causes a change in any major trend. There is also an issue of the "Fiscal Cliff" when a lot of US tax incentives and Government spending are set to expire. It seems like a never-ending story, but pessimism and 'what ifs' continues to dominate economic commentary. However, based on what has occurred before it is really just the same as it ever was.

Economies and Stock Markets always seem to be on the verge of some sort of collapse and nothing keeps valuations more honest than a good scare...and we are seeing our share. Investors have had a lot of time to digest and factor these realities into their valuations. For example: When I entered the securities industry in 1988, everyone was still consumed with the crash of 1987 and the fear that we are entering into another great depression. The best-selling books at that time compared our economy to the fall of Rome and it sure scared a lot of people. In the proceeding years, these dire predictions manifested into ones of renewed optimism that led to stock market performance that increased major indices 5-fold.

During the first weekend of November, my family visited Washington to see many of the memorials and museums. One of the things that stood out is just how young a nation the United States is. For what it is worth, the Roman Empire lasted approximately 500 years. The fact that the United States has been the world's largest economy for less than one hundred years suggests that just maybe we have a long way to go.

Our Investment Positions

On November 11, Leon's Furniture purchased its largest competitor, The Brick in a $700 million deal. Early indications suggest that this is an advantageous purchase that will bode well for our investment in Leon's. The company is extremely well managed and has always maintained a conservative posture (ie: large cash and real estate holdings), which underlies the deep value of this company. It also pays an attractive dividend and has been known to pay extra-ordinary distributions in times of strength. It also helps to know that the Leon family owns 70% of the outstanding shares, so our interests are aligned with theirs. Management has been very methodical about expansion despite a weaker retail environment and their experience through all types of business cycles over their storied existence leads us to remain confident in their execution. Speaking of retail, we have been establishing an investment position in Danier Leather over the past 6 months and were not surprised when the company announced their intention to repurchase over 20% of the outstanding shares in an auction between $12.50 and $13.30. Despite some anticipated capital expenditure requirements, the company maintains deep value potential despite a challenging retail environment. The actions taken by the board of directors to purchase shares at this time confirms this view. Lastly, we have seen excellent earnings from Softchoice and Easyhome this month and remain enthused about their long-term prospects for our portfolio.

By now most of you will have opened your October statements and will see a continued increase in our bottom lines. We are having a stellar year to date and have ample cash reserves to make further commitments as they present themselves.

Rolling Stones - Doom & Gloom

The Rolling Stones have just released a new best-of compilation with a new track that fits the times (and sounds like it came from the early 1970's). I have attached a link to their new song called Doom and Gloom, which is pretty fitting for the times:


Thanks for taking a look and as always,

All Good Things,


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 ├ępargnants.

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