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A View From Here May 2014

April 30, 2014 • Print This Article

"I'm sitting in my bedroom overlooking Findhorn Bay. Cluny Hill in the distance, summer on the way. Blue skies and sailing boats, like a picture in a book. I can't believe I got here or how long it took" Mike Scott - Long Way To The Light

Paradox

I have never been particularly fond of bargain shopping. Maybe it is because I grew up with a mother who loved it, and had to endure weekends in Buffalo buying things that were good value, but didn't necessarily want. Now, I prefer to go into a store and purchase what I need and while it may lead to the consequence of paying a higher price, I justify this with the perceived value of my time. In my professional life however, it is imperative that we are paying a reduced price for a business based on its potential, as I believe it removes a considerable amount of risk. I have learned that there is no perfect information for an investment and that opportunity exists out of a disparate stance of a prevailing investment view. In other words, consensus is often shortsighted.

We have recently taken a new position in an investment where we see great potential. Not everything has gone to plan in management's execution of growth, but its not all that bad either. Stuff happens and investors demand some version of perfection. We might be better served to take advantage of this because it can present us with an excellent entry point.

Currently, one of our best performing investments has been a company called Easyhome, which we have owned for almost 4 years. Our entry was based on challenges that led to concern that management was unable to execute. When growth resumed, the share price increased almost 3-fold. In another case, our investment in Methanex has seen a similar fate. The Company spent years in a volatile range as storm clouds followed them through their growth, but when the sky began to clear... as it often does, the share price responded in kind - resulting in gains beyond our original vision. As such, we look to exit the position at a significant profit believing that our strength is finding value in the fog and nurturing it out to a clear day.

One of the paradoxes of investing is what is defined as low risk. More often than not, we accept that if a business is successful now, then it makes a great investment, but that isn't necessarily the case.

In the meantime, we continue to look for new opportunities.

Thanks for taking a look,

All Good Things

*Source Thomson One

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 épargnants.

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.

 

A View From Here April 2014

April 4, 2014 • Print This Article

Patience is a form of wisdom. It demonstrates that we understand and accept the fact that sometimes things must unfold in their own time –Jon Kabat-Zinn

Many believe that we are in an aging “Bull” market that rose from the ashes of a bottom made on March 9, 2009. Since that date, the markets (particularly in the US) have staged a pretty spectacular rally to all-time highs. I recall writing in November of that year that had it not been for the events from the previous two years, we would be marveling at how strong the stock markets have reacted. It is hard to believe that 5 years have passed since those lows were made because it still seems so fresh in my mind. It also serves as a constant reminder that investing is not a straight line.

Economies and Markets swing in anticipation of what might happen. It is worth checking out the half hour link at the end of this document by Ray Dalio called “How The Economic Machine Works”. Mr Dalio is the founder of the biggest hedge fund firm in the world (according to Forbes magazine) and he has an excellent track record of success. It is really that good.

Exponential Gain

We have spent years building many of our investment positions and while some have reached maturity and subsequently sold, others continue to deliver results that have exceeded our original vision. The process of holding an investment is something that requires constant revaluation of its potential. This is measured by three things; the general market fabric, the company’s earnings potential and how that potential is measured against its peers and the industry it operates in. Since the end of 2011 we have seen exponential returns in many accounts, which has been great on one hand, but creates a tremendous amount of anxiety on the other. I know all too well of what can happen when investment positions start to decline. It often begins with a subtle nudge in the wrong direction and within a relatively short period of time we find ourselves at lower valuations and then the remorse of what we should have done sets in. Ultimately, it is a short-term way of thinking.

There is always the hope that we can capture a top, sell everything, wait in the weeds and capture the next move. This is nearly impossible to achieve. What we try to do is close out parts of positions based on valuation to mitigate our risk, reversing the process that we used in accumulating an investment position. The exception to this rule is when a company receives a takeover offer that instantly maximizes return.

The key is time and patience to let an investment play out. We have been so fortunate over the past 15 years despite periods such as 2002-2003 and 2007-2009 which in the end provided opportunity to make further commitments and come out stronger on the other side.

One of the by-products of our long-term success has been the referrals that we have been receiving. We feel fortunate that our practice has inspired new people to reach out to us.

May our numbers continue to grow and as always,

All Good Things,

Ray Dalio: How the Economic Machine Works

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 épargnants.

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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