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A View From Here September 2014

September 30, 2014 • Print This Article

"In investing, what is comfortable is rarely profitable" - Robert Arnott

New Year

Welcome to Fall.  I have always felt that the year begins after Labor Day.  That's when school starts, new alliances are formed and optimism prevails for what the 'new year' would bring.  It hasn't changed much in my professional career as the quiet end of summer is used to clean out old files, dust and prepare for what autumn dictates for the future.  

The Lever of Time

For the past year and a half we have been refocusing our investment portfolio by making new commitments with long-term potential that can hopefully achieve prosperity over the proceeding period.  Time is extremely powerful and underrated.  Many look to their investments through a daily looking glass that often muddies the picture.  What we are doing is living in the gap between the present and future (a great line from a Kate Bush song).  It usually takes many months into a few years for an investment to become an overnight success.   But the upside can be substantial; especially if you understand the investment so we are better equipped to weather short-term challenges.  One of the secrets of a great investment is the lever of time it requires for it to reach fruition, but the good news is that time moves quickly and allows for outperformance if an investment is going to be successful.  

Variant Perception

Michael Steinhardt (one of my favorite investors) said: "perhaps the most important facet of investment success is to have a variant perception of an investment.  This is an ongoing process of having constant knowledge of the company and a good grasp of the current expectation.  The powerful point being that when our viewpoint becomes the consensus, it should lead to meaningful profit.  Over the summer, there has been continued consolidation mixed with apathy in many of our names as earnings and corporate developments have created opportunity to make further commitments.  We have been active in adding to our holdings and believe that we are setting a stage for what can transpire down the road.  The challenging part is that on one hand, I want all of our investments too rise as soon as we are initially positioned so that we can feel good about adding to a rising share price, but I know all too well that it is not the way things usually go.  When pursuing value-based investment strategy, we are looking on the periphery and one must understand that it takes time for a transformation of consensus to occur.   

Growing on Skepticism?

"Bull markets are born on pessimism, grow on skepticism, mature on optimism, and die on euphoria.” – John Templeton

One of the things I look forward to in September is the Value Investing Conference in New York.  It is where like-minded managers meet and share ideas, processes and have the opportunity to listen to and meet with different well-respected investors.  This year, one of more notable presenters was billionaire Leon Cooperman who made an excellent presentation using the above-mentioned quote by John Templeton as a basis for where we might be in the economy and the markets.  This is a well-mentioned quote among investors, but I think it serves as an optimistic viewpoint of the progress that has been made since the markets made a low on March 9, 2009.  Using economic data, he believes that while markets are not particularly cheap as they were the last time he presented in September 2010, they are still the 'best asset house on the street'.  Despite record highs, investors generally remain pessimistic about its advance to date and there is a clear lack of euphoria.  He surmises that we are somewhere between 'growing on skepticism and maturing on optimism'...but clearly there is no euphoria.  

  As far as I am concerned, it is the investments that are the key to our success, but it is always important to have a gauge of the general market fabric which I believe is an important barometer of any action we take.  As such I continue to advocate the purchase of the value investments that we have been transitioning to over the past 18 months, using valuation and corporate signposts as our guide to what we believe will be meaningful profit in the future.

Thanks for taking a look,

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 épargnants.

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