ahennick logo
The Team
Investment Philosophy
pre-loaded image pre-loaded image


Page 1 of 1

A View From Here January 2016

January 20, 2016 • Print This Article

2015 was a very difficult year for investors and most were happy to see it end. North American markets felt even weaker than they appeared with the S&P 500 index closing the year lower by just under 1% yet still a stone's throw away from all-time highs in the US. Canadian markets didn't fare as well. The TSX index saw an almost 12% decline consolidating back to the levels of September 2010 however, underneath the index there was far more carnage. 2016 has done little to calm investors thus far, as an exponential sell off brought on by tension between Saudi Arabia and Iran as North Korea rattles the world's cage, shaking an already fragile and wildly volatile Asian stock market. These macro events coupled with the ever publicized drop in oil prices has sent shivers throughout the world's financial markets creating the need for caution and concern.

Scores of companies have seen their share prices drop and investors have needed a great deal of luck to sidestep the landmines. Our accounts have not been immune to this malaise but I am thankful that for the most part we were able to sidestep a great deal of the carnage in 2015. However, that's not what we're here to do. We are looking for a long-term rate of return from our investments and know that each one of them works in their own time frame to reach maturation. Markets will always amaze and scare us, but should never be the sole shepherd of our investment acumen.

2015 In Review

For most of the long standing accounts, 2015 saw strong values for our holdings as the year extended into the summer months. This was based on the strength of some of our long held investments as well as the weak Canadian dollar as at least 60% of our holdings are made up of companies that are valued in US currency. Despite that good fortune, some of our investment holdings reached levels I would have thought to be unlikely when we made our initial commitment. It is for that reason that we build our positions slowly despite corporate developments that meet or exceed our expectations. Corresponding regularly with the management of the companies we own, I get the sense that they too are surprised by current valuations. Most of these companies have used the weakness to repurchase shares and debt, reasoning that current prices are not reflective of the achievements they are making. That's a good sign, as it shows a faith in their businesses. Let's hope that we are both right.

Be careful with those Fixed Income Investments

In early December, Mackie Research held a conference in Turks and Caicos that I was lucky to attend. Many conversations revolved around what we saw in the world of investing, which was noteworthy for me because some in attendance had over 30 (in one case, over 50)years successfully investing for their clients. There were many debates around the current investment climate drawing on the longstanding experience that we shared. The discussions highlighted the historical view that in election years, markets are usually strong in the US which traditionally extends into Canada. Another area of discussion revolved around the weakness in fixed income (bonds and preferred shares) as being more specific to the financial state of the underlying companies than some bizarre act of the market gods. This was of particular interest to me because we have been advocating for a long time that our fixed income investments remain at the safest side of the equation. Perhaps companies are not as strong financially as the percentage of interest and dividends that they are paying. I believe that a lot of investors purchase fixed income based on percentage returns from dividend or interest earned, rather than a more investigative approach on the ability to make good on their commitment. With a lot of Canadian companies dependent on the energy, resource and mining sectors, fixed income securities should cause any investor to take that cautionary approach.

In a world of low interest rates and investors clamoring for safe and predicable returns, it's less of a strange wonder how badly this sector has performed for investors. I am once again reminded of another great investment axiom that has never been truer than in today's fixed income environment: "More people get killed reaching for yield than at the point of a gun."


I believe that the best course of action is to stay true to the right investments for the right reasons, and that the markets will always take care of themselves. It is almost downright impossible to make an investment case in a company using market predictors as the sole shepherd.

As for me, I'm reminded of another great quote when making predictions which these days seem to be more dire than any time in the past five years) about things as impossible as where the markets are going to go, by economist John Kenneth Galbraith, "There are two kinds of forecasters: Those who don't know, and those who don't know they don't know." But if I were to guess, at some point, 2016 could be the start of a final up-leg to this aging bull market that takes things to all-time highs before some unforeseen event or exhaustion (usually it's the former) takes us back to a place where we rebuild again. Our history suggests that we come out of these events with accounts at much higher levels than those achieved in the past.

In December, I finally released my book, All Good Things that is available on Amazon. This project has been six years in the making and for most of us who have lived through the success we have achieved, will find it a reminder of all the investment positions, comments and anecdotes we have presented.

Click here to purchase on Amazon.com

Thanks for taking a look and as always,

And as always,
All Good Things,

Adam Hennick

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.

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.


Page 1 of 1

Recent Posts




Copyright © 2000-2017, Adam Hennick
All rights reserved.
Member – Canadian Investor Protection Fund
membre – fonds canadien de protection des épargnants
Mackie Research Capital Corporation
Legal & Regulatory