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A View From Here June 2016

June 22, 2016 • Print This Article

"They did not know it was impossible, so they did it" - Mark Twain

Suspended animation

It feels like the investing world is in some kind of suspended animation as it tries to sort out how to make the future happen. From 35,000 feet, this lull makes sense (to me at least), despite the frustration that comes with it. The business of investment is the 'long game' and periods such as this bring out the manic depressive nature in most advisors and managers... myself included. Are we waiting for the shoe to kick, or drop? All the while, there continues to be a lot of warnings from well-known market forecasters around the world. Every time I hear that I am reminded of this quote from one of the great investors, Michael Steinhardt:

"Time and time again in every market cycle I have witnessed, the extremes of emotion always appear, even among experienced investors."

UFO - UnForeseen Occurrences

Infamous newscaster Dan Rather often said that the unforeseen occurrence is what shapes our future and it certainly stands true in my experience in all things markets. How many people believed that oil would collapse in 2014 or that subprime mortgages had the power to bankrupt well-known century old financial institutions and drive down the world's markets in 2008? The list goes on and on. These are the things that we can't expect and are nearly impossible to predict. But what we can do is look at the generally accepted consensus and question the possibility. It stands to reason that these generally accepted views are already priced into markets. That is why all the current concerns are unlikely to be a catalyst for the future. In my career, it is the place where we don't look that rears its head.

What we can do is dismiss the current dominant view of the future and as it is probably a good idea to not be invested into those views. So what is the current view? It seems to me that, since 2009, there is an overwhelming belief that the other shoe will drop, and the markets climbed a 'wall of worry' and reached new all-time highs in 2015. Since then, there has been a retreat and now a number of pundits, even among the most sophisticated, are calling for turmoil. In the last month alone, Goldman Sachs, George Soros and a myriad of other well-known investors have thrown their hats into the ring, stating that this aging bull market, that market, which rose from the ashes of March 2009 (considered to be the 4th longest in history without pause), is doomed to collapse. They are certainly the consensus, because I haven't seen much in the way of the opposite call for higher valuations. Perhaps, that's what will occur.

So we wait - in suspended animation as the tale gets told.

Speaking of Unforeseen Occurrences: Meeting with Constellation Software CEO - Mark Leonard

On June 2nd I hosted a number of my friends and associates on Bay Street for an unlikely lunch with the CEO of Constellation Software, Mark Leonard. Most of you reading this will not know who Mr. Leonard is and the aura that surrounds him. He kindly declines interviews and has only made one public appearance that I know of which resulted in the one picture you will find of him on the Internet. This is unfortunate, because outside of Jerry Garcia of the Grateful Dead, there are few people I've ever interacted with that had the kind of presence in a room. He stands 6 foot 5 - dressed in an Under Armour shirt with a tailored sport coat and a beard that rivals Gandalf from Lord of the Rings. If you are a value investor, he is seen as one of the great allocators of capital in the world... akin to a Warren Buffett or perhaps more comparably, Prem Watsa of Fairfax Financial in Canada.... or even Jay Hennick of Colliers and FirstService which has had a more direct impact on our own accounts.

His company was started in 1995 with a $25 million investment by pension funds and management, went public in 2006 at $20/share and currently is valued well above $11 billion (or $530/share at time of writing) - of which he is an approximately 7% holder. A good friend who is an analyst at another firm, had mentioned that Mr. Leonard was interested to see how the bonds of Constellation Software could appeal to retail investors (that's people like you and I), and that he would like to speak with advisors so he could get a sense of how they are thinking. I told him that we held these debentures in our client accounts and that if he was willing to make a presentation, I would host it at my own expense and invite my friends and associates whom I think would benefit from this extremely rare occurrence.

As such, we filled the room with 28 people who sat mesmerized by the wisdom bestowed upon us. I was fortunate enough to have a 5-minute discussion with him prior to the presentation and discussed our firm (Mackie Research Capital) and how investment firms had changed. He asked me how I ran my portfolio for our clients and talked of the importance of independence and concentration in your investments as being truly the only way to build wealth. These are long-held views that I feel quite strongly about. But then he added...as long as you're right! I took comfort in knowing that while the future remains uncertain, our long-term track record of success remains something we are proud of.

This was a truly inspirational and an unforeseen opportunity for a fiercely private individual with one of the best track records of success in Canadian history to date. Those who attended felt the same way.

Speaking of Great Allocators and Great Achievements

On June 14th I was in attendance with my family for the naming of the Jay and Barbara Hennick Visitors Center at the Mount Sinai Hospital honoring my brother Jay for his contributions to the institution and his tenure as Chairman of Sinai Health System. What really struck me is encapsulated in the portrait that now graces the hallway. For as long as I can remember, going to that hospital for visits of loved ones and the birth of my own children, I have always looked at that esteemed wall with reverence. I was struck by the importance to our city and community of the contributions my brother and sister in law have made and was deeply touched by the honor of seeing my brother immortalized on that wall of esteemed gentlemen.

Thanks for taking a look 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.


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