August 2019 Update

In the realm of ideas everything depends on enthusiasm… in the real world all rests on perseverance. – Goethe

Our investments performed well in July. In the Growth Portfolio, Canadian energy stocks are showing increasing appeal as US oil production slows, bonds held steady in the Income Portfolio, supported by what looks to be an incoming recession, American Growth Portfolio stocks performed well as investors seek the protection of value stocks, and the Small Cap Value Portfolio excelled on a favourable turn higher for precious metals. While the catalysts in each of our portfolios may appear seemingly different, the driving force at the root of their success is common: cashflow.

By investing in companies showing high amounts of sustainable cashflow relative to their peers, and in those showing the greatest cashflow growth, our portfolios are constructed for long term, sustainable success. While it is true that over the last five years investing based on cashflow has produced worse results than investing based on more ephemeral factors such as popularity, we know that similar periods have occurred through history. Each time, cashflow won the performance race by the cycle’s end. When comparing returns over longer, more meaningful periods (10 year, 20 year, or 30 year spans let’s say), cashflow always wins, and by a large margin. I have utmost confidence that will continue, and that the numbers are on our side.

Recommended reading

The opportunity of a decade: https://www.bloomberg.com/news/articles/2019-07-23/value-stocks-haven-t-traded-this-low-in-nearly-half-a-century

Living legend Joel Greenblatt on investing: http://blog.validea.com/investing-insights-from-joel-greenblat/

Cordially,

Ben W. Kizemchuk
Portfolio Manager & Investment Advisor
Wellington-Altus Private Wealth