DM Monthly Report – Feb 2020
MANAGER OF THE DECADE? DM’s equity management process lists four events which will prompt a full position review, with liquidation of the holding in question a possible outcome. One of these triggers is a change in corporate management and, in early 2014, Microsoft presented us with such an inflection point.
Leading up to that time, investors had grown weary of the company’s direction, believing that its executive team had fallen a step behind the rapidly evolving tech space, while allowing a dysfunctional corporate culture to manifest in which business silos competed ruthlessly with one another and teams actively avoided collaboration.
Click here to read more: DM-Monthly-Report-Feb-20
DM Monthly Report – Jan 2020
MORE THOUGHTS ON THE DECADES PAST AND FUTURE – In our Q4-19 portfolio commentary, we facetiously claimed to know exactly what the coming decade would bring (actually, we were imagining it was January 1990 instead of 2020 and that we were about to invest with the benefit of perfect geopolitical and economic foresight). Our aim was to emphasize that, even though compelling predictions for the next 10 years are now abundant and illuminated by vivid descriptions of current conditions, stock performance often bears little correlation to what our rational minds perceive to be the most important factors.
Another common cognitive bias that influences investor behavior is the belief that an extended period of growth is most likely to be followed by reciprocal weakness.
Click here to read more: DM-Monthly-Report-Jan-20
Cardinal Update – Dec 2019
Yield vs Growth and the New Global Income Portfolio – We have launched a new portfolio for clients who are more focused on income generation: the Global Income Portfolio.
Rest assured, our approach to this new portfolio does not drift away from our tried-and-true investment philosophy. All companies that Cardinal invests in, regardless of the portfolio, must pay a dividend. From here, the stock selection process is not as simple as it may seem. For a higher dividend yielding portfolio such as this one, you might expect our process to start by sorting a list of dividend paying companies and simply buy the highest yielding ones. We take a much more meticulous approach.
First, we are keenly focused on the quality of the dividends above all else. This means conducting in-depth research to understand how the dividend is funded. Does the company predictably generate cash flows in excess of what it needs to maintain its competitive position? Has this competitive position resulted in growing free cash flow or profitability and will it reliably extend into the future?
Click here to read more: Cardinal Update – December 2019
DM Monthly Report – Dec 2019
WHAT IF THERE’S A THIRD WAY? The recent federal election might have been the most divisive in our history, with the political map almost perfectly cleaved at the Manitoba/Ontario border. No topic separated attitudes more than the fate of our energy as-sets, with one side dug in for jobs and revenue, and the other counting these benefits as insignificant relative to our collective responsibility for the environment. What if these positions aren’t mutually exclusive, though? What if the case for Canadian energy development and the best intermediate course for the global environment were one and the same? The chart below shows world oil consumption over the past decade, which will soon pass 100m barrels/day for the first time:
Click here to read more: DM-Monthly-Report-Dec-19
