Comments from Management
Recall that the companies that we invest in report their earnings every three months. Financial statements are released to the investing public and those are often followed by conference calls where management discuss the results and analysts ask questions. The quoted price of the company sometimes moves significantly during or after these events, which can be an opportunity for long-term investors paying attention. We are in the middle of earnings season so there has been lots of activity with the companies that we own or follow, as well as central bankers. Recall that we have been monitoring the trajectory of the US economy to determine if we are headed for a soft landing. In addition to the data, comments from the companies that are “in the trenches” can give us closer insight. We have placed some that we found interesting below.
“So I think what there is to say about consumer spend is a little bit boring in a sense, because what’s happened is that it’s become normal. So meaning — I mean, I think we’re getting to the point where it no longer makes sense to talk about the pandemic… we’re not seeing weakening, for example, in retail spending. So overall, we see the spending patterns as being sort of solid and consistent with the narrative that the consumer is on solid footing and consistent with the strong labor market.” – JPMorgan Chase ($JPM ) CFO Jeremy Barnum
“Commercial loan demand remains weak, reflecting economic uncertainty and the expectation that rates will be lower in the future.” – Wells Fargo ($WFC ) CEO Charlie Scharf
“Our core customer who contributes approximately 60% of our overall sales comes predominantly from households earning less than $35,000 annually. Inflation has continued to negatively impact these households, with more than 60% claiming they have had to sacrifice on purchasing basic necessities due to the higher cost of those items.” – Dollar General ($DG ) CEO Todd Vasos
“I spoke to a couple of our portfolio company CEOs yesterday, and I would just echo the common theme was they feel like the election certainty, the removal of the election uncertainty will elevate confidence levels. And that obviously is — that’s good for capital markets and that’s good for M&A. And all those things being better, stronger, we think it’s good for our business.” — Carlyle Group ($CG ) CFO John Christopher Redett
“Right now we’re—there’s nothing to—there’s nothing to model right now. It’s such an early stage we don’t know what the policies are. And once we know what they are we won’t have a sense of, you know, when they’ll be implemented, or all those sorts of things.” — Federal Reserve Chair Jerome Powell
“This means that” based on the comments above, there is still a wide range of economic situations. Consumers are strong, while at the same time inflation remains an issue. Election certainty might have given a boost to the stock market, but economic uncertainty at the highest levels remains. We will continue to watch closely and evaluate.
National Instrument 31-103 requires registered firms to disclose information that a reasonable investor would expect to know, including any material conflicts with the firm or its representatives. Doug Johnson and/or Pathfinder Asset Management Limited are an insider of companies periodically mentioned in this report. Please visit www.paml.ca for full disclosures.
Changes in Leverage. We are increasing the asset ceiling to 2.0 times the market value of equity for Pathfinder International Fund and Pathfinder Conviction Fund to be consistent with Pathfinder Partners’ Fund and Pathfinder Resource Fund.
*All returns are time weighted and net of investment management fees. Returns from the Pathfinder Partners’ Fund and Partners’ Real Return Plus Fund are presented based on the masters series of each fund. The Pathfinder Core: Equity Portfolio and The Pathfinder Core: High Income Portfolio are live accounts. These are actual accounts owned by the Pathfinder Chairman (Equity) and client (High Income) which contain no legacy positions, cash flows or other Pathfinder investment mandates or products. Monthly inception dates for each fund and portfolio are as follows: Pathfinder Core: Equity Portfolio (January 2011), Pathfinder Core: High Income Portfolio (October 2012) Partners’ Fund (April 2011), Partners’ Real Return Plus Fund (April, 2013), and Partners’ Core Plus Fund (November 2014).
Pathfinder Asset Management Limited (PAML) and its affiliates may collectively beneficially own in excess of 10% of one or more classes of the issued and outstanding equity securities mentioned in this newsletter. This publication is intended only to convey information. It is not to be construed as an investment guide or as an offer or solicitation of an offer to buy or sell any of the securities mentioned in it. The author has taken all usual and reasonable precautions to determine that the information contained in this publication has been obtained from sources believed to be reliable and that the procedures used to summarize and analyze such information are based on approved practices and principles in the investment industry. However, the market forces underlying investment value are subject to sudden and dramatic changes and data availability varies from one moment to the next. Consequently, neither the author nor PAML can make any warranty as to the accuracy or completeness of information, analysis or views contained in this publication or their usefulness or suitability in any particular circumstance. You should not undertake any investment or portfolio assessment or other transaction on the basis of this publication, but should first consult your portfolio manager, who can assess all relevant particulars of any proposed investment or transaction. PAML and the author accept no liability of any kind whatsoever or any damages or losses incurred by you as a result of reliance upon or use of this publication.