Quality + Value + Patience = Returns

We had some good news in the Small Cap Fund earlier this week. US based Semtech Corporation entered into a definitive agreement to buy Fund holding Gennum for $13.55 per share, a 120% premium to its recent trading price.  This is one of the largest premiums offered in a Canadian ...

Balancing Yield and Risk

Another week, another round of bad news headlines:  “France loses their coveted AAA rating after a downgrade by Standard and Poor’s.”  “Greek default is inevitable after negotiations with lenders breakdown.”  “Euro Woes to temper growth:  Bank of Canada.”  All the more reason to hold 10-year Canadian government bonds priced to ...

What is it you do again? - Revisited

With every New Year comes the opportunity to create annual goals, or resolutions. British media recently published survey results that revealed “despite 2.6 million people starting diets last Tuesday…this weekend 92 per cent of dieters gave up, shunning exercise and gorging on comfort food.” This survey suggests that individuals are ...

2012 - Gosh!

We’re a touch atremble.  In reading financial and geo-political prognostications, we sense most columnists feel a dead body may evidence more life than the economy or the markets in 2012.  “Scouring the economic and financial landscape for bright spots can also be something of an exercise in futility,” says Alan ...

STOCKS - "BAH! HUMBUG!"

Sorry for the less than cheery title to our final letter of the year, but how else do you describe the mood?  The year started out with a lovely first quarter rally in the S&P/TSX Composite Index of 6%, but by October the Canadian market was down by more than ...

Are we there yet? - Nope

The European leaders have been meeting over the past two days to again ‘solve’ the crisis in Europe.  It is the 4th meeting this year and the 15th meeting held in the last 23 months. However, a viable long-term plan has not been unveiled.  To make matters worse, this week ...

The Only Constant in Life is Change

How true and apparent is this quote in the context of today’s global economy.  A call for change is happening right before our eyes, and rightly so.  Change is needed to fix the global imbalances that have allowed profligate nations to run for far too long.  Balance sheet excesses have ...

Painted with the Same Brush

Herd mentality is in full force. The chart below shows that the correlations between large cap American stocks have reached record levels at nearly 70% compared to historic averages closer to 26%.  Perfect correlation of 100% would imply all stocks would move in the same direction together.

This too shall pass...eventually.

“I think the future of equities will be roughly the same as their past; in particular, common-stock purchases will prove satisfactory when made at appropriate price levels.  It may be objected that it is far too cursory and superficial a conclusion; that it fails to take into account the new ...

Remembrance Day

November 11 is Remembrance Day.  We remember all those who came before, those to whom we owe our joys, knowledge, life, and our successes and those who made the ultimate sacrifice on whatever field of battle.

Sound businesses will "full-steam" ahead

It’s that time of the year again where investors sit on the edge of their seats in anticipation of third quarter financial reports from the businesses we own. To date we’ve seen some very good earnings…and some not-so-good earnings. However, it is important to keep in mind that interim performance ...

On Small Cap Watch

We have been given notice as a result of our small cap performance.  And so we should.  Warned that is, by trustees exercising their responsibilities.  We take notice seriously.  Our Canadian small cap results have not matched the market returns as measured by the BMO Small Cap Index.  The basis ...

What Happens in Europe Matters

The European financial situation has been front page story for many months now.  Well known strategist Don Coxe, formerly with the Harris Investment Management division of BMO, says the companies in which investors will make the most money are those on page sixteen. We agree.  The sectors or companies on ...

Equities & Good Companies

After decades and dollops of debt and denial, we are having the consequent contagion, first in America, and now Europe.  Dexia SA was a multi-line Belgian/French bank.  From a high of EUR 22.40 in May of 2007, the shares now trade at EUR 0.80.  In the second quarter, Dexia wrote ...

Beware of "Melting Ice" Businesses

Yellow Media (YLO) has been making headlines this week after announcing a $2.9 billion write down to goodwill and the elimination of its dividend. Best known for the production and distribution of the Yellow Pages telephone books, Yellow Media was at one time viewed as a very stable business with ...

A panacea or desperation?

On Monday, former US Central Bank Governor, Paul Volker, wrote a short opinion piece in the NY Times.  The central theme of the article was a warning to policy-makers on the dangers of a little inflation. “My point is not that we are on the edge today of serious inflation…but ...

Fresh off the press!

At times it seems like all recent news has been negative.  Especially as we end the week with Research In Motion's (RIM) stock down 20% today after reporting double-digit declines in revenues and earnings in its second quarter financials on Thursday.  The disappointment resulted from much lower BlackBerry device and ...

Bulls**t Bingo

This week, you might have read of the concerns of Mr. Carney, Governor of the Bank of Canada or those of Mr. Bernanke, the Fed Chairman, or those of Mr. Obama. Their thoughts parallel somewhat the words of Christine Lagarde, Managing Director of the IMF.

Buckle Up & Hang On

For investors the world over, the past month has been nothing if not a confounding experience. Between debt crises, natural disasters, and even a civil war, let alone the renewed fears of a global slowdown, there has been no shortage of news buffeting financial markets. Further, measures of the macro ...

The Good, The Bad, & The Ugly!

Yields on government bonds on both sides of the Atlantic have fallen to record lows this week. The U.S. 10-year note yield declined below 2% for the first time, even lower than the 2.03% after the 2008 financial crisis. In Europe, yields on benchmark 10-year German bunds and U.K. gilts ...

A Dizzying Week, a Focused Philosophy

This has indeed been a precarious week, full of rumours, new fears, and volatile market movements. Over the past two weeks, the Dow fell -8.2%, the S&P 500 dropped -9.3%, and the TSX declined -3.1%.  In comparison, the QV Canadian Balanced Fund slowed approximately -1.1% and the QV Canadian Equity ...

What a Week!

On Thursday, (when the S&P/TSX dropped 435 points or 3.4% and Dow Jones dropped 512 points or 4.3%) a woman in Townsville, Queensland, Australia, opened her groceries and found a rat had chewed a hole in her loaf of bread and was loafing inside the plastic package.  “The thought of ...

A Dedication to Dividends

Part of QV’s investment process includes a monthly audit of fundamental portfolio characteristics against a relevant benchmark. In recent reviews of the QV Canadian Equity Fund and equity portion of the Balanced mandates, we have witnessed the dividend yield of the Fund come down to a level in line with ...

Changing Landscape

The Canadian media landscape is transforming as consumers have many more options in accessing music, TV and movies.  As an example, if you are interested in watching old episodes of Undercover Boss, a television show in which the CEO of a large company goes into the field for a week, ...

We Are All Greeks Now

Neither a borrower nor a lender be; For loan oft loses both itself and friend, and borrowing dulls the edge of husbandry.

- Polonius, Shakespeare's Hamlet

Well, we certainly have dulled the edge of husbandry in the Western world.

After years of running up debt at cheap money rates, borrowers are running out ...

Hold 'Em or Fold 'Em?

Battle scars of the 2008-2009 bear market temporarily built conservatism into forecasts. As a result, earnings revisions over the past two years have been biased towards the positive.  With GDP forecasts recently declining, the positive revision trend appears long in the tooth.  Although we would not be surprised if the ...

Ruin In Market - RIM

Gosh if we didn’t have enough to fret with floods, beansprouts and Middle-East tribulations and in our line of business - the slowing global economy, the end of money printing by the FED, the contraction of credit in China and India and the Europeans juggling debt bombs, QV ended the ...

Consequences of a Slowing World

“Austerity” is defined in the Oxford English Dictionary as a state of severe simplicity.  In the world of economics, the word is used to describe a policy of deficit-cutting and lower spending.  No matter how you frame it, defining government policy with a word like “austere” or “severe” does not ...

Pass the Advil Please!

Many of us at QV are suffering with headaches these days. A number of QV’ers are studying hard for their high pressure Chartered Financial Analyst (CFA) exam this weekend, we wish them luck. For those of us in the office following the worldly ups and downs, it’s downright confusing. One ...

Financials?

With the debt risks talked about in financial markets around the world, the immediate reaction would be to stay away from any company related to the financial sector. While risks do remain, primarily in foreign debt markets, the Canadian banks have minimal holdings in these risky assets. It is more ...

Putting Cash to Work

When we're not discussing how the Canucks will win the Cup, cash flow is a hot topic among many of us at QV. Positive, sustainable cash flow is a quality we hold in high regard when looking at our businesses and seeking out new ones. As Darren highlighted in February, it paves the way for ...

Looking Beyond the Day to Day

This week commodity markets have taken a drubbing. Silver has declined in excess of 25%. Oil was down nearly 10% yesterday alone. Much of the recent gains in commodities have been erased in a time frame scarcely longer than a wink of an eye. Their rapid rise followed by liquidation is an example of how ...

Good Debt and Bad Debt

I recall watching a PBS documentary a few years back titled Secrets of the Parthenon; it described the historic significance and intricacies of this ancient Greek temple. It was and remains a majestic architectural achievement, made entirely of marble and limestone, and fabricated with such extreme precision in an age ...

Funny Paper, Funny Markets, Funny Profits

Only government can take perfectly good paper, cover it with perfectly good ink and make the combination worthless.
- Milton Friedman
Inflation expectations are rising. Record commodity prices are headlines. Silver hit a 31-year high. Gold, copper, crude oil, wheat ...

Q1 Review

Markets climbed the proverbial wall of worry in the first quarter of 2011. Increased tension in North Africa and the Middle East, natural disasters in Japan, and the risk of sovereign credit defaults in Europe were not enough to shake investor enthusiasm. ...

High P/Es and High Returns

We recently met with a company whose core business is private equity investment. Some highlights from their investment strategy include: 1) finding businesses with high quality cash flows; 2) using financial leverage cautiously; 3) buying at a discount to fair value; 4) ...

Transitory Inflation?

Recently, the New York Fed Chief William Dudley was seen publicly explaining how inflation in the US is not a problem for Americans. He grounded his thesis by showing that consumers can now buy an iPad 2 for the same price as ...

The Crisis in Japan

We write today's letter with heartfelt sympathies for the people of Japan as they deal with the devastating aftermath of last week's earthquake and tsunami. We are also tremendously thankful that QV employee Michelle Chang, who was vacationing in Japan when the ...

Black Gold

This week marks two years since the TSX hit rock bottom at just under 7,500. Today, the market has roared back to the 14,000 level with little interruption. Over this time period, oil has also been moving up from its low of ...

"Let's Stop Global Whining"

On a recent holiday on the island of Maui, I parked behind a small pick-up bearing the above bumper-sticker, a dig at the fuss over global warming. Complementing the climate comment was another, "Yes, This is My Truck. And NO, I Won't ...

This, That, or the other Thing

Maybe it's just the time of the year with people thinking about their RRSP contributions, but there sure is a lot of "advice" being offered. In glancing through the newspaper, there is no shortage of reasons to invest in gold ETF's, small ...

Why we love cash flow

We are in the midst of earnings season with a multitude of the companies we own reporting. Earnings per share are usually the first numbers reported outlining profits using accrual accounting. Earnings per share are more easily manipulated as certain decisions on ...

新年快乐 (Happy New Year)

Happy Chinese New Year! According to the Chinese zodiac we have now entered into the year of the rabbit. It is supposed to be a year in which you can catch your breath and calm your nerves. It is also a time ...

The Crocodile

As Lewis Carroll's Alice, in pursuit of the rabbit, fell down the rabbit hole to Wonderland, she started to think of matters mathematical and geographical and poetic, to recover her bearing and sense of self. She recited the poem "The Crocodile" in ...

Value still exists, and it still rewards.

It's been a busy start to the New Year and we've witnessed several encouraging signs for sustaining growth. Flaherty further acknowledged Canada's rising household debt by tightening mortgage rules; Obama stepped closer to corporate America by recruiting General Electric's CEO to his ...

A reason to dump this small cap fund!

We've never really thought of this letter as a marketing piece, but more of a communication tool. I think you would agree that the title to this week's letter would fully support this notion.

The fourth quarter results for our small cap ...

Q4 - Quarter End Review

Equity markets finished the year on a high note, rallying for most of the fourth quarter. Gains were made as investors became increasingly confident in the global economic recovery. The announced extension of the much debated Bush tax cuts and proposed payroll ...

Understanding the Rest of the Story

The other week Ian mentioned the deep freeze we were experiencing in Calgary. Like the stock market, the weather has changed. This week, I noticed a gentleman sitting outside Starbucks sipping on his latte. Here we go again, like the hit comedy ...

Experience from Bad Judgment

In today's Globe and Mail, in the Lives Lived column, Tom Eisenhauer, writes a tribute to his Father, Andrew, who died October 28 in Lunenburg, Nova Scotia. He was 87. Tom describes his Father as a family man, engineer, entrepreneur, community leader ...

Reaching Your Goals - Consistent Investing

This week QV Investors was honoured to be the recipient of the Best Canadian Balanced Pooled Fund award at the 16th Annual Canadian Investment Awards and Gala. If you ask Leigh why he started QV back in 1996 he'd tell you it ...

A Warm Visit with Crombie REIT

We have had a bone chilling week in Calgary. The weather dropped so low on Tuesday that the city was for a short period the second coldest place on earth behind the South Pole. Despite the deep
freeze, QV has not gone ...

Short term solutions are only band-aids

Since the Federal Reserve's November 3rd announcement of the Quantitative Easing 2 (QE2) program, the Canadian and US stock and bond markets have moved opposite the expected direction. It was anticipated QE2 would decrease yields and increase stock prices. It is evident ...

Virtuous circle, or something all too familiar?

With US Thanksgiving two weeks away, how many American families do you suppose will serve turkey with their holiday meals? Before taking a guess, Bloomberg has reported US wholesale frozen turkey prices have reached an all-time high. To be candid, I don't ...

What is wrong with this bond anyway?

Whatever the ultimate outcome of Mr Bernanke's purchase of bonds, Quantitative Easing 2, (we are certain it is unlikely to be of an enduring benefit), we recognize that QE2's anticipation has pushed bond, commodity and equity prices to new recovery highs in ...

Let the Market Clear!

We recently met the management team of Whistler Blackcomb during a road show for their initial public offering. In short, we were impressed with the executive team and the underlying asset but a few issues will keep us from investing.

Q3 - Quarter End Review

Equity market performance in the third quarter was nothing short of spectacular. It did not matter if an investor owned Canadian equities, up 10.3%, US equities, European equities, or even emerging market equities. The returns were all positive.

Nortel, Real Estate, Bonds?

When people are discussing their holdings of government bonds at yields less than 4% per year, the conversation is considered dull. Remember the good old days in 1999 when stocks like Nortel or Pets.com would provide capital gains of 4% on some ...

Technology: Protector and Friend

When I read about the speed of advancement in technology, it's hard not to conjure up scenes from The Terminator. Beyond the forecast of how the world would end, the movie portrays how moving too far, too fast can be detrimental to ...

Corporate Cash Conundrum

We had a chuckle when reading an article in Wednesday's Globe and Mail titled: "Budget cuts leave no rest for Irish travellers". The article claimed that motorists using Ireland's new motorway network should expect to find themselves bursting for the bathroom because ...

More of the Same - No Whiff of Candour

The government can't figure out what to do to revive the economy. As of last week, the S&P had recorded a 10-year loss of 1.30%. So who in their right mind wants to be an equity investor? Johnson and Johnson issued 10-year ...

Why is US Housing Important?

The run up in house prices prior to the crack in 2007 resulted in euphoria. Refinancing was common as homeowners increased their mortgage as their house price increased. Typically, the new mortgage was done at lower interest rates. Homeowners used this cash ...

Bond Bull or Bear?

According to Historychannel.com, on this day in history 99 years ago, the first around the world telegram using commercial service was delivered. It was sent from New York and it was relayed through 16 different operators. It took 16.5 minutes to be ...

The Confused Fisherman!

Happy Friday the 13th! It's a rather gloomy end to the week in our fair city, wet and cold for this time of year. We won't let this get us down though, especially if one enjoys the fine sport of fly-fishing. One ...

Expecting the Worst

Worry kills. So don't do it. But some days we arrive at the office, we read the news, and we want to turn off the computer, sell everything or ignore everything and start the weekend early.

Cheap or Expensive?

If we read through analyst reports or newspapers, we would receive differing opinions on whether the stock market is cheap or expensive. John Hussman helped by providing an analysis of the price to earnings ratio of the S&P 500 using forward operating ...

A Whole Lot of Noise

The week started with the Spaniards defeating the Dutch in a 1- 0 extra time victory to conclude South Africa's World Cup. The vuvuzela horns which hummed throughout the tournament causing viewers from around the world to ask; what is that noise? ...

Deflation Investing

The second quarter ended with a slump in leading indicators, in confidence, in equity, and commodity markets, in the Canadian dollar, and in interest rates. Bond yields, all along the yield curve, fell to new lows for the year. In the U.S., ...

The Fence

The fence around the area holding the G20 conference is three metres high. A formidable barrier that ensures each participant stays on his or her respective side. The new law passed by the Ontario government for the next two weeks will also ...

Swimming with Sharks

On this weekend back in 1975, Steven Spielberg's summer blockbuster Jaws was released in theatres across America. The film's musical score, a simple alternating pattern of two notes, quickly became a classic piece of hair raising suspense music. As a child growing ...

Current Policies & Reasons Why

Fiscal and monetary policy settings are vitally important today. As the world's banks and economies are so leveraged any negative wiggle or change, any restraint or removal of stimulus, becomes magnified through the system and the markets. Debts create the preconditions for ...

Sailing on the Red Ink Sea

Those who govern, having much business on their hands, do not generally like to take the trouble of considering and carrying into execution new projects. The best public measures are therefore seldom adopted from previous wisdom, but forced by the occasion.

What I've Learned - Mark Dyki

To me, monitoring the process of learning is like trying to watch the hands of a clock move. I'm not insinuating that I am a slow learner but more to the point that progress cannot be appreciated until you remember a snapshot ...

An update from Stephen Roach

This week we had the chance to sit down with Stephen Roach, Chairman of Morgan Stanley Asia, while he was visiting Calgary. Mr. Roach served on the research staff of the Federal Reserve Board from 1972 until 1979 and was the Chief ...

What happened?

Did a trader hit the 'b' versus the 'm' button and sell a billion shares instead of a million? Did a trader sell too much Proctor & Gamble stock, a member of the Dow Jones Index and set off a panic?

A Bunch of Black Swans

Worry is us!
At the height of the suspension of some international flights resulting from the Icelandic volcano's ashcloud, a client asked about its market impact. Despite the outcry over too rigid a safety call and the airline angst over costs, we ...

A change in tone...

The main tool for Central Banks to effect changes in monetary policy is by changing the target for the overnight rate. This is the rate at which banks borrow and lend funds among themselves. Lending and deposit rates are then set at ...

Inching from Stimulants

For 2010, the 2009 policies of low interest rates, fiscal spending, and bankruptcy salvation (now in the form of sovereign bailouts) continue stretching the equity markets into post-crash highs. Canadian equities are up over 60% from their lows. Canadian housing is frothy. ...

Refinancing Growth

On March 30, Athabasca Oil Sands Corporation raised $1.35 billion in an initial public offering co-led by GMP Capital and Morgan Stanley. This is the largest capital raise in over ten years on the Toronto market.

Investment Indigestion

The 2010 Canada Budget includes an end to the medical expense tax credit for liposuction. Could there be a more symbolic gesture for "cutting the fat"? Unfortunately, fiscal imbalances require much more than a tummy tuck. In the US, Barack Obama has ...

Petitions for Patience

The Prayer of Saint Francis speaks to the balance all need in their lives between satisfying appetites and maintaining sanity and good will. Balance in government, business and finance allows management to sustain a solid franchise.

Why do we talk about book value?

The much anticipated Berkshire Hathaway annual letter penned by Warren Buffett will be released tomorrow. Book value has always been a key topic for Mr. Buffett as well as QV. Book value (BV) is defined as the assets of the firm minus ...

Why the Materials Underweight?

The index that we get benchmarked against has a 31.9% weight in Materials. The QV Small Cap Fund is underweight the sector with an 11.0% weight. Sometimes we get asked why we are taking on such a big risk by being so ...

Market Outlook

"We believe the S&P 500 will close out the year at 1320 ..." This is a recent quote from one of the typical market outlooks one finds at this time of year. Exactly how do you get a target of 1320 on ...

Emerging Markets - The only place to be

Developed world ... sounds like we're all done. It's been a good run, now pack up your bags and get the heck outta here. The picture of a massive growth phase in emerging markets is hard to argue. The headlines above are ...

Why a weak US economy matters.

Canada has faired relatively well in this extremely difficult economic environment. Canada did not have to rescue any Canadian Banks like in the US, nor did the Federal Government have to come up with an insane number of programs (e.g. cash for ...

Year in Review

We are often asked by potential new clients what our performance looks like through a cycle? When does our style work best and when does it not? Well the good news is we seem to understand our process and how it responds ...

Christmas Cheer

Although 2009 had a miserable start, capital markets have been in a gift giving mood for most of the year. Near zero interest rate policy combined with unprecedented global fiscal stimulus resulted in assets catching a bid. A year ago at this ...

It's all about your expectations!

I recently had the pleasure of seeing my dentist for a root canal. Even typing the words sends a jolt through my spine, but you know what it wasn't that bad. I expected it to be terrible and when it wasn't I ...

Surprise!

I haven't been able to decide what has been more of a surprise - the better than expected job reports today, or the reaction in North American markets.

Oh My, Oh My, It's Debt Repayment Time for Dubai!

On Wednesday Dubai asked creditors to agree to a debt repayment standstill as they look for ways to refinance obligations outstanding from their gluttonous growth of the past decade. A Dubai default would be the largest sovereign debt default since Argentina defaulted ...

Fixing the System

On Nov. 18th, Venezuelan President Hugo Chavez stated in a televised address that he wants to find a different way to calculate his country's GDP. This was after the release of the third quarter 2009 GDP figure of negative 4.5%. He stated ...

St Andrews Sprint

The G20 finance ministers met at St Andrews last weekend to provide a progress report on the economic and financial actions put in place since the onset of the financial crisis. Trivia buffs know that the beach at St Andrews is also ...

What is it you do again?

Our philosophy - is to buy a portfolio of sustainable and enduring businesses run by capable, committed and candid people. We select equities on the basis of good value. We hold positions over an indefinite period of time.

Trick or Treat?

The tradition of trick-or-treating dates back to the middle ages. The act of people going door to door resembles what was known as "souling," in which people went door to door begging for food. In exchange for food, the beggars would pray ...

A perspective on time

This week the U.S. Treasury and the Federal Reserve Board unveiled measures to cut executive pay at firms which were recently bailed out. In addition, they will monitor banks' pay policies to ensure they don't promote excessive risk taking. Any measures which ...

Quarterly Review

During the third quarter of 2009 the Canadian market saw widespread appreciation as eight of ten sectors posted gains. The small cap market was even stronger with nearly every sector posting positive double digit returns. The areas which performed the best were ...

Choose your Dance Parnters Wisely

"Music begins to atrophy when it departs from the dance" -Ezra Pound
If the market was a sonata, the Conductor's arms would be mighty tired. They have been working overtime, applying a magnificent crescendo since the middle of March. If the music ...

What does the Q & V stand for again?

Jeremy Siegel, who is a well regarded professor at the Wharton School of Business, has written books outlining the benefits of long term investing. In his most famous book titled Stocks for the Long Run, Dr. Siegel has studied asset class returns ...

Rubber Chicken Risk?

I was at my nephew's third birthday party last weekend. A clown was in attendance and had the children mesmerized with her balloon animals and rubber chicken gags. To be honest, I was pretty impressed by her ability to make butterflies out ...

Hakuna Matata

You may recognize the above lyrics from the award winning Walt Disney production "The Lion King". In case you have forgotten, when the baby lion Simba was distraught along came his new found friends, the warthog Pumbba and the lemur Timon. They ...

What Credit Crisis?

Financial and Technology sectors typically lead in the early stages of the business cycle. The above commentaries from two of the heavy weights in those industries are suggestive that we are through the worst of the Great Recession. Indeed, there has been ...

Buy our Fund and we'll give you a ...

What is it going to take for you to put some of your hard earned cash into our Funds? Decent performance and protection of your nest-egg are important criteria but that's not enough is it? We know what you are waiting for: ...

What are we worried about?

In his August Insight, Gary Shilling superbly outlines six key factors which he believes will restrain global growth. Dr. Shilling is a US economist who correctly forecasted the most recent global slowdown, and he was also one of the few voices calling ...

Second Quarter Earnings Season

We are in the midst of the Canadian earnings season. Below you will find a snapshot of results from some of our largest holdings that have reported this week:

What a Fight!

The month of July has been like a boxing match. But not just any boxing match, this one's an epic battle. A real "one for the ages" bout, the type of fight that inspires thoughts of greatness, think: Sylvester Stallone in his ...

That car won't pay you dividends

As investors, we are often influenced by numbers and reports based on the near term. It is very apparent that the majority of businesses in the economy are being negatively impacted by the current circumstances. What we have tried to do is ...

Q2 2009 - At a glance

The Fund rose approximately 16.0% (before fees) in the quarter compared to a gain of 29.7% for the benchmark BMO Small Cap Index (unweighted). The under-performance relative to the benchmark was primarily a result of a continued large underweight in the Materials ...

A Confession

First and foremost, we advertise ourselves as fundamental, bottom up, company analysts. We must know with whom and in what we are risking our clients' dollars. And we are adamant in hewing to our categories of corporate tests - management, their financial ...

Return on Equity

We often speak of financial return and quality interchangeably around the hallowed halls of the QV campus. Speaking of our campus, we are about 60,000 square feet, sorry make that 6,000 square feet, of comfortable office space attained during the peak of ...

Cyclicals versus Defensives

Is nothing sacred in this upside down world we live in anymore? Just when you think you know how to beat the market by selling in May and going away, it doesn't seem to work. How about the old adage, "don't fight ...

A Spring in the Market's Step

For three months, from the March lows, stock markets, commodity markets, and the Canadian dollar have put in rallies of 20% to 40%. Moves of 100% or more in small companies, distressed resource, and bank issues were common thus partially reversing last ...

Dynamic in Approach, Grounded in Principles

This week is rich with illustrations supporting the old adage "the only constant is change". Nortel's market cap is less than $100 million today compared to $380 billion at its peak. Jim Flaherty's estimate of the budget deficit is now projected to ...

"Grab that cash with both hands and make a stash" - "Money", Pink Floyd

Initial Public Offerings (IPOs) were all the rage during the technology bubble. In 1999 there were a total of 492 IPOs in the United States totaling $63.7 billion. In 2000, the number was 422 with a total dollar amount of $97.35 billion. ...

Earnings Season

It's been a busy week with many of our companies reporting their quarterly earnings. Some have been relatively good and others down right terrible. The consensus earnings expectations for the market have been reduced significantly for 2009 after market analysts were slow ...

May, may be full of substance

I was a K-car kid. That and a Dodge Caravan were the underpinnings of my mobility growing up. They were popular cars and were largely credited with saving Chrysler from near bankruptcy in 1979. Witnessing the official demise of Chrysler yesterday could ...

Inflation vs. Deflation

My father always referred to economics as ikcy-nomics. I agreed with his conclusion in University as I studied obscure theories and hideous formulas. However, economics is essential to understanding what is occurring within the current marketplace. It is not the obscure theories, ...

Finally Some Relief

Thirty nine years ago to this day, a colossal sigh of relief resounded around the world. Four days after Commander James A. Lovell famously said "Houston, we've had a problem", the crew of Apollo 13 successfully returned to earth. Against all odds, ...

Cash is King...for now

The best performing investors over the past 12-18 months have hoarded cash, a good call to say the least. Currently, the average investor is acting as they have historically; they are chasing what has worked rather than considering the opportunity or risk ...

Lessons from a Surgeon!

If I am ever faced with the need for heart surgery, I wouldn't want a brain surgeon performing the operation. I would want the most experienced and knowledgeable heart surgeon. If I was facing what some call the worst recession since the ...

Seasons Change

After a cold winter we welcome with open arms the first day of spring. But as a radio commentator reminded us, "it's only 274 days until winter again". It is not only those directly involved in the investment industry which have become ...

Be Aware

With today being Friday the 13th and the Ides of March fast approaching, there is ample ammunition for fear mongering. We aren't going to go there today but we do reiterate the importance of exercising caution. In an era where we are ...

Ownership Equals Committed Stewardship

We think property ownership encourages a person to buy into society. We think ownership allows for increased productivity, responsibility and stability. Pride also comes with ownership and may be reflected in a homeowner's pristine lawn or a car owner's well presented automobile. ...

Remember China and India?

Remember the inundation of articles over the last few years promoting the notion of infinite demand in China and India for commodities. The Chinese population was reported to be moving into cities at the pace of one New York City a month.

Don't Buy Stocks for 2009!!!

Two weeks ago the subtitle of our letter was -
Investment Manager Marketing - BEWARE. Our marketing department would be outraged by our title in this week's letter. But hold on, before we are delegated back to the "research room" let us ...

Quality - It's all how you define it

Investment Manager Marketing - BEWARE
Our portfolio of quality companies with strong management, blah blah blah. How many times have investors heard about the quality companies their manager owns? Just this week there was a column on a hedge fund manager ...

Brand New Crisis

2008 was the year of the financial crisis and it appears that 2009 will be the year of the economic crisis. In our December fifth, Weekly Update we suggested that even more dismal economic headlines should be expected in the New Year. ...

Misconceptions in Finance

Many years have passed since I finished my business degree, but academic misconceptions in finance remain. Dividends are promoted as payments made by companies that are unable to grow. Business textbooks state the only reason people will buy these companeis ...

Potemkin Villages Everywhere

The year was 1787. Empress Catherine the Great was touring Crimea, now part of her Russian Empire. General Grigori Potemkin hosted her excursion, where she saw from her carriage, flourishing villages off in the distance. She concluded Crimea was a valuable asset ...

2008 Portfolio Review

PERFORMANCE - The QV Canadian small cap model portfolio declined 16.97% in the quarter, versus a loss of 30.41% for the benchmark BMO Small Cap Index (unweighted). The annual loss for the Fund was 29.54% versus a decline of 49.68% for the ...

Investment Industry - Ba Humbug

Sorry for the less than cheery title to our final letter of the year, but how else do you describe it? You may find it surprising though, we are not in fact referring to the 2008 stock market crash. Rather, the recent ...

The Dreaded "R" Word

In times like these no one has the answers. Neither the government, nor the self-proclaimed economic experts have instilled much confidence in the public. People are becoming more and more uneasy with the situation and want answers. In this regard it appears ...

Stimulus Please

Today is "Black Friday" in the United States; the official beginning of the US Christmas selling season. This term is used to reference the Friday after Thanksgiving. It originated in Philadelphia in the 1960s to refer to heavy traffic flow, but the ...

Book as a Measure of Value

"...it's not been possible to completely avoid the unprecedented global liquidity crisis of the last few months" - Ed Clark CEO of TD Bank commenting on TD Bank's profit warning and asset write downs earlier this week

Top Ten Update

The credit crisis has clearly evolved into a crisis of confidence. This is impacting the economy in a very real way as business and consumer spending has ground to a halt. This environment is stress testing business models to an extent we ...

Just Your Average Joe

Here we are, Halloween, one of my favourite times of the year. Ahhh, the tootsie rolls and the little munchkins dressed up as spooky ghosts and goblins is just the diversion most of us need right now. To top it off, the ...

How Things Change

Over the past year there have been extreme changes on so many fronts. In November of last year the front cover of India's national newspaper displayed a cartoon of an indestructible sacred cow in a superman costume celebrating the new found wealth ...

Sporting Contests Have Two Halves

What a week this has been! Currently, governments around the world are trying to alleviate liquidity problems in the first half of this economic environment. The halves of this sporting contest can be separated into liquidity concerns in banks and a slowdown ...

When the Going Gets Tough...

It is tough out there. The S&P 500 has declined 29.8% from the peak reached at this time last year. According to data provided by Myles Zyblock at RBC Capital Markets the current decline is in-line with the average 29.7% drop in ...

Update on RBC Dexia

To our Valued Clients,

Market volatility and uncertainty over the state of global financial institutions has resulted in many people questioning the solvency of their own financial institutions which hold their assets. As most of you know, RBC Dexia provides custodial, record keeping ...

Setting Expectations

There has been so much headline news yet so little of it seems to make much difference in this environment. The investment in Goldman Sachs by Berkshire Hathaway early in the week seemed to be a positive, for about six minutes. The ...

What's Next for Small Caps?

"I'm phoning about my exposure to AIG, Lehman and Freddie Mac and Fanny Mae?
"You haven't any."
"Whew."
"You're invested in smaller Canadian companies. They have no exposure."

Buyers Market for Financials

We have been inundated with news on the bailout of Freddie Mac and Fannie Mae. These firms, which the Globe & Mail calls "Fraudy and Phony" have further displayed the turmoil in the US credit markets. We believe the authorities placed a ...

Tough Love

It has been a long week back from the long weekend. The TSX has been plunging, down approximately 9% since the beginning of the week. Energy and basic material equities have fared the worst, following the underlying commodity prices down. The commodity ...

Making up Losses

On occasion we've been asked, "what's the point of being cautious and defensive in your investing, after all you invest in stocks to make money don't you?" It is our belief that you invest not to maximize gains but rather to minimize ...

An Unhappy Anniversary

This Sunday marks the one year anniversary of the beginning of the US Federal Reserve's rate reduction program in response to the global credit crisis. On August 17, 2007, the Fed delivered their first of seven rate cuts to alleviate pressure on ...

08/08/08

The Summer Olympics in China commenced today (08/08/08) at 8:08:08pm China Standard Time. There were 15,000 performers at the opening ceremonies and 30,000 fireworks. What a start to the most expensive Olympics on record, with costs estimated to be as high as ...

Inside the Fund

That's right, the title says it all, this week we're talking about the portfolio. No economics, no monetary reports, and no commodity reflections - just the portfolio. For those of you who read this Update you know our outlook on the economy ...

Bull Market in Pessimism

Have we been too bearish? I received an e-mail from one of our more insightful clients yesterday, "Dear Leigh, I received and read your quarterly report last night and must admit that I found it to be right up there with root ...

Quarterly Review

During the second quarter, the Canadian small cap market continued to under-perform the large cap stocks as investors sought perceived safety. Historically the market has migrated to larger cap companies at times of uncertainty and potential economic slowdown. We would expect this ...

There is Some Light at the End of the Tunnel

These markets are volatile! As I write this letter, the Dow Jones Industrial average is down 9.9% month to date. Most European markets are down over 10%. The S&P/TSX Composite is down only 3% as it has benefitted from the strength in ...

"Pete's Tax"

The above is the 'one man's meat is another man's poison chart'. What is good for oilmen is not so good for bankers. Our proposition is, this is about to change and the shift will result in higher interest rates.

Barometric Pressure = 101.1 kilopascals

Before we get into the hot topics of the past five days lets talk about the weather. Yes, for much of history the weather has been a topic of discussion for both idle chit chat as well as major global events. Today ...

A Sure Thing?

The National Post today has an article discussing the 140th Belmont Stakes which is set to take place this Saturday. According to the article a horse named Big Brown is attempting to win the coveted "Triple Crown". For those who aren't horse ...

What inflation?

Mark Carney, the relatively new Bank of Canada governor, dropped interest rates 0.5% at the end of April. In their release, the Bank of Canada stated: "The Bank is now projecting a deeper and more protracted slowdown in the US economy. This ...

Don't you guys get it ?!?!

Here we go, we're ready for the criticism, as they say, "Bring it on". What has been the area of the stock market which has been hugely successful in the past three to four months? The answer, commodity stocks particularly energy companies. ...

Performance Review

As you can see, our long term performance is in the top five percentile but our shorter term performance has moved towards the median. For the past year our performance was in the 30th percentile.

Oil, Gas, and Dilly Bars

Well, we finally did it. After a number of years of talking about attending the Berkshire AGM, we finally packed our bags and joined the other 30,000 or so people making their way to Omaha.

Market Update

Yogi Berra is reported to have said that forecasting is very difficult, especially when it comes to the future. If we didn't know that Yogi was a Major League Baseball Hall of Famer, we would have guessed that he was a money ...

Small Cap Financial Exposure

A crucial vote on the $32-billion restructuring plan for the frozen Canadian asset-backed commercial paper market will go ahead today. In light of this, it is timely to provide an update on the small cap fund's largest financial holdings.

Keeping us on our toes!

One of our long time supporters in the Fund recently sent us an e-mail inquiring about some of our holdings. We thought that instead of giving you the usual macroeconomic outlook we'd share our thoughts on the things which matter most, individual ...

High Expectations

According to the consensus earnings estimates in Canada and the United States everything is going well. The anticipated growth in Canadian earnings is 10.0% for 2008. In the US, the market is even more optimistic with an expectation of 16.6% earnings growth.

Q1 Review

Problem we have is, a lot of folks aren't responding to over a million letters sent out to offer them assistance and mortgage counselling. You know, these mortgages can be pretty frightening to people. I mean, there's a lot of small print.

President ...

Trust and Truth

A number of months back in our Small Cap Update we discussed the concept of "trust". Without it confidence in the system is lost, a terrible occurrence and one difficult to repair. Sometimes the question of truth is not as blatantly violated ...

How We Doin'?

Last year the BMO Small Cap Weighted Index earned a total return of 2.0%. The Unweighted Index lost 0.4%. The difference in returns suggests the positive return in the weighted index resulted from a few strong stocks, a characteristic of toppy markets. Our Small Cap returns on an average were in the region of 11.4% ...

Shareholder Friendly Governance Qualities that we Seek (Part 2)

Last week we reviewed QV Investors' corporate governance guidelines. This week we discuss three more governance qualities and capabilities that are of greatest importance to us. They are as follows:

Shareholder Friendly Governance Qualities that we Seek (Part 1)

At QV Investors, we review corporate governance qualities to ascertain whether a company's board has a shareholder friendly attitude as well as the capability and priorities required to make its stock a sound investment once the financial merits of the company have ...

Leigh's Musings

Pay attention to the bond market. Canadian bond yields peaked in mid-2007, breaking a rising trend that begun in mid-2003. As the cracks in the financial system became more pervasive, bond prices began appreciating, a pattern that continues into the New Year.

The Gifts in Santa's Sleigh

David Rosenberg, the North American Economist for Merrill Lynch, summed up his and our stance for the last few years perfectly. He stated this week that "it sounds strange to hear a positive story coming from the skunk at the picnic…". We have been concerned about liquidity in the market. We have also been concerned about ...

Sounding Like a Broken Record

Having to write a weekly investment letter can be challenging at times. You often feel like you're blathering over the same stuff week-in and week-out.

Earning Season

Quarterly earnings season is well underway and the trend of strong Canadian corporate profitability continues. Just over half of the companies listed in the broad S&P/TSX composite have reported to date, with first quarter profits surging 20 percent versus this time last ...