Investment Philosophy
Firm Profile > Investment Philosophy
Philosophy – Beliefs Guiding Our Investment Style
Human Nature Affects Stock Prices
Schism
A division into opposing groups because of a difference in belief or opinion
Stock prices are influenced by human nature as much as a company's intrinsic value (assets, earnings and cash flows). Management teams often overvalue or undervalue their companies; investors buy on good news, sell on bad news and ignore or overlook companies not making any news at all. These factors can create schisms between price and value. Sionna takes advantage of these schisms by picking Canadian stocks when they are trading significantly below our calculation of intrinsic value. We earn returns when they revert to their intrinsic value.
How Human Nature Drives Public Markets:
- Emotion Drives Irrational Thinking: Changing investor sentiment periodically causes stocks to be mispriced.
- Groupthink Drives Herd Mentality: Researchers have demonstrated that people think in herds and will act much more outrageously in the safety and comfort of a group than they would on their own.
Firm Profile:
Stock markets reflect human nature as much as value – and human nature never changes.
– Teresa Lee,
Portfolio Manager