While the United States gets ready to vote for their new president next Tuesday, I am reminded of a book I read, “What’s Happened to Politics”, written by Bob Rae. He has had political leadership roles, both provincially and federally in Canada, and along the way has learned many truths about leadership and human motivation and capabilities. I attended a book club gathering, where Bob Rae discussed his book, and I soon realized that some major insights he had learned from a career in politics were equally as applicable to investing.
When evaluating a money manager’s performance, investors often cast their eyes across the time horizons to the longest term number – since inception. A positive relative return can be such a great comfort; a validation of the investor’s original selection and a reflection on the quality of the manager. On the other hand, a negative number, whether in relative or absolute terms, might suggest the opposite: that the original selection process was flawed or that the manager lacks quality or skill. Or does it?
At Sionna, we go by the philosophy that it is better to know what may be hiding around the corner – this way you don’t panic and, in the investing world, you can prepare yourself so you don’t react irrationally. We know that markets are unpredictable, however the more informed we are, the better we can rationally respond to unanticipated events.
Recently, I was asked to participate in a mystery stock presentation for a group of investment professionals where I would slowly reveal the name of one of my favorite investments by providing more and more information as we went along. After struggling to choose a unique and exotic name to present I realized that my best choice was right in front of me the whole time.
With the Canadian capital market under siege again, we decided to brush off our 2006 essay, “Who is Afraid of the Canadian Stock Market”, and update it to address the current publicity. We find it interesting that Canadian investors are willing to consider severe criticism – that our market is sub-par and exposure to it should be minimized for our best interests – with very little backlash.
Sionna often speaks about the importance of prudent capital allocation in the art of investing. Accordingly, we strive to partner with management teams that carefully evaluate their investment alternatives and efficiently allocate capital toward high-return opportunities.