We recently read “Unicorns, Cheshire Cats and the New Dilemmas of Entrepreneurial Finance?”, authored by Martin Kenny and John Zysman of the Berkeley Roundtable on the International Economy, with great relish. In the paper, the researchers actively challenge the belief that the continued growth and dominance of winner-take-all business models are inevitable.
Investors have historically used a variety of characteristics to measure the valuation of a stock. Price-to-book value is one such characteristic and has often been used as the line in the sand when distinguishing value investors from growth investors. As long-term value investors, we have leaned on this ratio (and others) as a measure of value for both individual stocks and the overall portfolio. More recently, however, there are suggestions that price-to-book value has evolved into a less robust metric.
Capitalize for Kids is now in its fifth year of hosting charitable investment conferences, having raised millions of dollars for local charities by bringing together top money managers from Canada and the U.S. and having them share some of their best ideas.
In the search for excess returns, investors chase disruptors that they believe will transform the way businesses operate. High-quality investment opportunities are being discarded in their wake, which is great news for contrarian investors like Sionna. We aren’t blind to disruption in the economy and industry. But, we also recognize when things go too far, too fast.
Kim Shannon recently delved into this topic and revealed a current stock we believe the market has dramatically overlooked. This stock is inexpensive on a price-to-earnings basis and is trading almost 50 percent below its all-time high. Curious?
Canadian investors often like to compare and contrast our markets to those of our American neighbours. And being the polite and humble group that we are, we often focus too much on our shortcomings rather than highlighting our strengths. Year to date, the performance of the Canadian equity index has trailed that of the U.S. However, as value investors, we believe that negative sentiment and underperformance can sometimes create attractive investment opportunities.
Sionna believes market pricing is as much about human excess as it is about underlying security fundamentals. One feature of human weakness is that current market trends are often erroneously interpreted as the new secular normal. In reality, these trends are likely cyclical phenomena, which are so infrequent that present decision makers are unaware of their cyclical nature.
Kim Shannon and other industry experts answer the question, "what is your most important piece of investment advice for the second half of this year?"
It has never been easier to spread a message to the masses. Turn on the television and chances are you will find “facts” being scrutinized, so much so that consumers are willing to pay for high-quality, investigative journalism. Sionna is familiar with the investigative process as we have always felt the need to dig beneath the surface when looking for investment ideas. One topic we have been investigating recently is the robustness of the price-to-sales ratio (“P/S ratio”) as a tool to unearth investment ideas.
Zion joined Sionna in 2018 as Associate, Performance and Analytics. He has a number of years of experience in the industry, most recently as a Senior Performance Analyst at Sentry Investments. Zion earned his Bachelor of Arts, with a major in economics from the University of Waterloo, holds the Chartered Investment Manager (CIM®) designation and successfully passed Level I of the CFA Program.
Kim Shannon
President & Co-Chief Investment Officer