There is a fair chance that Imperial Oil, which reported its third quarter financials Friday, is etched in the mind of Kim Shannon, founder and chief investment officer at Sionna Investment Managers.
I had had the chance to catch Kim Shannon speak the year before at a RAMA event. She had just published her book, The Value Proposition, which had brought a packed audience of faculty, alumni and industry insiders. The speech explained her incredibly unique approach to value investing. Her sensitivity to the Canadian market had allowed her to abandon the pure-blood value investing approach in favour of her own “relative value” method, which accounted for a country overweight in cyclical stocks.
With the number of buybacks hitting record-breaking highs, share repurchases have increasingly become a popular topic on the news. Many commentators argue that the surge in buyback activity was an impending sign that the market was set for a correction. History, and recent market weakness, tells us that there may be some truth to this belief.
Katie joined Sionna in 2015. Prior to joining the firm, Katie was an Account Supervisor at a marketing and communications agency, primarily working with clients in the financial services industry, including Sionna. She earned her Honours Bachelor of Commerce degree from the DeGroote School of Business at McMaster University and after graduating, Katie spent several months volunteering at the 2010 Vancouver Olympics and Paralympics. She holds the Chartered Investment Manager (CIM®) designation.
Unlike the hordes of sellers who seemingly wanted out at any price, two of the country’s best-known value investment managers – Prem Watsa from Fairfax Financial Holdings Ltd. and Kim Shannon from Sionna Investment Managers Inc. – were spectators to the dramatic turn in global stock markets on Monday.
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.
Traditionally, value investors are perceived as focusing on companies that trade at low price-to-earnings (PE) and price-to-book (PB) multiples. At Sionna, we believe these traditional methods are best married with extensive fundamental analysis and a healthy dose of skepticism since multiples can be misleading in some cases.
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.
For the second time in the past few years, Kim Shannon, a relative value manager who formed Sionna Investment Managers a dozen years back, has revisited an old essay whose central thesis is there’s no point in being afraid of the local stock market.
In addition to giving rise to profit potential, buying when price is below value is a key element in limiting risk. Neither paying up for high growth nor participating in a “hot” momentum market can do the same.”
- Howard Marks