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.
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.
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.
How do you know if you should invest in a company or if it’s overpriced? Pricing power—the ability to increase prices at least above cost, in real terms—is critical in determining a company’s value, said Marlena Zabielska, an associate portfolio manager with Sionna Investment Managers, at the firm’s spring market review.
Oil prices have tumbled recently—a drop of this magnitude hasn’t been seen since 2008/09. Headlines point to both supply and demand concerns, including increases in non-OPEC (Organization of the Petroleum Exporting Countries) supply; Saudi Arabia’s decision to keep producing despite lower prices; and lower short-term demand due to economic weakness in China and Europe.