THE ADROIT
ISSUE #11
JANUARY 2017
LOOKING FORWARD, LOOKING BACK
– A FINAL VIEW
1993
2017
By Maria Holowinsky
Circa 1990’s
As I write this Adroit View, we are only days away from the next
step in the evolution of Adroit Investment Management – the
amalgamation with CWB Wealth Management. This is a good
time to take a moment to reflect on where we’ve come from,
and where we’re going; to think about what changed, and what
stayed constant; what passes in an ephemeral puff of smoke and
noise, versus what forms the constant granite beneath our feet.
One of the constants in an investment manager’s life is the “unconstant”, ever changing nature of the markets we invest in.
The past gives some indication of what to expect in the future,
yet despite all the research and prognostications available to us,
markets never cease to surprise us. History rhymes, it does not
repeat.
“The equity markets in Canada have provided a solid
performance for the year to date. The majority of the rise
can be attributed to the oil and gas and gold sectors. We
expect earnings to grow in 2017, driven largely by a previously
weakened but recovering energy sector and support from growth
policies abroad.”
Does anything strike you as unusual about these two sentences?
For those of you blessed with an eidetic memory, you will
recognize the first 2 sentences as coming out of our very first
Adroit View in 1993. The last sentence comes from our 2016
year end investment commentary to our clients.
“The current environment is very favorable for borrowers
who are enjoying the low cost of capital…savers, on the other
Circa 2015
hand, …are actively seeking an alternative to their traditional
provider of interest income, the banks, in an effort to improve
their returns.” This was also from 1993 Adroit View, though it
describes today’s desperate search for yield just as well.
Written more than two decades ago, these points could just as
easily have been penned to describe today’s market realities. As I
look over the last two decades, the truth of the adage “the more
things change, the more they stay the same” becomes readily
apparent. History indeed rhymes!
What about the things that have changed?
In the early 1990’s, the thought that most data and information
could be digitized and zipped around the globe electronically
was still only a concept. The primary means of transmitting
information was still paper and phone. Investment research
reports were prepared on a scheduled timetable, checked and
double checked, then published and mailed out. Institutional
brokers would call every morning to give us an update on
market developments. A large part of the morning was spent on
gathering information that might affect the stocks we owned.
A part of the morning routine was reading the business papers.
(Remember when newspapers where substantial, weighty
editions that thumped on your desk, and it was impossible to
read everything cover to cover? Remember when you had to
read the paper to keep up with what your colleagues were
talking about?)
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If anything stood out, we had time to discuss, to think, and to
act. Trades could be placed within two or three days of receiving
the news, as markets moved at a more temperate pace.
Let me use the Tech Bubble of 1998/99 and ensuing collapse as
an example.
Correspondence from clients came by mail, and urgent or
pressing issues were dealt with by phone. Actions promised on
the phone resulted in a letter and other documentation of some
sort, which was typed up and mailed. Nobody expected a reply
within minutes; there was breathing room in our day.
valuations:
How quaint that notion seems now!
Where before, professional investors earned our keep by having
access to more and better information on stocks and markets
than the individual investor, we are now all inundated with a
tsunami of data, news, opinions, and outright fantasy, literally at
the speed of light.
In the March 1999 View, we took a look at tech market
“Is this an investment or speculation? Some might call relying
on another to buy at prices unsupported by value the ‘Greater
Fool Theory’. We defer to John Maynard Keynes, “For it is, so
to speak, a game of…Musical Chairs…in which he is victor who
secures a chair for himself when the music stops.
Since we refuse to join the party and play Musical Chairs, we
are not popular with the very many bulls out there now. So be
it.”
In the December 1999 View, we wrote:
“As portfolio managers entrusted with protecting as well
as growing your
assets, we have not
participated in the
high tech, internet
‘hot air balloons’. We
can only watch in awe
as they soar into the
stratosphere, knowing
that sometime they
will come back to
earth. And if history
“Then and Now”
is any guide, when
Left photo Circa 1993 - Maria Holowinsky, David Schuster, Val Vaillant
they fall, they will fall
Right photo: Maria Holowinsky, Linnea McKercher, Malcolm Jones
hard – it will not be
If everyone has access
a pleasant landing….
to all the information at the same time, what is there for an
The technology sector correction should set the stage for the
investment professional to add? How do we earn our keep?
comeback of stocks with real earnings and proven potential –
the value stocks markets have ignored for so long.”
Now, the trick for professional investors is to filter out all the
noise and nonsense, and focus on the few key morsels of data
The Technology sector did correct, and with a vengeance. Our
and information that actually make a difference to portfolio
clients profited handsomely.
returns.
And that is our strength, and what we will not allow to change:
The challenge is to separate emotions from facts, and to think
a disciplined approach to a consistent style. We see things
before we act. Perspective gained from decades in the business
not because we have a crystal ball, or because we are so
helps us to focus on what is important. The patience to wait
much smarter than everyone else; we see things because our
for a genuine opportunity is a skill that is disappearing in today’s
disciplined investment style provides a measured perspective
hyper active world. Perspective and patience combined produce
on the markets. Our determined focus on value helps us avoid
the wisdom that leads to a steady hand on your investment
an emotional chase of the ‘asset de jour’. We cannot time
portfolios. A steady hand leads to peace of mind that your
the markets, but we can decrease exposure when we see risks
objectives will be met.
building.
Where before we
had time to evaluate
information before we
placed a trade, now
affected stocks and
markets move within
mili-seconds of any
supposedly substantive
announcement. Market
moves are magnified
by momentum and
emotion. The propensity
is to act now, and think
later.
That steady hand at the tiller is something that has not changed.
That is the bedrock that we stand for. We follow our style,
search for value, and work to avoid unnecessary risks. Periods of
time when investors let their emotions run away with them as
they chase returns are one such risk.
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At the end of the day, it’s as simple and as
complicated as that.
S&P 500 Total Return
800%
600%
400%
200%
0%
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
Looking forward, our growing team is in a
better position than ever to provide that “steady
and knowledgeable hand at the rudder that
will translate into peace of mind (Adroit View,
1993)”. With the strength of an amalgamated
entity behind us, the Adroit Investment Method
continues, alive and well, approaching a quarter
of a century of solid returns!
Adroit Non-Canadian Equity
1000%
Percentage
Looking back, we’d like to take this opportunity
to thank our clients and friends for giving us the
opportunity to earn your trust over the last two
decades.
Non-Canadian Equity Cumulative Rates of Return
1200%
This is the final Adroit View in its current format, but our intent is to continue to publish a quarterly publication that addresses
investment related topics of interest. We value your opinion, and request your input in helping us develop the next iteration of the
View. Please take a few minutes to fill out our questionnaire, whether on paper, online, or pick up the phone and tell us what you
think…we would love to hear from you!
The Adroit Team
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