MARKET OUTLOOK:

There are lots of things we, as professional investors, cannot control. We cannot make Russia behave, although we wish we could. We cannot make the economy stronger, although it seems to be doing that by itself. We cannot control the rate at which the central banks increase interest rates, although the decisions they make will affect all capital markets profoundly. So, what can we do and what matters about what we do?

Our job is to find good companies in which to invest our clients’ assets. We do this by way of constant research into new names, constant monitoring of the names we already own, and constant reading of the financial press to understand what is going on in the market in order to find new themes and new ideas. 

Warren Buffett says he spends most of his time sitting in a chair reading. It seems to have worked out pretty well as a strategy. We are also voracious consumers of information, and for the most part, it has worked out for our clients too.

One way of knowing if we are doing our job well is to look at the performance of our portfolio companies. We should surely not be looking only at the performance of the stock prices, which over the short term have an element of randomness and volatility caused by any number of things. 

What matters, and what we should be looking at, is the actual revenue and earnings of each company, and the prospects for increased revenues and earnings going forward. We believe, and history shows, that companies that grow their earnings increase in value, and that over time that value shows up in the stock price.

Building a diversified portfolio of leading companies, paying attention on a day-by-day basis to the progress of each one, and making changes as required, is the essence of our job. It is what matters. 

TOP PICKS:

TFI International (TFII TSX)
TFI International is one of the largest trucking and logistics companies in North America. TFI’s strategy is to use its skilled expertise to improve operations and returns at acquired companies, and has built up a diverse portfolio of trucking/logistics businesses with various end-markets. We believe the recent acquisition of UPS Freight is transformative to the earnings profile of TFI, and should reduce the cyclicality of the overall business. With a clean balance sheet, TFI can make more acquisitions and its shares cheap at 15x earnings.

FirstService (FSV TSX)
FirstService is a provider of outsourced property services including residential management, home renovation, and property restoration. FirstService’s strategy is to build up a strong brand in fragmented markets to gain market share by winning new business and making acquisitions.  As it grows larger, it can provide its customers with better pricing and stronger services. Even though it has had terrific success, FirstService still has a small market share in North America and has decades of growth ahead.  

Waste Connections (WCN TSX)
Waste Connections is one of the largest providers of waste collection, disposal, recycling, and landfill services in North America with a focus on smaller, exclusive cities where it can earn higher returns. Large, vertically-integrated players such as Waste Connections will gain share in the future given their ability to invest in technology in the face of ever-increasing environmental regulations. We believe Waste Connections’ strong culture and focus on employee safety is a competitive advantage especially in tight labor markets. We expect Waste Connections to continue making acquisitions and repurchasing stock.
 

 
PAST PICKS: April 1, 2021

PayPal (PYPL NASD)

• Then: $247.54
• Now: $106.98
• Return: -57%
• Total Return: -57%

Netflix (NFLX NASD)

• Then: $539.42
• Now: $383.20
• Return: -29%
• Total Return: -29%

TMX Group (X TSX)

• Then: $133.83
• Now: $130.22
• Return: -2%
• Total Return: 0.4% 

Total Return Average: -29%