Colin Stewart, CEO and portfolio manager at JC Clark Limited

Focus: North American large caps and long/short strategies
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MARKET OUTLOOK
The results of the recent U.S. election are a potentially significant inflection point for U.S. economic policy and growth. While global uncertainties remain (Brexit, populist movements in several European nations, China’s growth outlook), we believe the U.S. economic outlook has improved. Data over recent months has been strengthening and new pro-growth policies will likely improve this trajectory. Rising inflation expectations have led to a significant sell off in bonds and likely signal the end of the multi-decade bond bull market. Despite the recent price movement, we believe U.S. financials still represent compelling value. We continue to focus our efforts primarily on special situations, but are also evaluating opportunities in the depressed healthcare and energy sectors. 

TOP PICKS

FAIRFAX FINANCIAL (FFH.TO)
Most recent purchase in last few days at approximately $630/share. Fairfax is a high quality global property and casualty insurance business. The company is known for its long-term value oriented investment approach and outstanding long-term track record.  Recent results from the insurance business have been very strong with combined ratios in the 91-92 per cent range. A sharp sell-off in the share price recently has created an opportunity to purchase the shares at a small premium to book value. 

WELLS FARGO (WFC.N)
Most recent purchase in last few days at approximately $51/share. Wells Fargo is a large U.S. bank that has underperformed its peer group recently due to a scandal surrounding customer account openings. Like its peers, Wells Fargo stands to materially benefit from rising interest rates, a steepening yield curve, and a potentially lower U.S. tax rate. Despite the recent upward move in its share price, WFC’s valuation is still historically low at 1.4x Book Value and only 12.8x earnings. If net interest margins normalize, there is likely 50 per cent or more upside to earnings per share in the next few years. 

STORAGE VAULT (SVI.V)
Most recent purchase a couple of months at approximately $1.20/share. Storage Vault is one the largest owners/operators of public storage units in Canada with approximately 47 locations and 18,000 units (due to a recent acquisition). The long term dynamics of the industry are excellent and will continue to improve as living space and storage space in urban areas continues to shrink. Attractive industry characteristics include — high barriers to entry, economies of scale, minimal competition due to the local nature of the business, and high switching costs. Self-storage density is also far lower in Canada relative to the United States which should lead to high overall industry growth rates for several years to come.
 

DISCLOSURE PERSONAL FAMILY PORTFOLIO/FUND
  FFH N N Y
 WFC N N Y
 SVI N N Y


PAST PICKS: JANUARY 28, 2016

BRICK BREWING (BRB.TO)

  • Then: $1.94
  • Now: $3.12
  • Return: +60.82%
  • TR: +63.08%

POLLARD BANKNOTE (PBL.TO)

  • Then: $7.45
  • Now: $8.16
  • Return: +9.53%
  • TR: +10.77%

JP MORGAN (JPM.N)

  • Then: $57.28
  • Now: $81.79
  • Return: +42.78%
  • TR: +46.02%

TOTAL RETURN AVERAGE: +39.95%

DISCLOSURE PERSONAL FAMILY PORTFOLIO/FUND
BRB N N Y
PBL N N Y
JPM N N Y


FUND PROFILE: JC CLARK PRESERVATION TRUST (CLASS B)

PERFORMANCE AS OF: OCTOBER 2016

  • 1 year: Fund 5.48%, Index* 5.76%
  • 3 year: Fund 4.54%, Index* 5.05%
  • 5 year: Fund 7.17%, Index* 7.50%

* Index: S&P500; S&P/TSX
* reinvested dividends/net of fees


WEBSITE www.jcclark.com