I am very proud of our
ABC Funds. I grew them from virtually nothing. I've
nurtured the three funds from their start. Since
inception we have experienced considerable success, however,
there have been some pretty dry stretches over the past 14
years. None was more difficult than the July
1998-March 2000 period.
During this time high
technology ran wild and many fundamental value investors,
including myself, were left in a massive quandary.
Everything I learned in six years of university including
two years at the prestigious Wharton School, teachings by a
Nobel prize-winning professor, Harry Markowitz, the
three-year Chartered Financial Analyst program, 26 years of
battle-hardened work experience and a common sense, rational
approach to investments went for naught. It didn't matter.
No one cared to look at
balance sheets, income statements or annual reports. And
quite frankly you didn't have to. Cocktail party
chatter, rumours and gossip ensured the enormous success of
any high tech initial public offering. Huge sums of
money were made on paper by investors who simply flipped
IPOs or rode up an overly promoted tech stock. Hype
was in. Gargantuan fortunes were made on paper by
financially illiterate and neophyte investors. The
laws of nature, Sir Isaac Newton and common sense were
rejected. Investors were hallucinating. It seemed to
many that trees, indeed, did grow to the sky.
Savvy value investors
such as Warren Buffett were criticized as being out of touch
and behind the times. In fact, we, at ABC, were
severely admonished for not buying Nortel and other high
technology shares. We lost numerous clients.
However, we stuck to our value style and disciplines.
We believed that this was exactly what our investors
expected us to do, just as we had promised them in our ABC
offering memorandum.
To make a long story
short, the laws of gravity have not been refuted.
Starry-eyed investors have been chastised. Discipline,
focus and fundamental value investing are now in favour.
Reality is back. The mania is over. Investors now
realize that capable investment professionals can and do
provide value-added to the investment management process.
Rest assured that we will
continue to abide by our style and investment discipline. We
will remain focussed on our value hunt for fundamentally
undervalued common shares. But more importantly, our
focus is on the long-term. In fact, look at the
long-term. Our ten-year performance track record of
our ABC Fundamental-Value Fund is a compounded annual rate
of return of almost 20%. This return incorporates both
the good and bad stretches over the past decade, including
that tough 1998-2000 period. Incidentally, I am told
that this is the best ten-year performance record of any
mutual fund in Canada.
Summing up, I believe
that looking long-term is key to financial success.
Manias, frivolous trends and the herd instinct go in and out
of style. I honestly believe that looking long-term
and focussing on solid fundamental disciplines will continue
to provide for superior long-term investment performance.
