Value Library

The following is an excerpt from the ABC Perspective - January 2005 - Pg. 1

2004 has been quite a year. The first ten months were fraught with many economic, political and investment dilemmas. As a result, investors were nervous, risk-averse and fearful of the future. For some, the investment horizon clearly looked like it was the worst of times.

What confronted investors, for instance, was a too close to call November 2nd U.S. presidential election, Middle East turmoil, Iraq, international terrorism, anemic U.S. domestic auto sales, rising interest rates, $50 a barrel of oil, growing U.S. government budget and current account deficits and a plummeting U.S. dollar. Overall, the securities markets, at that time, appeared far too treacherous and stressful for many investors.

In spite of all these very visible negatives, we took a far different and more positive investment approach. Firstly, it was our belief that 2004-2005 North American economic activity would cluster around a 3% or better growth rate. Moreover we believed that both the Canadian and U.S. economies were building a solid economic base to elongate the business cycle to at least 2006-2008. While we fully expected to experience continued security price volatility accompanied with intermittent economic and political uncertainty we were fundamentally optimistic on the North American investment horizon over the next 12 to 18 months. Our strategy was to remain fully invested.

Our optimistic outlook, today, remains unchanged. To us the glass is half full rather than half empty as we are still experiencing “the best of times” of the current economic cycle. Our 2004 investment performance was reflective of our optimistic financial outlook, judicious stock picking and our profound investment conviction despite the all-pervasive uncertainty. In short, we stuck to our guns. However, we went one step further. Our deep-value philosophy was so strong and our optimism so assured that we decided to start our new closed-end ABC North American Deep-Value Fund.

As a measure of my own keen personal and professional commitment to this new undertaking and our bullish market outlook, my family and company, I.A. Michael Investment Counsel Limited undertook to become the new fund’s first investor. We invested over $3 million in the start-up of the ABC North American Deep-Value Fund. With this “skin in the game” and with my family’s significant investment in all four ABC Funds my personal and professional motivation is unequivocal.

As I complete this year-end commentary I would like to thank our loyal clients and friends who have stood by us during the past 16 years. Rest assured we remain fully committed to investment excellence and superior long-term ABC Funds performance.

Irwin A. Michael, CFA