Toughing It
Out
When you go in search of
honey
…you must expect to be stung by bees.
Kenneth
Kaunda,
Former President of Zambia |
The past two months have been brutal
for virtually all marketable securities and commodities.
Previously, the stock market, gold, silver, oil and basic
commodities had all experienced spectacular 12-month price
run-ups until about mid-April when the market suddenly
stalled. The months of May and June followed with white-hot
investor greed and bravado melting into utter fear.
A tug of war then erupted between the
forces of optimism and pessimism. Eventually, a growing
investor fear led to a massive buyers’ boycott. The few
buyers of securities were blind-sided by seemingly endless
and very motivated suppliers of common stocks. Looking back,
it is our view that the stock market’s recent weakness was a
long-expected and healthy correction. No market goes
straight up or straight down without a pause or adjustment.
Analogously speaking, just as trees do not grow to the sky,
major common stock rallies, regardless of contemporaneously
bullish sentiments, demand some sort of market correction.
This, we believe, is what is presently occurring after the
past year’s market exuberance.
Naturally, we are trying to adjust to
the present difficult market conditions. We hold to the view
that this period represents an excellent opportunity to
selectively take profits, add new fundamentally undervalued
securities and upgrade our ABC Funds portfolios.
Accordingly, we have been patiently restocking our
investment holdings while adhering to our strict deep-value
analytical disciplines. Although we realize that these
deep-value purchases might be a little early or premature we
intend to patiently abide by our fundamental-value
principles and to “tough it out.” In the context of a 6-12
month time horizon, we believe that these investments should
provide for excellent portfolio returns.
Most encouraging to us, particularly
over the past six months, are the growing number of
takeovers, mergers and acquisitions. These include: Dofasco,
Placer Dome, Hudson Bay Company, Sears Canada, Inco and
Falconbridge. Clearly, the acquisitors are not foolish; they
envision financial opportunity. Furthermore, notwithstanding
these takeovers we continue to believe that it is cheaper to
buy companies trading on the stock market as opposed to
starting an enterprise from scratch. These takeover
developments confirm our investment view that there is, in
fact, value in the marketplace.
In conclusion, we remain unshaken in
our optimism and fundamental convictions. We will continue
to abide by our investment disciplines and intend to tough
it out during this volatile, yet exciting, investment
period.
