No
Shortcuts
I took a course in speed
reading
and was able to read
War and Peace in 20 minutes.
It’s about Russia.
Woody Allen |
Even in the best of times it is not
easy to apply oneself in the stock market. Stock picking,
you see, is not a perfect science since there are many
pitfalls and exceptions to the rules. Ultimately, it has
always been my belief that investment success is largely a
function of hard work, deep-digging research, discipline, a
profound courage of one’s convictions, but above all, the
patience of Job. Clearly, this is not an easy row to hoe nor
a leisurely profession. There are no shortcuts to success.
There are times, in fact, when we, as
contrarians, must zig when the market zags. In the short
run, we may appear to be on the wrong course. Unfortunately,
once an investment manager shifts a multi-million dollar
portfolio in a certain direction, he must live with the
strategy. He cannot swerve to a 180 degree turn since the
sheer size of his investment holdings and the fickleness of
the market make it extremely difficult. In effect, once a
manager aims a portfolio on a certain path, he must
generally live with that decision until the strategy comes
to fruition. Regrettably, nothing ever goes exactly as one
plans, nonetheless, the manager must stick with his earlier
analyses. He is being tested. He must abide by the courage
of his deep convictions. This event, in all candour, is the
guts or true grit of successful portfolio management.
In relation to our ABC Funds 2006
investment strategy we made a decision to focus the five
portfolios toward natural resources, particularly, oil and
gas and base metals. After considerable research and
analysis, we cobbled together a portfolio of deeply
undervalued equities which we were prepared to hold for a
minimum of 6 to 12 months. Today, nine months into this
strategy, our views remain unchanged despite volatile
resource share prices. Along the way, we have been severely
tested by weakening North American economic activity,
fluctuating currencies and commodity prices, uncertain
central bank policies and the sudden meltdown of the hedge
fund, Amaranth Advisors. These series of events have brought
on further extreme market volatility and increased investor
inquiry/scrutiny. As professionals, we offer the following
commentary:
Over the past 20-25 years, we have
experienced similar periods of volatility on at least a
dozen occasions. During those difficulties we have always
stuck to our disciplines and mastered the storms. At all
times we remained vigilant, opportunistic, extremely patient
and looked beyond the valley. With regard to today’s
investment environment and our future direction, I would
like to state, nothing has changed.
Irwin A. Michael, CFA
