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How I Assess Public Companies for Investment Purposes

October 20, 2019 in Equities, Idea Appraisal, Letters

This article is excerpted from a letter authored by Samer Hakoura, principal at Alphyn Capital Management, based in New York.

I look for great public companies that have the power to endure, with long runways to grow through reinvesting cash flows at high rates of return, run by talented and aligned operators. This unpacks as follows.

At its most fundamental level, investing is about paying an amount of money today with the expectation of receiving a future stream of cash flows who’s present value, when discounted at an appropriate rate, exceeds the amount paid today. The greater the difference, the higher the Margin of Safety and the better the profit. Very basic, but I think the point frequently gets lost in unnecessary complexity, especially when prices react so vigorously to general economic news and quarterly results.

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Intelligent Cloning: Evaluating Allison Transmission

October 15, 2019 in Equities, Idea Generation, Ideas, Letters, Quantitative

This quarterly member publication is authored by MOI Global contributor and Zurich Project participant Peter Coenen, a value investor based in the Netherlands.

“The basic reason for the cyclicality in our world is the involvement of humans. Mechanical things can go in a straight line. Time moves ahead continuously. So can a machine when it’s adequately powered. But processes in fields like history and economics involve people, and when people are involved, the results are variable and cyclical. The main reason for this, I think, is that people are emotional and inconsistent, not steady and clinical.” –Howard Marks.

Recently, Howard Marks published a book, entitled Mastering the Market Cycle. Carl Icahn wrote on the back cover of the book: “If you’re uncertain as to wether there will be a correction in the market, or if you think there’s no reason to worry because this time it’s different, you have to read this book before you make a move.”

In this edition of Intelligent Cloning we will reevaluate Allison Transmission, one of the consitituents of the Intelligent Cloning Portfolio, and look at the long-term performance of this company through a different lens.

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Investors and Progress

October 11, 2019 in Commentary, Equities, Featured, Ideas, Letters

This article is excerpted from a letter by MOI Global instructor Daniel Gladiš, chief executive officer of Vltava Fund, based in the Czech Republic.

This summer, I had an opportunity to visit two places the names of which almost rhyme (and in fact their names in Czech differ by just one letter): Japan and Lapland. Although I had been in Lapland previously, this was the first time Japan found its way into my travel plans, and it was the 75th country I had visited. Wherever I travel, I always look at the world in part through my investing eyes. It is an aspect of my job conditioning.

My notion of an ideal vacation always combines the outdoors and physical activity, even though I am also interested in the cultures and histories of the places and countries I visit. It was in pursuit of just such interest that I was drawn to the Arktikum museum in Rovaniemi, Finland. There, I was immensely impressed by that part of the expositions comparing the lives of the local inhabitants from 100 years ago and today. A hundred years is a very short time in the development of a society, and it was incredible to see the enormous progress in the way of life that had occurred over that time.

A couple weeks later, as I was standing in the Edo-Tokyo Museum, I had the exact same feeling. Life in Japan is very different today than it was 100 years ago. Once again, I realized that people in general tend to underestimate the importance and enormity of long-term development and at the same time tend to overestimate the significance of short-term events. We all reminisce nostalgically about past times when things were simpler and more pleasant, but perhaps that is just an expression of our unfulfillable yearning to be young again.

Would we really want, for example, to go back 100 years? It would be an immense step down in our standard of living. We would need to reconcile ourselves, for example, with the nonexistence of today’s practically indispensable medications and a much poorer level of medical care. We would have to get used to the fact that meat would not be a part of our diets that is automatically and easily obtainable, that lives would generally be shorter, and that more newborns would not survive to school age. We would have to forget about the possibility of traveling easily and at will from place to place, forget about education’s being accessible to everyone, get used to the occurrence of genuine poverty, and so on. It would probably also mean a step back in terms of pension security, general public safety, higher crime rates, fewer human rights, and the nonexistence of most public services.

If we truly had the choice, most people would not want to go back. Life today is incomparably better than it was 100 years ago. When we focus on facts, we quickly find out that the world is many times better off today than we think it is and, moreover, that it still continues rapidly to improve (as a reference, I can recommend the excellent book Factfulness by Hans Rosling). Things are moving forward generally, even though they do so more rapidly for some people at some places and more slowly for other people in other places, which is why we can find various stages of development in various parts of the world.

The average European today has a materially much better life than did even the richest of Europeans 100 years ago. My grandparents’ standard of living was lower than that of my parents. My parents’ standard of living was lower than that of my generation, and my generation’s standard of living lags behind that of my children’s generation.

Investors and progress, part 1

Why am I writing about all of this? There are two reasons. First, I want to describe briefly what lessons an investor may learn from these things. Second, I want to describe how we as investors contribute to the progress of society as a whole.

I always say that one can learn a lot just by looking around oneself, seeing how the world works as well as how people perceive it. The way people perceive the world is then reflected in how investors (a subset of people) perceive the events on the capital markets (a subset of the world). The aforementioned tendency to overestimate short-term events and underestimate the importance of long-term trends is very strongly demonstrated in both cases. (Finance theory even has a name for this: hyperbolic discounting.)

On the one hand, there are the difficult-to-deny facts of long-term positive development in the society, general progress, and overall growth of wealth and living standards. It is very, very probable that this trend will continue. By incorporating this into their thinking, long-term investors will have latched onto something that they can for the most part rely upon.

On the other hand, there is day-to-day normal life full of events, twists, and seemingly crucial changes. In practice, most investors focus on these things, even though the future will very probably confirm that most of this information is of no consequence whatsoever in the long term. The study of history, including financial history, is an activity wherein an analyst sits in a comfortable chair, pointing a finger to past events that were key to further development. It is a bit like filling in a lottery ticket after the winning numbers already have been drawn.

If we as investors were to profit from short-term events, we would have to be able to recognize the truly fundamental ones in real time as they are happening. This is practically impossible, and even the effort to do so might bring very negative results, because in most cases it will transpire that one has overreacted to something that in the end will have been of no practical importance. We find it is much better to take the approach of betting on long-term expected developments in society.

Investors and progress, part 2

As investors, we are not merely passive users of the growth in society’s wealth but also actively contribute to it. A modern, well-functioning economy and society cannot get by today without a well-functioning capital market. Banks and insurance companies, for example, which are two basic and indispensable components of society, probably could not operate effectively at all without a well-working capital market.

The capital market is very complex and diverse. In its most rudimentary form, however, it has only two basic functions: It is used by companies to acquire capital for their businesses (the primary market), and it allows investors to trade with the resulting shares (the secondary market). A well-functioning capital market, then, enables not only the use of capital for commerce and value creation but also allows for capital to be used as efficiently as possible by enabling it to flow easily from one place to another based upon how attractive are the opportunities at a given time and place.

For the capital market to work well and efficiently and for it to allocate capital at low costs, there must exist a sizeable number of entities of various types. Vltava Fund is one of those entities. Our role in the overall system is twofold: we act as intermediaries and analysts. We collect free capital from investors who want to invest and then analyse the individual investment opportunities to determine those into which we invest the collected capital. Even though we are just a tiny cog in the gigantic global markets machine, I am very proud of the work we do and how all of us associated with investing in Vltava Fund contribute collectively to the general progress, growth of wealth, and betterment of society.

Our combined money helps make possible the operation of companies in such diverse and necessary sectors as health care, insurance, finance, transportation, technologies, communication, defence, construction, and automotive manufacturing. These companies provide jobs to people, bring their products and services to market, contribute through their innovations and research to the development of society, and pay returns to us, the shareholders.

Every day we try to learn something new and then reflect the acquired knowledge and experience in our common investments. The world is in fact much better off than we often think it is, and it will continue progressively to develop. The world will be better and better, with or without us. But as long as we are here, we want to play an active part.

Changes in the portfolio

There were no significant changes in our fund’s portfolio during the past quarter. We hold shares in 16 different companies. Ten of these will probably achieve the highest profits in their histories. The remaining six companies are prospering as well, and it is only a matter of time before their profits will exceed their heretofore highest levels. I know that many of you follow on your own how our companies are doing and so this is nothing new for you. Another question is whether or not these stocks are low-priced. The fact that a company does well – or even better than ever before – does not indicate whether or not its stock is low-priced. Only examining its stock price in the context of its fundamental value may give us a clue. So let us take a look at three of our key investments.

Berkshire Hathaway

Berkshire has been our largest investment for a long time already. In the time we have been holding it, the share price has almost tripled. At the moment, however, Berkshire shares are priced at their lowest for as long as we have been holding them. Berkshire is one of the largest companies in the world and also one of the most successful (if not the most successful of all). I am therefore surprised how little people understand what kind of business Berkshire actually does. I still keep meeting people who think that Berkshire is a kind of investment fund managed by Warren Buffett.

Berkshire is, in fact, a well-conceived and well-constructed conglomerate the whole of which is worth more than the sum of its parts. The business risk of Berkshire is by far the lowest among all large companies in the world. What’s more, the market is completely overlooking its unlimited long-term growth possibilities. In the long term, the Berkshire stock probably will outperform the American stock market index, and especially so in case of stagnating or declining markets. If I were to invest all my money into a single stock and not be able to change my decision for the next 10 years, I would choose Berkshire without any hesitation.

Berkshire is currently trading at nearly its historically lowest price-to-book multiple even though the fundamental value is steadily and increasingly rising above that book value as the company itself and its businesses develop over time. Because a picture is worth a thousand words, here is an update of a chart well known to you showing the price and value of a Berkshire share.

Sberbank

I bought Sberbank shares for the first time in 1997 on my own account. That means I have been continuously following the company for more than 22 years. It is incredible how the bank has developed over time, and in particular since 2007 under the leadership of Herman Gref. In terms of absolute profit, Sberbank is currently one of the world’s most profitable companies. By the way, Sberbank’s annual profit alone is on the level of Deutsche Bank’s market capitalisation.

I do not know any other large global bank with a similarly dominant and unwavering position as is that of Sberbank in Russia. Sberbank is surrounded by a very deep and broad moat which it continuously and successfully deepens. Although this is perhaps difficult to imagine in the case of a Russian bank, Sberbank is also a leading bank in its use of technologies. If you are interested, I recommend you read Sberbank’s presentation from last year and you will be surprised about all the technologies the bank can use and develop.

Among the world’s 100 largest banks (excluding Chinese ones), Sberbank ranks very low in terms of P/E and P/B multiples and leverage (asset/equity ratio) and among the tops in terms of ROE, ROA, dividend yield and cost/income ratio. Even though our return on Sberbank shares already exceeds 60%, the current valuation at 1.3 times book value and ROE of 24% mean it is still a very cheap stock. Its P/E of 5.5 and dividend yield of 7% only reinforce this. With ROE of 24%, the book value doubles every three years (before dividend payments).

BMW

We have been expecting more from our investment into BMW. To date, our return is around zero. Nevertheless, our view on this stock remains so far unchanged. Its current valuation indicates, in our opinion, the considerable irrationality occasionally seen in stock markets. BMW broke its own record last year in the number of cars sold, and this year will probably be another record-breaker. Nevertheless, the markets price BMW shares as if the company were facing life-or-death challenges. Let’s look at the numbers together.

BMW can be divided into two parts: BMW Bank and BMW Auto. BMW Bank can be valued like any ordinary bank on the basis of its ROE and book value. With ROE around 15%, BMW Bank deserves a valuation of at least 1.5 times book value. (ROEs of Western European banks are scarcely half that.) So, we come roughly to EUR 23 billion. BMW Auto has net cash (meaning the company’s total cash after subtracting all debts) of about EUR 15 billion. The value of BMW Bank + net cash together thus comes to EUR 38 billion. BMW has 657 million shares in issue, so EUR 38 billion means EUR 57 per share.

We own BMW preferred shares, which are priced at EUR 50 per share. By buying these shares, we get BMW Bank and the net cash in the amount of EUR 57 plus BMW’s whole automotive business, including research and development, manufacturing, distribution and the brand, FOR FREE! Forbes magazine estimates that the BMW brand is worth EUR 30 billion, and the book value of BMW Auto is EUR 58 billion. BMW Auto’s net income for the past 3 years came to EUR 15.7 billion, and the average return on capital employed (ROCE) of the automotive segment was an incredible 67%. All this we get for free in buying the stock. And not even for free but for even less than free – in fact minus EUR 7 per share. If somebody wants to give us something very valuable for free and then add in some extra money for us, it is hard to say no, is it not?

The BMW share’s current market valuation is close to that seen during 2008–2009, in the middle of the Great Financial Crisis. Even if we were on the brink of a similar crisis, which we probably are not, the share price already provides for that. Today, we are in the declining phase of the economic cycle. So far as global automotive sales are concerned, however, the overall decline will probably not be so striking as 10 years ago because the accumulated excesses in the economy were much greater at that time than they are today. BMW’s preferred stock has a dividend yield of 7%. In hedging the euro, in which currency the stock is traded, we make 2% a year. This puts the total annual yield at 9%. Considering all these parameters, BMW shares are a good investment even if the price will never rise in the future. There is so much pessimism built into the share price today.

In a private transaction, such a price would be unimaginable. Only stock markets sometimes offer such opportunities. Berkshire, Sberbank and BMW together make up a little bit more than 30% of our portfolio. In their own ways, these unique and very profitable companies are valued as if their businesses could suddenly begin to wither away for no foreseeable reason. More probably, however, these companies will continue to do very well. In the cases of our other stocks, we could present similar arguments. The conclusion would be the same. The stocks we own are generally very underpriced. In looking at their valuations, the only reasonable response that comes to our minds is to buy as much as possible and then just sit back and wait. The most difficult part of this is the “sit back and wait”. I assume we can agree on that. As Warren Buffett puts it: “The stock market is a device for transferring money from the impatient to the patient.” We want to be on the side of the patient ones in the end!

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Disclaimer: Our projections and estimates are based on a thorough analysis. Yet they may be and sometimes will be wrong. Do not rely on them and take your own views into consideration when making your investment choices. Estimating the intrinsic value of the share necessarily contains elements of subjectivity and may prove to be too optimistic or too pessimistic. Long-term convergence of the stock price and its intrinsic value is likely, but not guaranteed. This document expresses the opinion of the author as at the time it was written and is intended exclusively for promotional purposes. The investor should base his or her investment decision on consideration of comprehensive information about the Fund. Only a qualified investor pursuant to § 272 of Act No. 240/2013 Coll. may become a shareholder of the Fund. Persons who are not qualified investors pursuant to the aforementioned provision of the Act shall not be allowed to invest. The value of an investment may increase and decrease. Neither return of the amount originally invested nor increase in the value of such investment is guaranteed. The Fund’s past performance is not a reliable indicator of future investment returns. The information contained in this letter to shareholders may include statements that, to the extent they are not recitations of historical fact, constitute forward-looking statements within the meaning of applicable securities legislation. Forward-looking statements may include financial and other projections, as well as statements regarding our future plans, objectives or financial performance, or the estimates underlying any of the foregoing. Any such forward-looking statements are based on assumptions and analyses made by the Fund based upon its experience and perception of historical trends, current conditions and expected future developments, as well as other factors we believe are appropriate in the given circumstances. However, whether actual results and developments will conform to our expectations and predictions is subject to a number of risks, assumptions and uncertainties. In evaluating forward-looking statements, readers should specifically consider the various factors which could cause actual events or results to differ materially from those contained in such statements. Unless otherwise required by applicable securities laws, we do not intend, nor do we undertake any obligation, to update or revise any forward-looking statements to reflect subsequent information, events, results or circumstances or otherwise. Before subscribing, prospective investors are urged to seek independent professional advice as regards both Maltese and any foreign legislation applicable to the acquisition, holding and repurchase of shares in the Fund as well as payments to the shareholders. The shares of the Fund have not been and will not be registered under the United States Securities Act of 1933, as amended (the “1933 Act”) or under any state securities law. The Fund is not a registered investment company under the United States Investment Company Act of 1940 (the “1940 Act”). The Fund is registered with the Czech National Bank as a foreign alternative investment fund for offer only to qualified investors (not including European social entrepreneurship funds and European venture capital funds) and managed by an alternative investment fund manager. Investment returns for the individual investments are not audited, are stated in approximate amounts, and may include dividends and options.

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The Third-Generation Curse: Impatience vs. Patrimony-Building

October 10, 2019 in Letters

This article is authored by Francois Sicart, co-founder and general partner of Sicart Associates, based in New York.

There is a famous proverb in the United States: “From shirtsleeves to shirtsleeves in three generations.” Interestingly, many diverse nations have the equivalent saying: “Rice paddies to rice paddies in three generations” in Japan; “Clogs to clogs is only three generations” in England; “Wealth never survives three generations” in China; “The father buys, the son builds, the grandchild sells, and his son begs” in Scotland: these are just a few colorful examples.

In more than forty years taking care of families and their patrimonies, I have become convinced that all families have clear, often predictable, financial winners and losers — and that losers often belong to the third generation. Fortunately, not all members of that generation are necessarily doomed to take that role.

In western developed nations, we tend to believe that winners and losers are determined by social and cultural factors. But it seems to me that to be so universal, the idea of a third-generation “curse” must be more deeply rooted in human nature itself.

Missing the Incentives of the First Generation

First-generation fortune builders usually had an original, often disruptive idea. Some were immigrants (as so often in the United States) and had to surmount the barriers and prejudices associated with their origins. Many simply did things differently, either in their neighborhood or in their industry. But as a rule, most founders of multi-generational fortunes surmounted significant adverse odds. Their overriding incentive was to survive this adversity and, willingly or not, they succeeded by being different. Following generations, in contrast, were eager not to differentiate too much from their friends and neighbors.

Guardians of the Temple

Members of the second generation were often close enough to the first-generation creators of the family fortune to realize that they might not possess the entrepreneurial talent, the single-minded drive to work and fight for an overriding goal. Or possibly the conditions that had enabled the building of the original fortune were no longer so favorable. Instead, the second generation believed their primary responsibility was to preserve the patrimony that was left in their custody, for the use of future generations.

That in itself is a greater challenge than is generally realized. Years ago, a client member of a second generation instructed me, “All I want is to leave my two sons a fortune equivalent to what I received, after taxes and the erosion in purchasing power due to inflation.” When I attempted to calculate the extent of the damage imposed by 40% inheritance taxes and 5% annual inflation, $100 would only be worth $15 in purchasing power for each son after 15 years. If my memory serves me well, to achieve my client’s goal would have required an annual investment return of 13.8%!

It’s well recognized that the main psychological motivations for making money (i.e.,investing) are greed and fear. With the challenging responsibilities toward future generations that had been left on their shoulders, fear of losing the family’s presumably irreplaceable patrimony, or letting it erode, tend to be the main psychological driver of the second generation.

Impatience and a Sense of Entitlement Before Responsibility

As a rule, many members of the third generation lack the single-minded drive of the first generation or the sense of historical responsibility that characterized the second generation. Its members feel that the family fortune has been built and preserved for them and that they are, unquestionably and without restriction, entitled to it. And, though they may not acknowledge it, these inheritors have usually had a comfortable youth and adolescence, so they are not as motivated as their predecessors to work harder than most of their peers for what they want.

Part of the problem is that the newcomers view their predecessors through the prism of these generations’ lifestyles rather than recognizing the sense of purpose, hard work, and even sacrifice that made those lifestyles possible. An additional factor is that in recent decades life expectancies have been steadily increasing in most of the world. Generations now tend to last longer, as does their control of family patrimonies. Not surprisingly, third-generation members often become impatient to assume the privileges, if not always the responsibilities, that they perceive previous generations to have effortlessly enjoyed.

A Character Fault: FOMO

One of the greatest handicaps in investing successfully for the long term is impatience, most often amplified by FOMO (Fear Of Missing Out).

Clearly, when the proverbs cited in this paper’s introduction became popular, modern mass media, 24-hour business-news TV channels and, of course, the Internet did not exist. But, in my mind, these recently-developed technologies shape opinions more uniformly than in the days when personal experience counteracted second-hand news distribution. The newest generations are more likely to behave as a crowd, with all the excesses and limitations that crowd psychology warns us against.

Here, I speak from personal experience — taking into account all the compliance restrictions meant to prevent the selective use of examples and other performance-embellishing gimmicks. So I will resort to generalities implying no specific mention of past performance (which, in any case and as the traditional disclaimer reminds us, is no guarantee of future performance).

I recently reviewed the performances of several accounts that I had managed for 30-plus years in a style that evolved marginally over that period but could be described as “contrarian investing disciplined by a strong value filter.”

The lessons I drew from that examination were:

  • Value investing and/or significant cash reserves tend to yield performance that is better than the leading stock-market indices during down markets, but only marginally. In traditional bear markets, the invested portion of portfolios – even if selected along value criteria – still loses “some” value.
  • The big difference comes from having maximum opportunities after markets have had big declines. Histories of financial markets often feature anecdotes about operators who made a fortune by buying aggressively at or around the bottoms of major market declines. Often omitted from the narrative is the question of where the money to invest came from. The answer is that investors had cash before these big declines – most often because they refused to participate in the preceding euphoria or complacency.
  • The problem with impatience and FOMO (reminder: Fear Of Missing Out) is that they amplify and extend momentum moves: the more markets keep going up, the more followers feel they are missing something by not participating. As a result, more investors want to jump on the bandwagon, at ever higher prices. This is how speculative bubbles form, and with diminishing fundamentals to support rising prices, it is hard to determine when they will burst. But burst they always do.

The last ten years have represented one of the longest and most powerful momentum episodes in my memory, exaggerated by the aggressive policies of most central banks (quantitative easing and, eventually, an unprecedented $17 trillion of negative interest-rate lending worldwide).

When bankers and governments pay investors to borrow money, the notion of risk disappears, and the idea that making money is easy gains broad acceptance. As a result, the FOMO bug has spread fast and wide in recent years, promising to bring what it has always done in the past: what I referred to in a previous paper as a Minsky Moment, when the markets’ excesses and increased risk-taking are corrected by a painful return to sanity.

Of course, third-generation inheritors have been the most vulnerable to the FOMO epidemic. But only witches and wizards can reverse a curse. Wealth managers are left to hope that those generational members who have escaped the FOMO infection will allow them to preserve some of the family fortunes.

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Disclosure: This article is not intended to be a client‐specific suitability analysis or recommendation, an offer to participate in any investment, or a recommendation to buy, hold or sell securities. Do not use this report as the sole basis for investment decisions. Do not select an asset class or investment product based on performance alone. Consider all relevant information, including your existing portfolio, investment objectives, risk tolerance, liquidity needs and investment time horizon. This report is for general informational purposes only and is not intended to predict or guarantee the future performance of any individual security, market sector or the markets generally.

Keith Smith of Bonhoeffer Fund Discusses His Investment Philosophy

October 9, 2019 in Audio, Equities, Interviews, Transcripts

We had the pleasure of speaking with MOI Global instructor Keith Smith, manager of the Bonhoeffer Fund, about his investment philosophy.

Keith has presented on several occasions at MOI Global online conferences, including on logistics providers in 2017, compound mispricings in moated businesses in 2018, and bond-like equity securities in 2019.

This interview is available exclusively to members of MOI Global.

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About Keith Smith:

Keith is the fund manager and brings over 20 years of valuation experience to the Bonhoeffer Fund. He is a director for Enterprise Diversified, Inc (OTC: SYTE). He is a CFA charterholder and received his MBA from UCLA. Keith is the former Managing Director of a valuation firm and his expertise includes corporate transactions, distressed loans, derivatives, and intangible assets. Warren Buffett and Benjamin Graham’s value-oriented approach of pursuing the “fifty-cents on the dollar” opportunities, underpins Keith’s investment strategy. The combination of his experience and track record led Keith to commit most of his investable net worth to the Bonhoeffer Fund model.

About the Bonhoeffer Fund:

The Bonhoeffer Fund is named after the German theologian Dietrich Bonhoeffer, whose opposition to the Nazi regime ultimately led to his execution. He was an inspiration to Martin Luther King, Jr., and the civil rights movement, the anti-communist movement in Eastern Europe during the Cold War, and the anti-Apartheid movement in South Africa.

Highlights from European Investing Summit 2019

October 9, 2019 in Diary, Equities, European Investing Summit, European Investing Summit 2019, Featured, Ideas

We are delighted to bring you the following investment idea highlights from European Investing Summit 2019, held LIVE online from October 3-5.

The idea snapshots below have been provided by the respective instructors or compiled by MOI Global using information provided by the instructors. For the full investment theses, please review the slide presentations and replay the conference sessions.

Please note: This post covers selected sessions only. Browse all sessions.

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Tennis and Speculation — How to Survive a Loser’s Game

October 8, 2019 in Commentary, Equities, Letters

This article is excerpted from a letter by Alain Robitaille, portfolio manager of Robitaille Group at Desjardins in Quebec, Canada.

At the time of writing, we had just watched Bianca Andreescu’s historic victory at the US Open. I saw the match like a record number of Canadians I’m sure, and was able to appreciate the unbelievable precision of both players’ shots. While we were watching, Fanie and I were discussing how difficult it is for an amateur to play tennis. The audience ratings for truly amateur players like me would certainly not be as high, and for good reason! We also learned that the Stornoway Diamond Corp. diamond mine had just filed for creditor protection. This piece of news together with the Canadian tennis player’s exploit reminded me of Charlie Munger and Charles Ellis.

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Disclaimer: None of these returns take management fees into account. This data reflects past performance and is not indicative of future returns. This newsletter may contain statistical data cited from third party sources we believe to be reliable. Desjardins Securities makes no claim regarding the accuracy or completeness of the statistic information obtained, and readers should not rely on it in this respect. Alain Robitaille and Fanie Ouellet are registered as portfolio managers with self-regulatory organizations. In accordance with Investment Industry Regulatory Organization of Canada (IIROC) Rule 1300, they are authorized to make investment decisions and provide advice on securities for managed accounts. With the exception of Alain Robitaille and Fanie Ouellet, no member of the Robitaille Group may exercise any discretionary authority with respect to a client’s account, approve discretionary orders for a managed account or participate in the formulation of investment decisions made on behalf of the holder of the managed account or advice for a managed account. Each of the Desjardins Securities advisors named on the front page of this document or at the beginning of any section of this same document hereby confirms that the recommendations and opinions expressed accurately reflect the personal opinions of the advisors with respect to the company and the securities discussed in this document, as well as any other company or security monitored by the advisor that is mentioned in this document. Desjardins Securities may have previously published other opinions, including ones contrary to those expressed herein. Such opinions reflect the different points of view, assumptions and analysis methods of the advisors who authored them.

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