Insights from Mark Schmehl, Portfolio Manager at Fidelity Investments
Mark joined Fidelity in 1999, he manages Fidelity’s Canadian Growth Company fund, Special Situations and Global Innovators. Fundamentally, Mark is looking for positive change. He doesn’t care if a company is hated by everyone, or way over valued at 200x earnings (~17 is ‘normal’) or if the company is even profitable at all. He pokes and prods and checks in with staff to see if things are getting better or worse for the company. In recent years this has expanded to include the environmental friendliness of companies because investors are more and more commonly rewarding good corporate behavior. Mark is happy to not own oil, he says it is in secular decline with too much excess capacity and that while it could have one more buying opportunity that it will be impossible to time. This is of course a risk for the Canadian economy.
Some of the points Mark made in a recent interview include:
- The US election doesn’t matter.
- Paper will continue to falter, and gold will benefit.
- The market is strong, and he doesn’t see why it should falter.
- climate change is hard to fight, and there is no money in it yet, but there will be.
This is a man who we hold in very high esteem. When he makes a statement, we listen, and we have only ever regretted not trusting him with more money.
Insights from David Wolf, Portfolio Manager at Fidelity Investments
Before being employed by Fidelity, David Wolf worked as adviser to the governor of the bank of Canada, Mark Carney, and is a great resource for macroeconomics. He is part of Fidelity’s Asset Allocation team and helps to manage many of Fidelity’s funds including the Monthly Income funds, NorthStar funds, portfolio funds and Dividend fund.
To help frame the extent of the COVID-related debt David points out that in 1990 debt to GDP ratio was 250%, in 2019 it was 350%, and 2020 it’s grown to 450%. These are unprecedented levels of debt relative to earnings in Canada (easily overlooked, the low interest rates do help make this fed-debt more manageable, but not necessarily sustainable.)
When asked how we get out of this new covid-related federal debt burden, David said the same thing we said 3 months ago, there are basically 3 ways out: BIG Growth in GDP (unlikely,) Default on debts (unlikely,) or inflate our way out (most likely.)
He says inflation is a matter of when, not if. Traditional 60/40 portfolio will not work as well as a result. David and his team are buying Inflation linked bonds (TIPS) to help hedge inflation risk. Consistent with almost all portfolio managers, he says US election is a ‘non-event.’
Insights from David Fingold, Vice President & Senior Portfolio Manager at Dynamic Funds
David Fingold has over 30 years of business, operational and investment experience, the most recent 18 of which have been with Dynamic Funds. David considers himself to be a value investor similar to Warren Buffet.
David’s ‘value’ stocks are those he considers a bargain not just for their reoccurring / past revenue, but for future / projected revenues as well.
This method has served David and his investors extremely well the last 5 years. David often quotes Ned Goodman for saying “I’m an optimist because I’ve never met a rich pessimist.” And this is indicative of that same mentality. Things may not currently be optimal, but it is when conditions improve that investors make money.
At the office
We have been very fortunate in the past to be able to meet face to face with the portfolio managers. Although there have been no conferences or face to face events this year due to COVID, we have been attending webcasts, conference calls and other live events online.
The COVID limitations have in fact increased the amount of continuing education we are undertaking.
Our ongoing research and attention to the markets has not changed. We would welcome these as permanent changes if it meant reduced costs to clients on the fund MER side (although the difference would be marginal.)
QUOTES
Risk comes from not knowing what you are doing.
Don’t fire until you see the whites of their eyes.
Our acts can be no wiser than our thoughts.
Unlimited power in the hands of limited people always leads to cruelty.
DISCLAIMER: This newsletter contains general information only and is intended for informational and educational purposes provided to the clients of Anne Marie Dryden & Hans Bischoff. While information contained in this newsletter is believed to be reliable and accurate at the time of printing, Anne Marie Dryden & Hans Bischoff do not guarantee, represent or warrant that the information contained in this newsletter is accurate, complete, reliable, verified or error-free. This newsletter should not be taken or relied upon as providing legal, accounting or tax advice. You should obtain your own personal and independent professional advice, from your lawyer and/or accountant, to take into account your particular circumstances. Commissions, trailing commissions, management fees and expenses all may be associated with ETF & mutual fund investments. The indicated rates of return are the historical annual compounded total returns including changes in unit value and reinvestment of all distributions and do not take into account sales, redemption, distribution or optional charges or income taxes payable by any security holder that would have reduced returns. ETF’s & Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. Please read the prospectus before investing. The views expressed in this message are not necessarily the views of Investia Financial. Exchange traded funds, mutual funds and exempt market products are offered through Investia Financial Services Inc.
