An Ernest Opinion

Legendary investor Warren Buffett famously said that his favorite holding period is forever. Our aim at Baskin Wealth Management is to replicate this by owning great businesses managed by skilled & honest CEOs, and then sit back and let these [...]

Last November, shares of Restaurant Brands International, the parent company of Tim Hortons, Burger King, and Popeyes, shot up on the announcement that Patrick Doyle would be the incoming Executive Chairman. The market’s enthusiasm is well founded: Doyle is best known for leading the turnaround of Domino’s Pizza as CEO from 2010 to 2018 with Domino’s Pizza being the #1 performing stock in the S&P 500 during that time.

Last December, Brookfield Corporation (BN) listed its asset management business into an independent company called Brookfield Asset Management (BAM), in essence separating Brookfield’s capital (Brookfield Corporation) from the third-party capital managed by Brookfield. The naming can be confusing, so in this blog, BN will refer to Brookfield Corporation, while BAM refers to Brookfield Asset Management.

In recent years, it has become common for companies to include a section on Environmental, Social, Governance (ESG) during investor calls and presentations. As an example, here is a slide from RioCan explaining their initiatives on ESG: I usually glaze [...]

The recent underperformance of the so-called “FAANG” stocks has led some investors to question whether a strategy of owning these large technology companies remains sound. Ernest outlines why the long term prospects for these companies remains attractive.

Amidst the market volatility, investors sometimes forget that stocks and bonds fundamentally represent sources of capital for business operations. When capital is plentiful and prices are high, it is cheap for companies to invest in growth to open new stores, spend on marketing, hire employees, and make acquisitions by issuing new equity or cheap debt.

On August 23, 2022, TFI International announced a deal to sell its entire US Truckload business (called CFI) to Heartland Express.

If you ask investors why Costco is so dominant, you will likely get answers such as low prices, strong cost control, consumer-friendly returns practices, membership program, and cheap gas, hot dogs, and rotisserie chicken.

A notable feature of the current stock market decline is how disproportionately growth stocks have been impacted. The S&P 500 is down only about 12% year-to-date, while the technology-focused NASDAQ is down about 18%. Apart from Energy (+41%), the top performing sectors are low-growth, dividend-heavy Consumer Staples, and Utilities stocks. This result is not too surprising as high-growth stocks are more impacted by rising interest rates than low-growth stocks.

By now, there is unanimous consensus that inflation is happening and that it is not as transitory as once thought. I normally don't spend time thinking about macroeconomic issues such as future inflation since it is difficult to not only forecast such factors accurately, but even more importantly, have a correct non-consensus macro view that adds value. This is why our investment strategy focuses on company-specific factors such as business quality and capital allocation and why we often say, “We own individual companies, not the market”.

Given the current oil price environment particularly with the geopolitical issues in Russia and Ukraine, it is natural to ask questions about whether an investor should buy energy producers.

An interesting phenomenon about the recent bear market is that it is not uniform. The S&P 500 is down 8% since January 1, 2022, while the technology-heavy NASDAQ Composite is down 12.5% and funds focused on disruptive companies such as the ARK Innovation ETF are down well over 20%. Many “COVID winners” such as Netflix and Peloton that experienced a surge in demand due to global lockdowns have now underperformed the S&P 500 in the two years since the COVID crisis began while others such as Zoom, Shopify, and Roblox are down over 60% from their all-time highs. This is a puzzling result since there is little doubt that these companies had benefitted from COVID and are larger today than they would otherwise be.