Vertex Managed Value Portfolio
Vertex Managed Value Portfolio – Matt Wood, Portfolio Manager
Our portfolio has been trending positively while the news flow continues to be decidedly negative. If news flow was predictive of the direction of individual company stocks, investing would be a very simple exercise. What does remain true is that sometimes news flow is predictive of stocks direction and sometimes it is not. Too many people fool themselves into believing that negative news = negative stock prices (or the opposite) or as in the fund’s case that negative news = positive stock prices! Either way, anything in the short term, medium term or long term is largely unpredictable. What remains then for an investor is to find companies trading at values where unpredictable events have less impact on their respective stock prices. This naturally has led us to buy sectors of the economy that investors have either ignored (Property & Casualty) or out of favour (as in Healthcare, US banks and Forest Products) and to avoid sectors where consensus predictions have been very rosy. This stance costs us when investors are very sure of an outcome and stocks in the relevant sectors rise dramatically sucking cash out of every other sector, causing inexpensive stocks to fall further. However again and again, the outcome does not occur as predicted. Just four short years’ ago predictions of “Peak Gas” abounded until excess supply was found in shale deposits. Natural gas is now trading at $3.40 down from $13.55 and it is difficult to find anyone predicting a rise in natural gas today. History never fails to annihilate investors betting on specific outcomes. We certainly would relish if one or more events we are predicting happens, but we’ll do just fine either way. We don’t pay up for a prediction because no one, not even the talking heads on BNN and CNBC knows what’s going to happen tomorrow. In keeping with theme, through no fault of our own, the portfolio went up in November!