Good morning,

As many of you know, I believe maintaining a calm, reasonable investment approach in these clearly unreasonable times is a sound strategy. Investor’s concerns appear justified, as the coronavirus has spread around the globe and therefore the investment fundamentals are less compelling than they had been. On the other hand, equities are also less pricey in the wake of the recent correction. The lower level of the market is creating some opportunities to buy quality stocks with secure dividends at more attractive prices.

Here is just one example:

Alimentation Couche-Tard. In the short term, it will have a lower debt carrying costs (interest rates are down). Secondly, the switching from public transit to personal vehicles could help offset fuel demand impact from work-from-home. It’s worth nothing that in prior periods of sharply lower gas prices - 2009 and 2014/15 - inside store sales rose to +4-6% vs normal growth rate 2-3%. In the long run, it has a real-world electric vehicle R&D lab in Norway. Looking ahead, we can all agree that sales of electric vehicles are likely to accelerate. Couche-Tard already operates in excess of 100 charging stations in Norway, has signed a partnership agreement with multiple manufacturers and is gaining valuable insight into consumer behavior/revenue opportunities associated with top-up charging in that country.

Furthermore, please keep in mind that market decline tend to end in climactic fashion, with the worst day at the end - and that could very have been yesterday. Was it ?

We don’t know.

I’m sensing a peak in the panic from investors. From a friend, a very large Swiss based investment firm had its biggest 1 day outflow in history yesterday from retail clients. Net outflows of over -$1.1bn (note this includes ETFs and stocks), surpassing the previous record of outflows of -$735mm in Feb 2014. Selling was across both single stocks and ETFs, and for the first time since the selloff began this all occurred on massive volume (ETFs experienced the greatest outflows). 

I’m proud to say that we had no clients panicking and selling yesterday. We know that the stock market looks forward and will be moving to the upside well before the trend of the virus infection is heading lower. Eventually, it will be time to put cash to work and really avoid selling anything at this point. How soon you might ask ?

I don’t know.

So we’ll stay prudent and nimble, reassess our stocks & funds and be prepared to go back to our target allocation over time. This is not over and we could very possibly re-test the lows of yesterday. There are still certain moves that are hard to understand, such as gold going down yesterday. So we don’t want to be overly cocky and just charge in. We are still in a public health/financial storm and your portfolios will stand up to the weather. But are looking at various names and sharpening our pencils.

I reiterate that our whole team is here to listen, to talk and to meet with you. We are also happy to reassure any of your friends or family at this time.

Have a great & relaxing weekend,

Charles