| The Semi-Annual Reports: Part Deux |
Dateline: 09/16/97
We continue this week with a look at the semi-annual reports of two more mutual fund companies.
BPI Financial Corporation manages fifteen mutual funds and one labour-sponsored fund. They are particularly noted for running some very successful small cap funds, the BPI Canadian Small Companies Fund, BPI American Small Companies Fund and the BPI Global Small Companies Fund.
BPI President and CEO, James McGovern, notes in his comments that the economy is "like Goldilocks' favorite porridge, it's not too hot and not too cold."
He discounts the bearish sentiment of some commentators, arguing that "temporary corrections, some dramatic, are an inevitable part of investing in stocks."
In the report's six month review, the analysis takes a Dickensian flavour with its "tale of two economies". "Evidence suggests," says the report, "that the U.S. economy is slowing while Canada's is picking up speed." However, it is too early to tell whether this trend will continue.
This echoes the comments from Dynamic Funds noted last week that Canadian stocks have not performed as well as expected and may surge ahead.
BPI notes that fully a third of the gains in the TSE 300 are due to the five big banks which are heavily weighted in the index. Financial Services was up 27.8%.
The worst performing sector (Surprise! Surprise!) was Gold & Precious Metals, down 26.3%.
BPI concludes that "we can look forward to a low inflation and stable growth environment going forward," both domestically and globally.
One of Canada's newer fund groups, Stone & Company, reports that its investment manager, McLean Budden, "believes that corporate earnings for the TSE 300 companies will increase significantly (for the rest of 1997) and that this trend will continue into 1998."
"With slack still evident in the Canadian economy," the report continues, "the potential for dramatic increases in inflation or interest rates is remote."
In conclusion, the fund managers of the reports I received expect the Canadian economy in particular to do well for the rest of 1997 and 1998. While they acknowledge that a correction may happen soon, maybe even a sharp correction, they expect this to be quickly followed by a resurgence of the bull market. The outlook for small cap funds is particularly bright as they have lagged behind their large cap cousins. Precious metals may make a comeback if central bank sales of gold retreat.
Concurring with their assessment, and given the difficulty of predicting when a correction will happen, I am staying pretty well fully invested, with the mix being about 60% large cap, 10% precious metals, 15% oil and gas and 15% small caps. The large caps are primarily growth oriented. A volatile mix, but fun to chart and watch! (And so far, remarkably successful in spite of big drops in precious metals and small caps.)
Since reading The Warren Buffett Way I have become more and more interested in value investing. I recently picked up a copy of Janet Lowe's Value Investing Made Easy which I will review here in the coming weeks.