Ian Cook, CFA, QV Investors:
“In our portfolios this morning, we are holding steady in the wake of the Brexit news. We have identified levels where we would buy our most directly exposed businesses to the Brexit. For businesses we were buying yesterday, we are buying today. The fundamentals supporting these businesses have not changed overnight. It will take several years for Britain and the EU to hammer out new trade agreements and it is in both parties best interest to work effectively together. This morning’s wild market swings reflect the reality that more money is being risked despite little appetite for it, increasing the need for some to react hastily. Nothing has become something”
Christie Rose, CFA, Vice President, Portfolio Manager, Guardian Capital Advisors:
“Given the strength of the market close yesterday, the vote of Britain to leave the European Union is a surprise. We are invested in assets that can weather volatility. Our portfolio strategy has been more skewed towards Canada as we have been positioned towards the recovery in the oil markets and the benefits to Canadian assets with this recovery. Since February oil has moved from the lows of $27US to the recent highs of $49US. The noise is now coming from international markets due to uncertainty caused by Britain leaving the European Union. This will also offer up some opportunity. The opportunity is not immediately identifiable, in the short term the opportunity is hidden in the noise of the uncertainty. The important key notes are that this exit will not happen overnight. In fact it is years away. All the vote has done is clarified that in the future, with no hard date attached, Britain will leave the European Union.”
David Atkins, CFA, Portfolio Manger, Value Partners Investments:
“ On June 23, the UK voted in a referendum to either leave or remain in the European Union (EU) and is commonly referred to as ‘Brexit’. The leave surprisingly won by 52% to 48%. The European Union has been striving for free trade and freedom of movement for decades; however, Britain’s actions are obviously protectionist. Britain is the world’s fifth largest economy, fifth largest military, and was important member of the EU. The EU has just become weaker without Britain’s voice and there are new concerns that other countries may follow their path.
The Brexit vote has caused uncertainty and fear amongst politicians and investors alike. The market hates uncertainty, and over the previous two days of trading the global markets have reacted negatively. We expect the markets’ negative reaction to be a short-term one. We will continue to monitor these events as they unfold.
The focus for the VPI Canadian Equity Pool remains the same; to manage the Pool’s $540 million in assets to help achieve unitholders’ financial goals. Therefore, we will remain focused on what matters: the profitability of the businesses we own, and the opportunities that the market may present. We know what we own and we will take advantage of others who do not. The VPI Canadian Equity Pool was not immune to the markets’ pessimism. Although stock prices have fallen, there is no evidence that the profitability of the businesses we have ownership in are going to be materially impacted as a result of the Brexit situation. We have over $55 million in cash to take advantage of this event.
We will purchase more of the businesses we own should the stock prices fall to a level that warrants a greater percentage ownership in the Pool. There are also businesses we would like to own, but not at any price. The price we pay must still provide a reasonable rate of return for investors with a high probability of success. Those stock prices need to fall further. We hope the politicians in the European Union will act ruthlessly, vengefully, and loudly to create more uncertainty and fear in the marketplace. Uncertainty and fear is our opportunity to own great businesses at attractive prices.”
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