The Value Fund returned +5.3% in 2018 net of fees and expenses (or approximately +7.1% gross). We managed to outperform both of our benchmarks in 2018. The S&P/TSX Total Return Index finished down -8.9% for the year. The S&P500 Total Return Index was down -4.4% for the year. Measured in Canadian dollars (the Value Fund’s reporting currency) the S&P500 Total Return was up +3.9% for the year.
There is a concept in cycling that has been adopted by famed value investor Tom Russo that resonates with us – namely the capacity to suffer. There will be times when our prudent value investing approach will be out of step with the markets and we will experience the pain of looking foolish for ignoring expensive and/or poor-quality stocks. But our long-term and patient approach when things aren’t going our way serves us well when panic returns. The ability to endure short-term pain (be it psychological, emotional and/or physical) often leads to long-term rewards. Buffett has often said that temperament is more important than intelligence in investing. Fortunately we were wired a certain way that happens to be helpful in the investing arena.
… Our large bet (6.8% weighting) on Express Scripts (Nasdaq:ESRX) is performing according to plan with the stock up +16.4% since we purchased it in April. Our recent writeup of our investment thesis for Express Scripts can be found in Scorecard #21. Our idea was published in Barron’s and was recently ranked as one of the best performing ideas from the View From The Buyside column. In an expensive market, good ideas are hard to find. But they are out there. It just takes a lot of effort to uncover them.
In our latest newsletter we discuss our Q1 performance along with a recent stock purchase that will be familiar to our long time followers.
One of our arbitrage investment ideas – long Express Scripts (NYSE:ESRX) – was republished by Barron’s earlier this week. Details inside.
… Value Fund holding Novo Nordisk (NYSE:NVO) is the world leader in diabetes care with a global market share of 27% by value (46% by insulin volume). The company was founded in 1925 and is headquartered in Denmark. However, its origins have a uniquely Canadian connection…
… Express Scripts processes 1.4 billion prescriptions a year. It uses its scale to negotiate favourable rates with pharmacies, pharmaceutical manufacturers, drug wholesalers and others in the drug supply chain.
… Express Scripts Holding Company (Nasdaq:ESRX) is the largest pharmacy benefit management (PBM) company in North America. It serves thousands of clients including managed-care organizations, insurance carriers, employers, third-party administrators, public sector and union sponsored benefit plans.