DKAM-final newsletter5-a

Back to the Future We’re entering the last quarter of 2018 with the Capital Ideas Fund up 5.73% 1 for the year, while the market is up 1.36% 2 . Our annualized return since inception sits at 18.75% 1 while the Canadian market has returned 6.30% 2 . This newsletter is all about time . There are two related – but very different – questions when it comes to timing and how it relates to investing in the stock market. At first the two questions below appear to be related but from our point of view they are anything but. 1) How do you know when to get in or out of the stock market? 2) How do you know when to get in or out of a stock? This edition of the ROE Reporter aims to answer both questions and concludes with a DKAM specific example of a stock we’ve recently exited. Along the way we will revisit our stance on growth versus value. This distinction is pivotal in informing both our buy and sell decisions within the portfolio. Being able to predict the future value of a company is the Holy Grail of investing and is much more valuable than predicting market moves in general. We believe we run a “machine” capable of consistently beating the market by picking stocks that outperform the market. The inverse of this would be the ability to consistently predict the upward and downward moves of the actual stock market. In order to do that successfully, one would need a time travelling DeLorean parked in their garage. To our knowledge, no one actually possesses such a device, which makes sense because no one has exhibited the ability to consistently trade stock market fluctuations. It’s appropriate to reiterate the old adage, that the measure of making money is “time in the market” and not “timing the market.” Not many people have been able to consistently time the market, but there remain a few studied experts who have been able to outperform it…enter Warren Buffett. VOLUME XLV October 2018 INVESTMENT ISSUES • STRATEGIES • INSIGHTS FROM DONVILLE KENT