Saturday April 19, 2014





Consenheim: In the investment world, it appears patience truly is a virtue

Back in the fall of 2008, the markets were coming off their high and about to head into one of the worst downturns most investors will most likely ever remember.

Peaking in June of 2008 and bottoming in April 2009, the TSX Composite Index was about to fall by close to 50 per cent.

In the midst of that fall — around November 2008 — a newly formed wealth management company launched what we call a closed end mutual fund. Simply put, it was an investment fund listed and traded on the TSX.

This fund was listed at $10 a unit and in a little over a year had traded as high as $15 a unit, up 50 per cent in about 14 months.

Some of my clients took profits at that time and or exited the position completely.

The fund invested in, and continues to invest in, what the managers determine to be extremely well run, undervalued global equities. They will hold them until they are fully valued or they see limited upside and then exit the position.

It sounds like a pretty simple game plan. Buy good stuff, hold it as it performs, or sell it if it does not, and always diligently tend to the flock.

After hitting the $15 mark in January 2010, the unit dropped to $11.50 in the early fall of 2010. It then rallied close to $15 in the early spring of 2011 only to be dragged down with the market in the summer to bottom below $11 by the fall of 2011.

On Jan. 6, 2012, the unit was trading at $11.93. The net-asset value (NAV) was $13.48.

The NAV is what the unit is worth if everything was in essence sold off and the shareholders were paid out. It was selling at more than a $1.50 discount to NAV. I would consider this a good buy at this point.

By the end of 2012, the unit strengthened to the $12.50 range. The NAV closed out the year at $14.68. That’s over a $2 discount and an even better buy.

It was at this very point, that for whatever reason, I received a few calls. “This position has really done nothing for some time, maybe we should unload it.” “It’s only up 25 per cent over four years. Will it ever go anywhere?”

I had been in discussion with representatives from the management company and they were very confident in the companies the pool owned. This, in combination with the discounted NAV, reinforced the conviction to just leave it alone and let the managers do their job.

This very same unit is currently trading at $20.50 — up 64 per cent from where it started the year.

I guess patience and self-control are virtues in the investment world.

This Cymbria (CYB) unit is currently trading at about a $0.25 premium to NAV (more than it is worth), so I imagine I will get a few calls about buying some.

However, I must stress that it may not be appropriate for everyone and a recommendation would only be made following a personal review of an individual’s portfolio and risk profile.

Unless otherwise stated, opinions expressed in this column are those of the author and are not endorsed by Raymond James.  Raymond James accepts no liability for any errors, omissions, loss or damage arising from the content, transmission or receipt of this column.  Raymond James Ltd. is a member of the Canadian Investor Protection Fund.





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