Just before summer decided to finally arrive, I was able to get out and visit a number of Cambridge supporters from coast to coast. While it is always nice to talk about what we have been up to, it’s also nice to hear what is on their minds. One item that kept getting brought up was “CRM 2” and what it could mean for the industry.
Stephen Groff's blog
In 2013, Cambridge added three exciting additions to our lineup of dividend funds – Cambridge Canadian Dividend Fund, Cambridge U.S. Dividend Fund and Cambridge Global Dividend Fund. Given the large number of dividend funds in the market today, you may be wondering why we are choosing to highlight these funds and what our view is on rates for the future (higher).
Just like the philosophy we take with our equity mandates, we believe these funds approach yield investing differently than what most investors are used to.
We operate in an industry which craves activity and excitement. Many who work in the industry are paid based on trading volume, banking deals or short-term investment performance. I thought this would be a good chance to reflect on the benefits of taking a longer term view through a couple examples.
At Cambridge, we have consistently stressed the importance of capital allocation as a driver of returns for shareholders over time. We were recently asked if our less optimistic view on a company would change given a buyback announcement. The answer in that specific case was “no.” When it comes to buybacks in general, our answer is “it depends.” We thought an explanation of our view on this topic would give people a better understanding of how we think about allocating capital.
To put it simply, buybacks do not always make sense.
It has become harder to find opportunities today than it was a year or two ago. Despite this fact, and with more work, we will continue to follow a consistent philosophy to find new ideas. Fortunately, there are still high-quality businesses we think the market is not valuing appropriately.
I wanted to share some highlights after recently returning from a conference held in Munich, Germany. The conference was an excellent opportunity to get updates from two dozen leading European industrial and consumer businesses.
Advisors, portfolio managers and the investing public are rightfully frustrated with the effect that high-frequency trading (HFT) is having on the markets. We have been discussing this with clients for years now and without getting into the details of different HFT strategies, the key point is that HFT allows certain traders to "game the system" and earn a small profit on each trade without taking any risk. This cost is similar to a tax, which is ultimately paid by the investing public for limited to no value.
Over the past couple of years, we have been bullish on U.S. equities driven by attractive valuations and a slowly improving economy. This was despite the countless negative headlines which kept many investors on the sidelines during a very good time to stay invested. Using our bottom-up approach, we saw attractive investment opportunities in a number of very strong businesses with exposure to cyclically depressed (but recovering) end markets trading at low valuations.