Mackenzie Minute: January 12, 2018
RICHARD WONG: One interesting phenomenon we have observed at the Cundill Team is the divergent valuations within the markets. Although many pundits argue the market is expensive, there is no value; we have had no shortage of opportunities. Our Cundill Value Fund, for example, is trading at about 40% discount versus the MSCI World Index on a price-to-book basis. We’ve been able to find compelling value opportunities to add to our performance. Two examples are Fiat Chrysler and 21st Century Fox. Fiat is exposed to SUV and truck segments that are growing. We like the opportunities in rejuvenating the brands, such as Maserati, Dodge, as well as deleveraging the balanced sheet. Another example is 21st Century Fox. In the world of Netflix, traditional media has remained largely out of favour and under pressure, but in Fox, we saw value in the content, in the film studios and the TV studios, as well as underappreciated assets they own internationally. In December, Disney announced a deal to acquire a majority of their assets and the rest of the business in Fox will be spun out in a separately-listed company. Those are two examples of how value stock picking continues to work in this market.
The tax cuts in the US, that’s stimulative to the economy. We believe that we are going to see upside surprises in global GDP and inflation. Interest rates will likely continue to rise and I think that is a very good backdrop for value investing.
We are very excited about the holdings in our portfolio. We are very excited about the names we have in our research pipeline. We believe there is a lot of opportunities in the market with divergent valuations and we look forward to sharing those ideas with our investors in the future.