We just wrapped up a series of conference calls with our equity managers.  The key message from all three is that they’ve been sitting tight.  None of them have made any material changes to the funds but they all have some cash reserves available to jump on opportunities as they arise (or cushion against a down market, depending on your outlook). 

That’s where the similarities end.  They all have unique skill sets and different views of the world, which provides our clients with useful diversification.  Here are the takeaways from each meeting.

CGOV (Equity Fund)
Our partners in Yorkville feel that we’re in an environment where the “strong will get stronger”.  They continue to focus the fund on what they refer to as ‘Franchise’ stocks – great businesses; great management; good price.  Companies like Cisco and HSBC are prominent examples of this theme.  CGOV hasn’t changed any stocks in the fund, but has made some adjustments.  With the widespread selloff in early January, all stocks got hit.  It gave them a chance to add to some ‘Franchise’ names at attractive prices, including Starbucks, the purveyor of an “addictive, non-regulated substance”.  Conversely, Compass Minerals was trimmed as the stock continues to perform well but may be getting slightly ahead of itself from a valuation perspective.  CGOV feels that the short-term downside risk to the portfolio is now quite modest, while the medium-term upside potential is compelling.

Edinburgh Partners (Global Equity Fund)
Christine Montgomery provided us with a balanced update in her usual charming tone.  EP’s view has not changed and they haven’t made any notable changes to the fund.  The portfolio is roughly 15% in cash.  They don’t think the rest of the world is ‘decoupling’ from the U.S., and therefore businesses with strong cash flows and balance sheets are best positioned in a slowing global economy.  They’ve spent much time revisiting their earnings models to ensure their outlook is as realistic as possible.  They are not assuming that the super-cycle we’ve just had is the norm.  Speaking of super-cycles gone bad, EP is still concerned with the financial sector and is only nibbling at these types of stocks.  Elsewhere, investors have given up on the Japanese market, as it’s down nearly 10% so far this year.  In contrarian fashion, a research trip to that country is happening this week. 

Wutherich & Company (Small-Cap Equity Fund)
Wil Wutherich’s comments from Montreal were short and sweet.  The fund pulled back in January, but has since maneuvered nicely through the turbulence that has seen many small-cap stocks drop sharply.  Total Energy Services has had a good run early in the year, as has Cervus, Gemcom and Sherritt.  Wil is holding about 14% cash in the fund right now.  As we reported at year-end, he continues to look closely at a stock or two, although he is being patient.   The stocks in the portfolio are unchanged since year-end, although Wil has adjusted a couple of the position sizes significantly.