facebook twitter instagram linkedin google youtube vimeo tumblr yelp rss email podcast phone blog search brokercheck brokercheck Play Pause
%POST_TITLE% Thumbnail

Portfolio Management Due Diligence while Social Distancing

In these interesting times when so much is unknown about how the COVID-19 pandemic will play out, there are no shortage of opinions thoughts and ideas on its conclusion, many of which are conflicting. What everyone can agree on is that, for the time being, what we used to consider easy and normal has changed.

However, the role of the Investment Advisor and Portfolio Manager very much remains the same, albeit if you read in the last two editions of the Market Observer - how we conduct our role has certainly changed. When we were all forced to work from home, we knew one thing that would be important and that is more analysis, due diligence and research as we sort through the financial implications. 

It seems like it has been a 7 day a week exercise since early March as we take the weekends to catch up on the reading and research we use to be able to do through the work week. 

Some of you may remember from previous editions of the Market Observer email the JMRD Watson Team would meet at least annually with leading Fund Managers from around the country at a team Portfolio Manager summit in Toronto.

This year, getting everyone together in one room has proven to be impossible. However, what we have recently discovered is that when you're confined to your home, with limited options for activity, your availability often increases. With the help of technology including zoom meetings and Microsoft Teams live video chat, the PMs on the team have had an opportunity to speak with a number of leading fund managers and market insiders to gauge their outlook on the virus’s impact on the financial markets.

What started with a daily market check in at 4:30 each day for us internally, has turned into a comprehensive series of due diligence and market research activities with many great outside experts. It has been interesting to see them more relaxed and dressed a little more casually.  We all get a laugh when their pets or our kids, or both add their views to the sessions by barking or asking for something. 

The following are some thoughts from a few of our recent presentations:

  1. One of the largest fixed income managers in North America, that is a held in our models, sold $11 billion worth of short term low risk bonds paying 2% or less and bought $11 billion worth of bonds paying an average of 6%.  This was all done in a matter of weeks.  A clear illustration of how to take advantage of the disruptions in the market.
  2. A large Mortgage Investment Corporation (MIC) CEO that deals with many of the largest developers in Toronto gave us insight on the current real estate market, the current appetite for lending by large institutions and how this period compares to past major disruptions he has been through.  
  3. One of the largest “value” style fund managers went over their view of the disruptions in the markets and highlighted their “non-obvious” winners coming out of this to add to the list of obvious winners we know like Amazon, Walmart and Costco.  
  4. We had the portfolio manager of a U.S. & international fund, which we use in our models, that holds a limited number of very high quality companies describe how active they have been in this market as they use the dip to upgrade their portfolio. In a normal market they rarely make large changes but have seen a variety of opportunities and taken advantage of it.  
  5. We had a retired portfolio manager that is still very active give his views on what the long term impacts are.
  6. We had a large real estate investment manager go over their views and their top picks in the sector. 
  7. We heard form the President of a gold and silver company give his perspectives on a successful mining operation and the current investor appetite for gold and precious metals.

We think this easy access to some great outside views has been one of the unexpected positive outcomes of this interesting situation.  We plan to continue to schedule these calls as long as we are working from home to take advantage of this unique opportunity to access leading portfolio managers in a timely manner to help shape our views of the financial markets going forward.