Keep Calm and Carry On: A Message from the CEO

Keep Calm and Carry On Poster

Keep Calm and Carry On

In 1939, facing a second World War, the British government produced the now famous poster – intended to raise the morale of the British public that was threatened with widely predicted mass air attacks on major cities.[1]

I am very cognizant that comparing investing to living with the threat of (or in the middle of) a war is clearly not “apples to apples”. In light of what is happening in Ukraine today, and the resulting effects on world stock markets and assets, I nonetheless feel that this message is a good one, and is Ginsler Wealth’s best investment advice for how to navigate this very challenging situation.

Climbing the Wall of Worry

In my last quarterly letter, I stressed that uncertainty is the only thing I know for certain. Throughout history there has never been a time without uncertainty and there has rarely been a time without significant negative world events. Just looking back over the past 30+ years (see chart below[2]), there has been a variety of reasons for investors to worry. In all cases – using world equity markets as a guide – the world has climbed, or overcome, this wall of worry. The COVID-19 pandemic is a fantastic example of the resilience of citizens, countries, and asset prices.

A Timeline of Negative World Events

“Diversification is the Only Free Lunch in Finance”

Famed economist and Nobel Prize laureate Harry Markowitz coined the above phrase. While correlation of assets tend to move in relative sync during times of crisis, it is precisely at these times when investors should be reviewing their own personal risk tolerances. Most people have a very high risk tolerance when assets are moving higher, but not necessarily the same corresponding risk tolerance during asset corrections. This is why we spend a lot of energy seeking alternative asset class strategies and managers that can employ hedging tools, with the goal of protecting downside while striving for reasonable upside.


I do not know what will happen next in the world in either the short or long term, but by keeping calm, by looking at history as a guide, and by ensuring your portfolios get the benefit of our best thinking and diversification, we will carry on.


Brian singnature


[1] Source:


Ginsler Wealth Fourth Quarter 2021 Client Letter

(An audio version of this letter can now be found as Episode 2 of The Unlimited Podcast by Ginsler Wealth. Use the link provided or find us on your favourite podcast app.)


To Ginsler Wealth’s Clients:

The new omicron variant was certainly an unwelcome and perhaps unexpected holiday development. I do hope the holiday season found you and your loved ones happy and healthy.

“Uncertainty is the only thing I know with certainty.”

With the arrival of the end of the calendar year comes the requisite financial and market forecasts for the new year. On December 30, 2021, the Globe and Mail ran two articles, one directly on top of the other:

The first, written by my dear friend David Rosenberg entitled, Here’s what investors should expect in 2022, details the potential for a 30 percent equity market correction. The second, written by BMO Capital Markets’ Chief Investment Strategist was titled Why the bull market will be alive and well in 2022. Its content is self-evident by its title.[i]

Which of the above will prove prescient, I don’t know. Nor can I identify the best forecasts from the many other experts who have weighed in. So instead of trying to be right, at Ginsler Wealth we aim to be prudent.

Because the only thing I know with certainty is that there are uncertain roads ahead, we build your portfolios by incorporating a variety of investment strategies with the collective goals of both reasonable performance and commensurately reasonable downside protection. To be clear, the other thing of which we are fairly certain is that over the longer term, equities will remain the best performing asset class and will always be an important and sizeable component of most clients’ investment portfolios. However, the cost of achieving higher returns through equities is always their accompanying volatility.

So how do we strive for equity-like returns[ii] while aiming to protect capital? Among others, we do so in a number of ways:

  1. Investing in exchange traded funds, for extremely low cost, broad market exposure (no capital protection component here),
  2. Selecting equity managers that use a variety of strategies to hedge market exposure and reduce volatility,
  3. Utilizing equity managers with strategies that focus on dividends and income,
  4. Allocating capital to hedge funds that aim to take a “market neutral” approach to investing, and
  5. Finding managers with unique and often non- or less-correlated investment strategies.

As an example of the last approach, we have recently begun allocating capital to a specialized SPAC (“Special Purpose Acquisition Corporations”) arbitrage strategy. We believe this strategy is unique in that it has a track record of delivering equity-like returns with principal protection qualities, low downside volatility and low correlation to equity and fixed income markets. In fact, to date, 99% of the fund’s closed positions have resulted in positive realized returns. We believe this strategy’s long-term target return is between 8-10%. As an added benefit, due to our scale, all Ginsler Wealth clients—regardless of the size of their allocation—are able to invest in the fund’s lowest fee class. In a recent Globe and Mail piece entitled How SPACs can tone down your risk, Larry MacDonald[iii] writes on this type of strategy: “…buying and selling pre-acquisition SPACs can be a virtually riskless way to earn positive returns in bear and bull markets.” Our job, as always, is to find the managers with the experience to execute well.

How to Build a Goldilocks Portfolio

This past quarter, a new client asked us to build a portfolio for his family with the following characteristics:

  • Limited direct equity exposure
  • High single digit target returns
  • Tax efficient
  • Downside protection

While we thought of calling this portfolio the “Unicorn” portfolio, given the difficulty in finding such a magical collection of investments, we ultimately named this portfolio the “Goldilocks” portfolio by mixing a few asset classes (i.e., not too much, not too little, just right) with the goal of achieving the client’s objectives. The resulting portfolio blends an income-oriented equity strategy (with hedging capabilities), the SPAC strategy mentioned above, a venture debt strategy (closed to most outside investors), a market neutral hedge fund (closed to most outside investors) and a long/short public real estate focused investment strategy. We utilized the family’s registered (non-taxable) accounts to hold the income-producing securities, while keeping capital gains-oriented holdings in taxable accounts. Through a combination of asset allocation, security selection, and asset “location” decisions, we believe we have built a portfolio that meets the client’s needs[iv]. We will be reaching out to all clients as part of our normal portfolio review process and will be happy to discuss this Goldilocks portfolio in more detail.

Incidentally, this past quarter, we reviewed upwards of 40 or so additional investment strategies and ultimately made allocations to two new strategies (both of which we have known and followed for many years). The bar remains very high.

Digital Asset Activity

We remind you that digital asset exposure generally only comprises a very small, single-digit proportion of our clients’ (where applicable) investment portfolios. However, we continue to spend a disproportionate amount of our time and energy on this space. We remain bullish on the long-term outlook for digital assets broadly and the underlying technology more specifically. This was a particularly active quarter for Ginsler Wealth in the following ways:

  1. We worked with Digital Asset Council of Financial Professionals (DACFP) to bring its certificate program to Canadian advisors at a special, Ginsler Wealth discounted price. We believe it is incumbent on financial advisors to truly understand this space (this goes for the media as well!) prior to making client recommendations. I was also featured on DACFP TV, where I discussed Ginsler Wealth’s approach to digital asset investing.

DACFP GW discount code

  1. We spent an extraordinary amount of time performing due diligence on a Singapore-based digital asset fund manager. Due to the 12-hour time difference, this included many late-night Zooms with the company. When we say we “search the world” for investment strategies for our clients, we really mean it! The core strategy that we have begun allocating to returned 295% for the year through November 2021. While we do not expect this level of return to be repeated, we are confident that we have found a group that are truly experts in this space.
  1. Finally, we were pleased to get clients access to participate in a highly oversubscribed private investment in Sygnum Bank AG, the world’s first fully-regulated digital asset bank, alongside other major international investors. You can read the announcement and company press release.

Digital asset investing is not appropriate for all clients, but we are always available to discuss the asset class with you.


As we begin 2022, I am hopeful that the end of the COVID pandemic is in sight, as we learn to live with whatever variant or variation of the virus remains. From a financial perspective, I am hopeful that world economies will remain resilient. Most of all, I am hoping that you and your families are, and will remain, happy and healthy.

But, in these uncertain times, hope is not a strategy. We will remain unrelentingly focused on managing your wealth and investments carefully and prudently. Because, unfortunately…we can’t forecast the future.

Thank you for your trust, support, and confidence. We are available 24/7 should you need us.


Brian singnature

Brian Ginsler
President & CEO



Alphabet Soup and Tax Savings

RRSPs (Registered Retirement Savings Plans)

Reminder that March 1, 2022 is the deadline to contribute to your 2021 (last year’s) RRSP. The maximum RRSP contribution limit for 2021 is $27,830. However, check your CRA account to confirm your personal contribution room. If you have good visibility into your 2022 earnings, we also encourage you to make your 2022 (this year’s) contribution now to benefit from tax-deferred investing as early as possible. The maximum RRSP contribution for 2022 is $29,210. We can help you determine your best course of action in this regard.

TFSAs (Tax Free Savings Accounts)

Similarly, you now have another $6,000 of TFSA contribution room to utilise. The TFSA is a wonderful way to invest tax-free, forever. For those that have not yet established a TFSA, you may have up to $81,500 of lifetime contribution room. We recommend all our clients make use of this tax saving opportunity.

RESPs (Registered Education Savings Plans)

Finally, for those saving for their children’s education via a RESP, for those who are eligible, you can now earn 2022 CESGs (Canada Education Savings Grants – i.e., “free money from the government”) on your contributions. At Ginsler Wealth, we love helping our clients get free money.





[i] Both articles are only available to Globe and Mail subscribers. Apologies if you are unable to access them.

[ii] While equity markets of late have been returning high double-digit returns, please recall that the historical, long-term compound annualized total return of the S&P 500 has been approximately 10% since 1928. Source:

[iii] This article is also only available to Globe and Mail subscribers. The article references a SPAC strategy offered by a Calgary-based firm. Ginsler Wealth is not familiar with such strategy nor its principals.

[iv] Of course, no investment results are guaranteed and there is no guarantee that this portfolio of strategies will meet the targets and objectives detailed herein.

Brian Ginsler First Advisor to Receive DACFP Certificate in Blockchain and Digital Assets

Show image DACFP prepared

September 2021 – The Digital Assets Council of Financial Professionals (DACFP), an organization committed to giving financial professionals the knowledge and skills they need to provide their clients accurate, relevant, timely and valuable advice about blockchain and digital assets, have announced that Brian Ginsler is the first advisor in Canada to receive the DACFP Certificate in Blockchain and Digital Assets.

Brian Ginsler commented, “I believe having at least a base level of understanding of blockchain and digital assets is a critical addition to an advisor’s toolkit. This course, offered by Digital Assets Council of Financial Professionals, is a fantastic start. This asset class will not be appropriate for many. But at Ginsler Wealth, we believe, where appropriate, our clients should have exposure to what could play a role in the future of money (bitcoin), smart contracts/Web 3.0 (#ethereum) and more.”

Speak to us to learn more about how digital assets might (or might not) fit into your overall portfolio.

Brian Ginsler Announces Launch of New Independent Wealth Management Firm, Ginsler Wealth

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Brian Ginsler, a Canadian wealth management industry leader, is pleased to announce the official launch of a new, independent wealth management firm, Ginsler Wealth Management Inc. (“Ginsler Wealth”).

Ginsler Wealth was created as a direct response to growing demand from high net worth families for a comprehensive solution for their overall wealth management needs. Ginsler Wealth provides financial planning services, which include tax, estate and insurance planning, along with an open-architecture investment management platform that brings a universe of investment opportunities to clients, without the sale of proprietary products.

“Ginsler Wealth is a new wealth management experience,” said Brian Ginsler, President & CEO. “We exist to serve successful families that embrace independence and the flexibility it provides; families that want unconstrained wealth management solutions; and families that expect a higher, more personal level of service. Think of it as your wealth…unlimited.”

Ginsler Wealth’s founder, Brian Ginsler, is a wealth management industry veteran. After completing his MBA at Harvard Business School, Ginsler achieved his Chartered Financial Analyst and Certified Financial Planner designations and has held leadership roles in investment banking, wealth management & family office, investment management and alternative lending. Ginsler is a registered portfolio manager. He was the first advisor in Canada to achieve the Certificate in Blockchain & Digital Assets from the Digital Assets Council of Financial Professionals in New York (“DACFP”).

Ginsler Wealth’s services fall into four categories:

  1. Planning – Cashflow & budgeting; tax, insurance, estate and retirement planning.
  2. Investing – Goal setting, asset mix determination, investment manager & strategy selection, reporting.
  3. Coordinating – External advisor & investment manager oversight, review of private investments, consolidated reporting.
  4. Living – Lifestyle concierge, information services, strategic business advice, philanthropic planning.

Ginsler Wealth believes high net worth families can no longer be constrained by traditional investment portfolios simply comprised of stocks and bonds. Ginsler Wealth client portfolios include real estate investments, alternative investments, investments in private deals and private companies, and exposure to digital assets such as Bitcoin and Ethereum.

As the first advisor in Canada with a certificate in Blockchain & Digital Assets (i.e., “cryptocurrency”) from DACFP, Ginsler Wealth is uniquely positioned to advise Canadians on adding digital asset exposure to their overall portfolios.

In addition, Ginsler Wealth has introduced a unique fee structure: “We strive for direct alignment with our clients in everything we do,” said Brian Ginsler. “We believe our standard management fee is lower than our competitors; if we don’t do a good job for our clients, we get paid less than our competition. Our performance oriented fee structure allows us to do well only if our clients do well.“

Ginsler Wealth is a new alternative for those seeking an independent, unconstrainted wealth management alternative. “Our independence ensures we solely serve our clients and enables us to be unconstrained in our ability to search the world for the most appropriate solutions,” said Ginsler.


About Ginsler Wealth Management Inc.

Ginsler Wealth Management Inc. (“Ginsler Wealth”) is a new wealth management experience. We exist to serve successful families that embrace independence and the flexibility it provides; families that want unconstrained wealth management solutions; and families that expect a higher, more personal level of service. Think of it as your wealth…unlimited.

Ginsler Wealth is a registered portfolio manager and exempt market dealer in the province of Ontario.

“Ginsler Wealth Lunch Series”: Real Estate Edition

For this week’s “Ginsler Lunch Series”, I had a real estate focused panel with some of the country’s leading real estate experts.

Thanks to the following for joining: Rael Diamond (President & CEO, Choice Properties REIT), Sasha Cucuz (CEO, Greybrook Securities), Jamie Grossman (Managing Principal, Cresa), Evan Cooperman (CEO, Foremost Financial) and Jeff Appleby (Managing Director, Real Estate Investment Banking, CIBC Capital Markets). We discussed some of the key questions investors have regarding the real estate market.

Some of this week’s key questions and takeaways:

What is the future of retail?

Retail is not dead. People need a place to go, with much of Retail “necessity based”. Also, Retail is evolving to be more experiential, which will be critical to keep people visiting.

Is anyone ever going back to the office?

Yes, In fact, many are starting to go back to the office now and those at home may start to feel left out of “in person” meetings and office interactions. In time, offices will be full again and overall, the office environment may be the best place for instilling culture, training and collaboration.

Where do people want to live now?

There has not yet been a mad dash out of the Big Cities and we don’t believe that will occur. Student housing occupancy is currently challenged with uncertainty surrounding the start of the school year. Rent collections remain strong but as COVID continues, some cracks in rent payments are beginning to appear.

Which real estate sectors are “hottest” now?

Industrial is attracting the most demand and highest pricing right now. People need stuff and businesses need warehouses to manufacture, store, sort and ship.


In summary, expect people’s behaviour to revert to “normal” as COVID passes, albeit there is concern about weakening consumer strength the longer COVID persists.

What’s an investor to do now?

As of yesterday (June 8, 2020), the S&P 500 had recouped all its COVID-19 losses incurred in March, while the NASDAQ reached new all time highs. We all instinctively know that times are difficult, yet investors who are watching “the markets” could be forgiven for thinking that things may not be so bad.

The first question investors should be asking themselves now is: are these indices really the best indicators of the health of companies and markets?



Because both of these indices are “market-weighted”, it turns out that five companies: Microsoft, Apple, Amazon, Facebook and Google (Alphabet) make up ~46% of the “weight” of the NASDAQ and just above 20% of the “weight” of the S&P (higher than almost any point in history).

These companies have performed well this year, dragging up the performance of the “markets” but masking the true situation for the majority of public companies, where just over 60% of S&P 500 constituents remain down in 2020.

Why have these 5 stocks rallied throughout this crisis? No doubt they are fantastic companies, with sticky revenues and loyal and growing customers. But according to a Bank of America research report published on June 8, 2020, the rise of the S&P 500 and the FAANG stocks (the stocks mentioned above + Netflix) has been closely tied to the liquidity the U.S. government has injected into the economy during this pandemic.



I would also suggest the “piling in” to these stocks is a continued theme of investors chasing growth and comfort in the popular stocks, resulting in passive investors (via exchange traded funds) having to continue to buy these stocks, resulting in their stock prices increasing, resulting in investor greed and fear of missing out, … , and the cycle repeats.



Another indicator of investors’ current insatiable appetite for growth can be seen in the historical percentage of unprofitable IPOs (initial public offerings), which currently sits at an historic high and above the Tech Bubble levels.



So with that as a backdrop, the second question an investor should ask is: What is an investor to do now?

There are no definitive answers. The only magic bullet I can offer is as follows: buy and hold high quality companies, trading at reasonable (or ideally, discounted) valuations.

It turns out that what one pays for a company (valuation) is the most important determinant of long-term stock returns.



The chart below tells us a few key things:

  • Most importantly, when looking at the returns of the S&P 500 over the past 30+ years, generally, the higher the valuation (measured using price/earnings ratio), the lower the subsequent annualized returns have been.
  • Even during this COVID-19 pandemic, the market is trading at above-average valuation multiples.
  • When valuation multiples get above 30x P/E, subsequent 10-year returns tend to be negative. (Note that according to Yahoo Finance, Facebook, Apple, Amazon, Netflix, Google and Microsoft currently trade at P/E multiples of 32x, 26x, 122x, 85x, 29x, and 31x, respectively. And everyone’s favourite new stock, Zoom, trades at 1,234x earnings – not a typo).



You will also note from the chart above, that average valuations tend to cluster between 13-18x P/E. The challenge with sky-high valuations, is that companies either have to “grow into” their valuation to maintain their stock price, or suffer stock price declines.

Netflix Example

As per above, assume the average high-quality S&P 500 company ultimately trades at a multiple of 15x earnings. Netflix currently trades at ~9x revenues and ~85x earnings. What would it take to grow into its valuation?



At its current market capitalization, if Netflix traded at a P/E of 15x, its net income would have to be ~$12 billion. For net income to be ~$12 billion, at its current operating margin, revenue would need to exceed $85 billion (a 4-fold increase from here, or >30% revenue growth per year over the next 5 years). Recall that Netflix grew revenues to $21 billion with little competition for much of its existence. And you know what they say…“the first $21 billion is always the easiest.”

Netflix’s current valuation combines comedy, drama, suspense, thriller and horror.

During the tech bubble, Sun Microsystems was trading at similarly lofty valuations before crashing spectacularly. In an interview in 2002, its CEO Scott McNealy famously stated:

At 10 times revenues, to give you a 10-year payback, I have to pay you 100% of revenues for 10 straight years in dividends. That assumes I can get that by my shareholders. That assumes I have zero cost of goods sold, which is very hard for a computer company. That assumes zero expenses, which is really hard with 39,000 employees. That assumes I pay no taxes, which is very hard. And that assumes you pay no taxes on your dividends, which is kind of illegal. And that assumes with zero R&D for the next 10 years, I can maintain the current revenue run rate. Now, having done that, would any of you like to buy my stock at $64? Do you realize how ridiculous those basic assumptions are? You don’t need any transparency. You don’t need any footnotes. What were you thinking?

So to repeat the second question again: What is an investor to do now?

Value over Growth

Using history as a guide, it may be time for “Value” investing to shine. According to Bank of America, Value led in 14 of the last 14 recessions, and by ~23% on average.



However, Since the fall of 2014, the gap between the price-to-earnings valuations of the S&P 500’s most expensive (“growth”) and least expensive (“value”) stocks has doubled. Expensive stocks have gone from 24x to 33x P/E while cheaper stocks have gone from 11x to 8x. Only 3% of the time in history has the gap been wider.


When valuations revert to their means, as they inevitably do, undervalued stocks have the potential to significantly outperform overvalued stocks, as they have in the past.

Warren Buffett’s 2018 Letter to Shareholders: “Buffett’s Greatest Hits”

Warren Buffett is widely regarded as the greatest investor of all time. His track record is astounding: since 1965 Berkshire’s compound annualized return has been 20.5% as compared with 9.7% for the S&P 500. In any other business, competitors and amateurs alike would be doing everything they could to get a peek “behind the curtain” to understand how one could be so successful in the hopes of emulating or recreating that success. Unfortunately, companies and management are typically highly protective of their “Caramilk Secret”.

Not so for Warren Buffet. He has been telling the world for decades exactly how he thinks and acts around investing, yet very few professional investors and even fewer individual (or, retail) investors pay him much heed.

The good news is that Warren Buffett’s 2018 Letter to Shareholders could be summarized as his “greatest hits” of themes he has been discussing for decades. So if you have ignored or missed Buffett’s advice over the last 5+ decades, you are in luck. What follows is a summary of the key highlights in his latest quarterly letter.


Hit #1: Buy Great Businesses at Great Prices

“…let me remind you of our prime goal in the deployment of your capital: to buy ably-managed businesses, in whole or part, that possess favorable and durable economic characteristics. We also need to make these purchases at sensible prices.”[1]

This really is Buffett’s #1 Hit but this year he understated his 50+ year message. So let me elaborate for him.

What does “favourable and durable economic characteristics” mean? I define that term to encompass companies with: strong competitive positions, essential service-type products, big competitive moats, strong balance sheets and superb management that operate with integrity.

What does “sensible prices” mean? Buffett is looking for both great businesses trading at great prices. Not just one or the other. Using the FAANGs (Facebook, Amazon, Apple, Netflix, Google) as an example, there is no doubt that all five are great businesses. They are world dominating in some cases. Buffett, however, has only determined that Apple trades at a reasonable or “sensible” valuation and therefore meets both his criteria. For reference, Apple currently trades at a P/E multiple of approximately 14x. Facebook trades at 21x, Google trades at 26x, Amazon trades at 81x, and Netflix trades at 134x[2].

An amazing company trading at an amazingly high valuation requires everything to go right and then some to keep the stock price moving upward. A great company trading at a great (i.e., cheap or discounted) valuation creates a large margin of safety for investors to absorb inevitable hiccups in the business or the economy.


Hit #2 Reprise: Buy Businesses, Not Ticker Symbols

“Charlie and I do not view [Berkshire’s common stock investments] as a collection of ticker symbols – a financial dalliance to be terminated because of downgrades by “the Street,” expected Federal Reserve actions, possible political developments, forecasts by economists or whatever else might be the subject du jour .”

This is a follow-on lesson from the first one – Buffett treats the businesses he invests in as just that – businesses that he understands that possess the fundamental characteristics highlighted in Hit #1 above. If one has truly done a tremendous amount of research and understands the investee company significantly better than the average manager, investor, journalist or other newsmaker, the noise generated from those individuals is generally of no consequence. Tremendous investment conviction comes from serious work that is not swayed by noise. Those that do an average (or less) amount of work have their weak conviction shaken fairly easily.


Hit #3: Focus on Earnings & Cashflow, Not EBITDA or other Adjusted Financial Measures

“When we say “earned”, … , we are describing what remains after all income taxes, interest payments, managerial compensation (whether cash or stock-based), restructuring expenses, depreciation, amortization and home-office overhead. That brand of earnings is a far cry from … “adjusted EBITDA,” a measure that redefines “earnings” to exclude a variety of all-too-real costs.”

Owners of companies are entitled to a share of the earnings of those companies. One step further would be to look at a company’s free cash flow. Cash doesn’t lie. A business is either producing it (hopefully lots of it) or consuming it. Look to own companies doing the former.


Hit #4: Everyone Seems to Love Dividends. We Love Buybacks.

“All of our major holdings enjoy excellent economics, and most use a portion of their retained earnings to repurchase their shares. We very much like that: If Charlie and I think an investee’s stock is underpriced, we rejoice when management employs some of its earnings to increase Berkshire’s ownership percentage.”

Investors have been infatuated with dividend-paying companies over the past decade under an often false belief that dividend stocks are stable, less risky and less volatile than non-dividend paying stocks.

In 2018, the iShares Canadian Select Dividend ETF, a diversified “fund” of Canadian dividend paying stocks, fell over 16% while paying out an approximate 5% dividend yield. So on a total return basis, using this ETF as a proxy, Canadian dividend stocks’ 2018 performance was worse than the S&P/TSX’s overall 8.9% decline.

While companies paying a dividend may be strong businesses generating significant cashflows (although some use debt to fund dividend payments), investors should make no mistake about what receiving a dividend means: the company and its management cannot find a more attractive use for its excess capital…so it is giving it back to shareholders, along with an almost 40% tax bill for those (Ontarians) in the top tax bracket.

Consider investing in companies that most often use their excess free cash to buy back their own shares. In contrast to dividends, share buybacks typically provide a different message from management: our stock is cheap and therefore the best use of our excess capital is to buy back our shares, thereby increasing each remaining investor’s share of our earnings. For the taxable and long-term investor, share buybacks minimize the distribution of taxable dividend income. They enable each individual investor to decide when to sell units for their specific cash needs, thereby generating a capital gain which will be taxed at approximately 27% (in Ontario) versus almost 40% as noted above.

“When earnings increase and shares outstanding decrease, owners – over time – usually do well.”


Hit #5: When You Find All The Above, Hold On For Dear Life

“Truly good businesses are exceptionally hard to find. Selling any you are lucky enough to own makes no sense at all.”

These two simple sentences are two critical tenets of Buffett’s investment strategy.

First, because truly good businesses (selling at reasonable prices) are exceptionally hard to find, it stands to reason that it is not really possible to build a portfolio of 50 such companies (plus, how could you truly know the companies well at that level?).

Buffett’s letter shows that the top 16 public company holdings (if Kraft Heinz is included), comprise 88% of Berkshire’s public company investments. Put another way, Berkshire holds an investment portfolio with a market value of $164 billion that is 16 stocks in total![3] Oh…and the Top 5 holdings represent almost 63% of the total common stock portfolio[4].

The second sentence highlights Buffett’s long term focus. For those that have been reading Buffett’s letters for years, you will note that Berkshire owns some great businesses and brands (Coke, Amex, Apple, Goldman Sachs, etc.) and in most cases those companies appear over and over each year. In other words, Buffett buys, and rarely sells.

If you think about finding a fabulous business as similar to finding an attractive building selling at a reasonable cap rate, and where the owners can raise rents over time. It would be abnormal to see real estate investors buy and sell buildings even within a few years of their purchase.


Hit #6: Investment Performance Converges with Business Performance

“Charlie and I have no idea as to how stocks will behave next week or next year.”

“Our advice? Focus on operating earnings, paying little attention to gains or losses of any variety…I expect [Berkshire’s equity portfolio] to deliver substantial gains, albeit with highly irregular timing… Over time, … , investment performance converges with business performance.”

Buffett has said over and over again that he does not have a crystal ball to predict what the future holds for the markets in general. Instead, he buys great companies that he can better predict will do well over time from a business performance perspective. Markets, in theory, are efficient. In practice, they are reasonably efficient, but are very good over the longer term at ensuring stock prices ultimately reflect what is going on in the underlying businesses (often with a bit of a lag relative to those who have studied the company thoroughly – like Buffett).


Last Hit: Invest Now. Markets Have Historically Climbed the “Wall of Worry”

“Since 1942 , we have had seven Republican presidents and seven Democrats. In the years they served, the country contended at various times with a long period of viral inflation, a 21% prime rate, several controversial and costly wars, the resignation of a president, a pervasive collapse in home prices, a paralyzing financial panic and a host of other problems. All engendered scary headlines. All are now history.”

Investors (I mean, speculators) seem to be very focused on timing the market just right and getting in or staying out of the market with perfect timing. In December, speculators pulled huge amounts of money out of the market because it was falling (and missed January’s rally) and in February speculators are holding off entering the market because “it just got frothy again”. Trying to time the market has been proven time and time again to be a loser’s game. Similarly, dollar cost averaging (investing similar amounts over regular intervals vs a lump sum up front) has also been proven to be a poor investment approach.

A better approach, for those with long investment time horizons, is to simply get in “now” (whenever “now” is for those reading this paper).
Over the last 100+ years, on the whole, the markets go one way – up.

[1] Unless otherwise indicated, all quotes are from Warren Buffett’s 2018 Shareholder Letter dated February 23, 2018:

[2] All P/Es are approximate and based on trading prices as of February 28, 2019.

[3] Excludes $22.4 billion of “Others” as we are not provided the composition.

[4] Total is $186.8 billion, which includes Kraft Heinz at a market value of $14 billion as at December 31, 2018 according to Buffett.