Financial letter

April 25th, 2023

Volume 14 Number 1



Hello everyone,

This financial letter is in its 14th year and I want to thank all of you for your loyalty and interest in reading it. We are fortunate to have you as our clients and we are entering 2023 with enthusiasm and a number of interesting investment ideas.

The past year proved exciting for investors in many ways. Despite a decline in markets and portfolio values, which is unfortunately unavoidable from time to time for all stock market participants, economic conditions made it possible for us to implement effective loss minimization strategies, a feature inherent in our trend monitoring approach.

In fact, while the S&P 500 fell nearly 20%, the Nasdaq lost almost 30% and several large-cap U.S. tech stocks plunged more than 80% during the year, our traditional strategies managed to avoid these huge losses. In this newsletter, we will explain how we managed to do it. In the equity asset class, we rank among the top-performing private portfolio management firms in 2022.

However, it wasn’t always a bed of roses. Indeed, our alternative funds such as the Crypto Fund and the MicroCap Fund were unable to withstand the bearish waves we experienced during the year. The strategies for these funds are discussed in their own newsletter, and we would be pleased to include you on the mailing list if you wish.

Good reading.




To fully understand our performance in 2022, we need to go back and explain the reasons behind the decisions we made in 2021. Back then, it seemed clear to us that the stocks that rode the COVID-19 wave were running out of steam, especially the so-called FAANG group (Facebook, Amazon, Apple, Netflix and Google). This list also included Rivemont favourites such as Docusign, Lightspeed and Nuvei. As a result, we decided to dispose of these equities and build up an unusually large cash position. Amazon was the last on the list to leave our clients’ portfolios.

You will find below an excerpt from an article on cash positions that I contributed to Les Affaires in January 2023.

[… ] In every other situation, if you pay an advisor to look after your portfolio and active management is available, either with full discretion or through mutual funds, then cash management must be considered and, conceivably, used. I can already hear some people say: Yes, but predicting the market is very difficult and missing the 10 best days of the year has a very negligible impact on the portfolio. I would answer that, while it’s true that predicting the market is no easy task, missing the 10 worst days has a very large impact. 

An article on finance would not be complete without discussing or quoting the famous Oracle of Omaha, the fabulously wealthy Warren Buffett. As a number of other people have done, he has said that the best option for the majority may be a passive approach and the use of exchange-traded funds such as SPY. However, that is certainly not what he did, nor what made him rich. The foundation of Buffett’s strategy, which has been copied repeatedly and is also called the fundamental approach, is to invest in public or private companies at a price below their intrinsic value. Their prices are usually low during recessions and when the economic outlook is less than bright. Not surprisingly, the flip side of this coin is to refrain from buying when prices are particularly high.

But to take advantage of opportunities, you obviously need to have cash on hand, or dry powder, as we say in finance. And to have this cash, ordinary mortals need to sell at some point. In other words, if you never sell and stay fully invested at all times, then you can’t take advantage of the opportunities offered by the market. And Buffett has clearly understood this. In 2021, just before the post-pandemic bull market came to a close, he increased his cash holdings by over 80% compared to the previous year, and then used them to seize opportunities that he espied in the wake of the market downturn.  

It is indeed difficult to predict markets. Historically, however, one method does work: Valuing markets and companies on the basis of their future profits. And you didn’t have to be the Oracle of Delphi to realize that, by the end of 2021, the stock prices of several companies had reached unsustainable levels, particularly in the U.S. high-tech sector.

To give you an idea of how important active management is when markets are stressed, here is a graph showing the performance curve of the securities we sold, namely Docusign and Lightspeed.




But along with increasing our cash position, we moved from a majority of “growth” securities to a majority of “value” securities. We’re still invested in companies like Intact Financial Corporation and Royal Bank, and have added an industry (namely electronics) that has been under the radar over the last decade, by taking positions in companies such as Sanmina and Flextronics. A number of securities are currently on our watch list and we’re just waiting for a sign of fatigue in the current bear market to deploy our cash.

You will find below a link to the gross return of the equity portion of our portfolios.




On the bond side, we also managed to create value by raising our cash position at the end of 2021. You will find below a graph showing the timing of our initial sale (yellow arrow):



We became fully invested in bonds again in mid-2022, notably by reinvesting in corporate bonds. Given the current level of interest rates, we believe there will be less movement in bond values due to the additional income generated. In other words, any further decline will be offset by an increase in interest rates that will close the gap.

Similarly, because of rising interest rates, we invested our liquidities in money market funds that are generating returns of nearly 5% per annum. As the spread is now tangible, we’re seizing this opportunity.


Market Prospects




You will find below a list of the individual securities with the largest weight in our “growth” portfolio. These stocks were selected based on their respective potential to outperform the stock market. You will find a short description of their activities, the annual dividend, if any, and the total return since their first inclusion in our portfolio.





Once again, the active management that we advocate has enabled our clients to end the year in better shape than if we had simply hoped for better days. While we can’t tell the future, it is possible to take advantage of certain stock market anomalies to add value to our portfolio.

We’re currently onboarding several new clients whose experience with some of our competitors in 2022 was very trying. Please feel free to discuss our approach and results with your loved ones.


Martin Lalonde, MBA, CFA


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