Celebrating 25 years of Absolute Returns

In April Pyrford passed the landmark of 25 years of consistently investing for absolute returns. We have successfully navigated 

Risk Disclaimer 

Past performance should not be seen as an indication of future performance. The value of investments and any income derived from them can go down as well as up as a result of market or currency movements and investors may not get back the original amount invested.

Views and opinions have been arrived at by BMO Global Asset Management and should not be considered to be a recommendation or solicitation to buy or sell any companies that may be mentioned.

In April Pyrford passed the landmark of 25 years of consistently investing for absolute returns. We have successfully navigated an eventful period in global investment markets – the biggest tech boom in history; a great financial crash; the longest bull market in US equities and an unprecedented amount of money printing by major central banks to name just a few.

We also thought you would enjoy a few flashbacks. Below are excerpts from our quarterly Pyrspectives newsletter:

This is what we said at the end of the 1999 tech bubble:

To call this a bubble usually invites criticism as it is assumed by many that these are symptoms of the “new” economy – an economy that has no regard for the “old” rules. Spending can outstrip income forever because of the perpetual money making machine known as the stockmarket. Wealth can be created with little effort by investing in companies that have adapted to .com world.

It seems that dividend yields and indeed earnings are now irrelevant. What is more often quoted is price to sales – although any where between 50 and 1,000 seems to be considered acceptable.

History is, of course, replete with examples of bubbles – not all of them in the stockmarket – although this has probably been the most accessible bubble ever. It has been played and enjoyed by students and pensioners alike.

Bubbles are rarely discriminating. Tips relayed in the supermarket have been as rewarding as many hours spent diligently poring over a company’s accounts.

We have no way of knowing how long these circumstances might last. The suspension of orthodox valuation renders useless orthodox analysis. At the risk therefore of being labelled out of touch we would like to discuss a number of “fundamentals”.

And this is how we reported on the news of the global financial meltdown in the fall of 2008:

Events are moving so rapidly that putting pen to paper is dangerous. Any conclusions can swiftly be swept away by the latest twists and turns in the global crisis. Some observations however:

The seeds of this disaster were sown many years ago and were obvious to anyone who cared to look. The problem is that there were too many vested interests sharing in the ‘good’ times. Crying wolf is a lonely sport. Collective and monumental stupidity is fine provided everyone joins the game. It is a little late to play the blame game now.

The finger wagging and hypocritical politicians leave us gasping. Did they not bask in the warm glow of public approval occasioned by rising house prices and the general perception of prosperity? How many onthe- record comments can we find suggesting that lending practices were incautious or leverage excessive?

And Central Banks? With few exceptions were they not always ready to use the interest rate lever to cushion any slump in markets?

Leverage, leverage and more leverage. That’s what this has all been about. The unwinding process was never going to be pretty but even we are surprised by how ugly it has become. It has a long way to go.

The now infamous Paulson $700bn bail-out had as its main text the unclogging of bank arteries to allow lending to resume. There is no certainty this will work as the issue now is as much about solvency as liquidity. Its sub-text, however, was to convince the American public that lining up at the bank window to withdraw their life savings was unnecessary. This probably will work and is the most important reason why the plan, flawed as it is, should be supported.

Tony Cousins, CIO and CEO of Pyrford, commented:

Risk Disclaimer 

Past performance should not be seen as an indication of future performance. 

Views and opinions have been arrived at by BMO Global Asset Management and should not be considered to be a recommendation or solicitation to buy or sell any companies that may be mentioned.

I am tremendously proud of what we have achieved for our clients over the last quarter of a century. Nothing we have done is more critical than helping pay pensions for many years. This has been achieved by a tightly knit team following a very consistent investment methodology that has never changed. Our approach has always been rooted in quality, value and common sense with a focus on avoiding losses, so that we could continue to compound a great long term rate of return for our clients.

And of course we welcomed a new US President in 2016, which incidentally is the fourth president that has been in the White House over the period we have been managing this strategy!

We could conceivably write a Pyrspectives without referring to THE election and President-elect Trump and, to be frank, it is tempting to do so as there are so many unknowns that it is difficult to be cogent and value-additive. Nevertheless we feel compelled to make some stumbling attempt at comment. We never fall into the trap of forecasting the outcome of elections but if we are being totally honest we did believe it unlikely that we would end up discussing a Trump Presidency.

The first observation to make is that the stock market clearly likes the prospect of Mr Trump at the helm. The “Trump bounce” in the stock indices is very pronounced even on very long-term charts. The market likes the sound of a big spending President who has also promised a substantial reduction in the corporate tax rate. The jaw-boning about tariffs and protection seems not to disturb the traders one whit (it disturbs us!).

As we look forward to the next 25 years we wish to thank all of our clients and other supporters for the confidence they have shown us and we look forward to continue trying to make sense out of markets to identify more investment opportunities in the future – whatever it may hold!

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