Dona Eull-Schultz

A recent New York Times article suggested the “Oracle of Omaha” was looking a bit ordinary. The reason for the loss of luster was an underperformance four of the last five years as measured against the S&P 500. Notwithstanding the recent past, his overall 49 year track record is stellar. This begs the following questions: What is your timeframe? And, how relevant is relative performance?

At Leon Frazer and Associates we are not fans of relative performance measurement on any level. This recent example of a sharp reversal in our relative market performance shows why long term discipline is at a premium and short term market timing is a detriment to investors everywhere.

  • Our focus continues to be on making our clients a dependable annualized return, year in and year out, with as little risk as possible. Our performance relative to our peers in the short term is of little concern comparatively. We continue to be very positive on the long term prospects for the Canadian equity market and that is why we did not allocate one additional dollar to the US market in the last 18 months, even in the face of short term underperformance.
  • Our long term view on Canadian equities had not changed. Canadian equities have dividend yields far greater than US equities, and in order for us to satisfy a mid to high single digit annualized return goal EVERY YEAR, we look to the portfolio dividend yield to provide a significant chunk of that return.  Dividends are paid whether the market is up, down, or sideways.
  • Our primarily Canadian portfolios have internal dividend yields of roughly 3.5%-4%, due to the strong dividend increases from our holdings over time, and the sector mix of the portfolio. Increasing our allocation to US equity would have decreased this crucial portfolio yield metric and put our long term annualized performance goal at greater risk.

We will keep employing a long term thinking approach through thick and thin, refusing to play the relative performance game in the short term.  We are more than happy, however, to compare our long term track record of a 9%+ annualized return over 63 years with any investment strategy of a similar vintage.

Keep the faith in what is real…cash in your pocket on your money…sleep at night volatility.


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