At COTE 100, in our weekly management meetings, we start our discussions by going around the table where each participant must share a piece of good news, whether work-related or personal. I assure you, it’s not easy!
A recent article by Nicolas Bérubé in La Pressehighlights “10 Things Going Right in Quebec.”
I challenge you to find one or two other pieces of good news for Quebec! And while you’re at it, could you list five aspects that are truly going well in your personal or professional life?
Not easy? Yet I’m sure that if I asked you to list five things that aren’t going well in Quebec or on the international stage, you’d have no trouble listing them.
This phenomenon, in my opinion, is due to both our nature and the fact that we are constantly bombarded by bad news from the media. We can’t really blame them: it’s the bad news, the sensational news, that draws readers’ attention.
In his article, Mr. Bérubé writes that “relying on the mood of the day and headlines to form an opinion on the health of the province is the perfect recipe for spending your time outraged by society’s fate.”
I recently wrote that an investor’s thinking, which is focused on the long term rather than the short term, is a muscle that must be developed through regular exercise. Optimism is another crucial muscle that investors must continually exercise.
To invest in the stock market over the long term, one must have a thick skin and an unshakable optimism toward the stock market, the economy, companies’ adaptability, and humanity’s ability to find solutions to its challenges.
I often refer to an article written by Warren Buffett and published in The New York Times in October 2008, titled “Buy American. I Am.” during the 2008-2009 financial crisis. For Buffett, betting against the U.S. economy and its stock market has always been costly in the long run. In October 2008, he wrote that “fears regarding the long-term prosperity of the nation’s many sound companies make no sense.”
Could I identify two more pieces of good news for Quebec investors?
Here’s one: despite the small size of Quebec’s stock market, we are fortunate to have a proportionately high number of quality companies that have greatly enriched their shareholders over many years right here in Quebec. I’m thinking of companies like CGI, Couche-Tard, Dollarama, Metro, National Bank, MTY, Stella-Jones, Transforce, and WSP Global. I’m sure I’ve forgotten a few.
Another piece of good news: in my opinion, today’s North American companies are significantly more attractive than they were 30 or 40 years ago. Indeed, the typical business today has a business model that requires far less capital and fixed assets than 40 years ago. Services and technology have increasingly taken a larger place in the economy over the decades, to the detriment of heavier industries like manufacturing or metallurgical extraction. Generally, such companies are more profitable (at least in terms of average returns on invested capital), less cyclical, and offer greater long-term growth potential. In my view, it’s only natural that a higher price-to-earnings ratio is warranted.
Reading the newspapers, one might get the impression that everything is going wrong in the world. But that’s not the case. Investors would do well to remind themselves of that regularly.
Philippe Le Blanc, CFA, MBA
Chief Investment Officer at COTE 100
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