The Markets
By Don MacDonald
Montreal money manager Benjamin Horwood rejoiced every time the stock market dropped in recent weeks. Horwood manages the $6.5 million Value Contrarian Canadian Equity Fund and he's pleased with the 27 per cent fall in the Toronto Stock Exchange 300 composite index from its high on April 22.
"The merchandise is finally going on sale," he says.
In his office in the Sun Life building, Horwood keeps a large sun-bleached bone on his paper-strewn desk. It's a souvenir of a trek through the Botswana wilderness, but it would be more appropriate if it had been extracted from the carcass of a slain bull.
The market plunge is sweet vindication for bearish investors like Horwood who were often ridiculed and scorned for their pessimism when the bull market was running strong.
Then cash was trash. Now cash is king.
Indeed, Horwood's fund - which requires an initial investment of at least $150,000 - was holding almost a third of its value in cash going into the plunge because he says he couldn't find enough reasonable priced stocks in an over-heated market.
Now his investors are benefiting from his caution. In 1998, his fund is down just 4 per cent to Aug. 31, compared with a decline of 17.5 per cent for the TSE 300. He says he's moving into the market with his cash and a list of stocks he's interested in buying when the price is right.
Horwood, like his heroes Warren Buffett and Benjamin Graham, is a value investor. That means he seeks out stocks trading at a discounted price compared with earnings, book value another measures.
Buffett, who has produced a 25.6 percent average annual return on his investments since 1967, counsels investors to buy stock in quality companies at favourable prices and hold on. And he advises those who will be buyers of stocks in coming years, such as members of the big baby-boom generation, to be optimistic in the face of market pessimism.
