Investment Letters for the Value Contrarian Fund



Full Disclosure

Over the coming years we want to advise investors that the Value Contrarian Fund may be more volatile than has been the case in the past. Here is our reasoning:


  1. When your Fund is fully invested, we are subject to the full volatility of the financial markets. As we don’t short stocks, cash is often the simplest, risk-free instrument to blunt stock market volatility.

  2. Berkshire Hathaway, Warren Buffett’s investment vehicle, represents approximately 20% of your fund's assets. We view this as a strong anchor investment in all market conditions. Nonetheless, there will be years (like 2019 & 2020) where Berkshire underperforms the market and will impede your Fund's returns. 

  3. A rising Canadian dollar and a weakening US dollar will also affect your Funds results, due to our significant U.S. holdings. Presently, the Canadian dollar is approximately 78.8¢. However, if over the coming years the CDN$ rose to .85¢ - .89¢, this would add a stiff headwind to your fund’s net results. Predicting currency moves is about as easy as predicting the weather this time next year. Good Luck!


Benjamin Horwood

2021 Year End
             Value Contrarian Equity Fund

Dear Partners,


The longer the Fed takes to tackle a high rate of inflation, the more inflationary psychology is embedded in the private sector - and the more it will have to shock the system.

[Perhaps with even higher rates than expected]

Henry Kaufman

Former Vice Chair Salomon Brothers

Jan 14, 2022

There's nothing in the market variables that is telling me the Fed is behind the [inflation] curve. Be careful what you wish for [higher rates], because six months from now we'll be talking about a recession and inflation is going to be relegated to the back pages of the newspaper.

David Rosenberg

Rosenberg Research

February 2, 2022

Year-End Performance  

Your Fund ended the year with a net asset value of $4,203.71 per unit

The era of investors buying profitless sales growth stocks, while racking up effortless stock gains has passed. Surging inflation and the prospect of numerous interest-rate hikes have dented the 2009-2021 bull market.

***Furthermore, unlike in the past, there are no guarantees that the Federal Reserve will ride to the rescue with lower rates during the next market downturn

According to one line of thought (Greg Ip - Wall Street Journalist), the Fed is so far behind the inflation "curve ball" that it needs to get interest rates up almost irrespective of the upcoming data. As a result, the Fed won't be holding the market's hand by committing to a particular path of rate increases. "This is a "recipe" for an unpleasant surprises (larger individual rate hikes), more market volatility, and a risk premium in the form of higher bond yields..."

There is a looming dilemma the Bank of Canada and U.S Fed may eventually face. At some point, the Fed may have to choose between which specific problem to rescue:

  1. A plunging stock market; or

  2. Persistent inflation.

In other words, will the Fed, as it has in the past 30 plus years, come to the rescue of stocks and a falling stock market with lower rates, or;

Will the Fed make the tough decision and continue to raise or maintain rates, despite a weak/falling stock market, in order to win the battle against inflation.

David Roseberg (see quote p.2) provides a differing view on the severity and duration of today's inflation threat. Only time will tell whether today's outbreak of inflation is "transitory", or something more entrenched. 

Your fund had a solid year of singles & doubles. We took profits early in our energy holdings. Not being overweight in the energy/commodity sectors did hold back your Funds returns for the year. 

For the most part, our larger positions performed well. TD Bank (+39.2%), Berkshire (+28.9%), AON (+43.2%), Pershing Square (+17.4%), and CGI (10.7%).

We took advantage of the billion dollar + Definity - Insurance IPO for a quick gain of over 30%. Definity is one of Canada's largest property & casualty insurance companies.

Luckily, we did not have any major "blow-ups" in the portfolio. However, your manager was "early" investing in an ETF holding "bluechip" Chinese internet stocks.

Alibaba, Tencent, etc. were down over 50% from their records highs as a result of the Chinese governments crackdown on the tech sector and its freewheeling entrepreneurs. Add in rising interests rates, a slowing economy, and regulatory uncertainties, and now one can better understand the headwinds facing these Chinese stocks.

Our portfolio anchor (and largest position) remains Berkshire Hathaway, which had another solid year. With rising interest rates now underway, there has been a rotation away from "growth" and into "value" stocks, all to the benefit of Berkshire and its large insurance and financial portfolio.

Buffet, disciplined as ever, did not find any "elephant" sized investments to put its $150 billion of cash to use. Instead, Berkshire spent over $20 billion in the first nine months buying back its stock.

Buffet is a "supremo" allocator of capital, and very price sensitive when buying back Berkshire stock. No worries of him overpaying!

An interesting Berkshire fact. Apple stock represents approximately 50% of Berkshire's entire equity portfolio, and almost 25% of its market capitalization. Berkshire stock will thus suffer "guilty by association" should Apple's stock plunge in price. 

Despite Buffet's rock-solid balance sheet, huge cash position, and stable of high-quality business, one must remember Buffet's following observations.

"Berkshire, three times since I took over, has gone down roughly 50%. Did I feel poor then? No, not at all... I knew it was going to be worth more over time. American businesses are going to be worth more over time... But if you think you can jump in and out or that you know the time to come in, then I think you're making a mistake." (Feb 2017)

Finally, we own a significant core holding in Bill Ackmans, Pershing Square listed hedge fund. While the current asset value of Pershing was up +26.9% for the year, its stock price advanced only +18.7%. 

From 2015 to 2018, Bill suffered a series of missteps with Valeant, Herbalife and JCPenny. Nonetheless, Ackman has sharpened his investment skills from this rough patch. Today, Pershing Square is concentrated portfolio of quality, world class growing business. The Funds holdings include such names as Universal Music Group, Hilton Worldwide, Domino's Pizza, Lowe's hardware store, and Chipotle, amongst others. Simply stated, we are piggybacking off of Ackmans superior investing skills... at a discount!

Ackman relishes being a contrarian. In 2020, he famously made over two billion dollars on a Covid-19 short bet. While recently, he made approximately a billion dollars calculating that there would be a more than expected rise in interest rates

Unfortunately, in our opinion, the 1.5% + 20% performance fee the Fund charges causes Ackman's vehicle to trade at a hefty discount to its asset value. Thus, we prefer to be buyers of Pershing stock at a 30-35% discount. (The Fund normally trades at a 25% discount.)


Mr. President, something that never existed... Now does not exist anymore.

[Israeli covert military operation - destruction of the Syrian

secret nuclear reactor - September 2007]

Israeli PM to President Bush

Operation Orchard: The Mossad & Sayeret Matkal

Youtube Doc - July 24, 2015

Geo-political shocks to the global financial system rarely, if ever, happen totally "out of the blue". Cataclysmic events/showdowns are usually telegraphed well in advance. Investors always need to pay close attention to these potential geo-political powder kegs. These warnings may occur over weeks, months or even years. Today (or in 2023), think - Israel & Iran, Russia/Ukraine or China/Taiwan.

In our opinion, the combination of rising interest rates, with an Iran/Israel conflict, could be the eventual one/two knockout punch to create the conditions for the next bear market. However, should an acceptable nuclear deal with Iran prevail, the payoff could be lower oil prices, and reduced military tension in the Middle East.

Today, western democratic powers don't usually engage in un-telegraphed military moves. It normally takes time to gather a consensus in a democracy. Moreover, only when democracies have been directly attacked, their backs are up against the wall, or a strategic ally has been invaded/attacked, will a western democracy get off its butt and make a military move

Interestingly, no European/North American democracy has ever destroyed a nuclear reactor. However, there is one nation that is an "outlier" when it comes to destroying nuclear reactors. 

The one democratic exception [we can think of] to the above military behavior, is the state of Israel, which in the past has destroyed two nuclear reactors in Iraq and Syria.

Israel, the size of New Jersey, with a 9 million citizens [of which 2 million are Arab Israelis] is surrounded by dictatorships, autocrats, and supreme rulers/monarchs for life. Neighborly relations in the Middle East are not normally a picture of "campfire Kumbaya" love. As people in the region like to say: "it's a tough neighborhood". In our opinion, this region is always one geo-political powder-keg "spark" waiting to blow!

The “starters gun” announcing the official countdown to the onset of the next bear market, likely commences this March/2022, with the first Fed rate hike. A big question, that only in hindsight can be answered: “Is the 40 plus year cycle (1981-2020) of steadily falling interest rates finally over?” History has shown that it can take anywhere from 3 months to a further 3 years (from the initial rate hike) before a final stock market peak has been reached.

The not so good news:

The “cream puff” ride of 2021 is over, especially for profitless growth stocks. Rising interest rates in 2022 will mean increased volatility and market corrections. And, there is always the possibility that the Fed overshoots, with more frequent or larger rate hikes than expected.


The good news:

Slowly rising interest rates and inflationary pressures may actually be positive for the Canadian stock market. The TSX commodity, energy, and banking sectors will likely continue to lead the way. Shopify has been dethroned from its #1 position as Canada’s largest TSX listed company. The market is now saying – show me profitable growth, as opposed to, fast sales growth!

All the stars are aligning in 2022 for the TSX to finally outperform its tech laden southern neighbor. Canadian stocks represent solid value, trading below their five-year average valuation at about 14 times earnings.

Unfortunately, in the coming year, the gains in the TSX will likely not be broad based. Rather, the gains will likely continue to be concentrated in a few sectors, such as volatile energy & commodities. Thus, Canadian managers will have a tough time beating the market in 2022, unless they are “index huggers”.

Barring a surprise “geo-political” event [i.e.; Israel/Iran], rising interest rates will cause further P/E multiple contraction on growth stocks, while favoring profitable value stocks.

Remember, opportunities present themselves in all markets! And don’t forget to fasten your seatbelts!


Respectfully yours,


Benjamin D. Horwood

Portfolio Manager

February 1st, 2022

Value Contrarian Equity Fund

Call today: (514) 398-0808

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Certainly, we prefer to act through international co-operation, but if necessary - we will defend ourselves, by ourselves [against Iran].

Yair Lapid

Israeli Foreign Minister

December 2021

In order to turn the market around to a more non-inflationary attitude, you have to shock the market. You can't raise interest rates bit-by-bit.

Henry Kaufman

Former Vice Chair Salomon Brothers

Jan 14, 2022


Value Contrarian Asset Management


Bank of Commerce Center

1155 boul. René Lévesque West Suite 2500

Montréal, Québec 

H3B 2K4, Canada

Contact Information


Tel: (514) 398-0808

Fax: (514) 398-9602



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2016 Value Contrarian Asset Management


Value Contrarian Asset Management


Bank of Commerce Center

1155 boul. René Lévesque West Suite 2500

Montréal, Québec 

H9K 1J5, Canada

Contact Information


Tel: (514) 398-0808

Fax: (514) 398-9602