Warren Buffett has said it’s easier to tell what will happen with a stock than when it will happen. This often means sticking with an original investment idea for some time before your predictions pan out. Patience is the key for investment managers and I’d like to share an example with you of what I mean by this.
In 2011, I bought shares in PNI Digital Media, a Vancouver-based company that supplies leading retailers with a platform for photos, greeting cards and mobile software. The same year I bought the stock it declined 58%. Despite its performance I still believed in my original thesis and had increased the stock’s weighting in the fund to 5% by year end.
In 2012, PNI fell another 53%. Again, I didn’t waiver from my original idea because I believed in the company’s long-term value. By the end of 2012, PNI’s weight in the fund increased to 7.2% despite more than 50% in two consecutive years – its cumulative decline totaled 80%.
In 2013, my original predications about the company’s value began to unfold. PNI’s stock climbed 198% and was, by far, the biggest contributor to Trimark North American Endeavour Class, Series A 39% return.
By averaging down on PNI as it declined, the fund saw a 40% rise in PNI’s position from its cost base as of December 31, 2013. It took more than two, often painful, years to see the PNI investment pay off for unitholders, but my patience was well rewarded.
This is what others call active management, but we call it the Trimark discipline.
Have you ever held onto a stock that dropped in excess of 50%? Share your story below or via e-mail.
Note: The company mentioned in the article was selected for illustrative purposes only and is not intended to convey specific investment advice.
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Trimark North American Endeavour Class, Series A provided the following performance returns as at December 31, 2013: 1-year, 39.11%; 2-year, 28.47%; 5-year, 17.13%; 10-year, 4.22%.
On August 10, 2007, the Fund’s investment objectives and strategies, and portfolio advisor were changed. The performance of this Fund for the period prior to this date would have been different had the current investment objectives and strategies, and portfolio advisor been in place during that period.