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Dear fellow investors,

In this newsletter you will find an analysis of the BDL Rempart Europe and BDL Convictions funds’ performance in 2019, as well as our investment ideas for 2020.

After the market rout in December 2018, we wrote in our January 2019 newsletter to our investors that “we are finding some interesting valuations to invest our money in companies with strong business models and management teams. Our IT and quantitative measurement tools are recent but we cannot remember having built a portfolio of long investments with such attractive price multiples since the 2008 crisis. The average free cash flow yield on our long investments is more than 10%.”
Our performance in 2019 were good despite a complicated situation. Global growth showed signs of weakness due, amongst other things, to uncertainty surrounding the trade dispute between the United States and China, to Brexit and to several uprisings such as that in Hong Kong. As in times of crisis, central bankers again came to financial markets’ rescue, kicking any recession into the long grass. Economic agents are being encouraged to accumulate debt, and financial asset prices are at a high. The risk now is that central bankers will end up running out of ammunition. The most common response is that fiscal policies will take over the rescue operation at this point. The argument holds water as central banks’ insatiable appetite for buying government bonds would provide the fiscal headroom needed by increasingly populist governments. The question is whether the policy tempo will be fast enough to identify and anticipate future risks of a recession.

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