Report Updates

We have posted report updates on Andlauer Healthcare Group (AND) and North West Company (NWC). AND is one of Canada's most highly valued supply chain management companies which operates in the specialized transportation segment of the healthcare industry. NWC is a niche retail player which focuses on rural and developing regions. One company trades at a slight premium to peers and has a strong acquisition strategy, whereas the other is trading at a discount to peers with a discipline capital allocation strategy. 

Read the latest updates by logging in here!

Investor Sentiment Survey - RESULTS!

Thank you to all those that participated in this past market update's Investor Sentiment Survey. We have published the results from the survey in a report in the link below. Please note that the weightings and categorization of these results are still a work in progress, and the model(s) used to analyze the results may change over time as more data comes in.

The investor sentiment score has continued to drop, and now stands at 42/100, from a prior reading of 45. Investors have titled towards a 'very bearish' camp and expectations for a higher Canadian market in the next 12 months have waned. Compared to the previous survey, investors have increased the odds of future rate hikes, but have also increased the odds that inflation remains flat one year from now. 

Survey Results

We look forward to releasing another round of the Investor Sentiment Survey at the next market update!

Market Update

The markets have largely been chopping sideways over the past few weeks as investors mull over inflation readings for May and central bank interest rate decisions. The US dollar and the price of oil have been holding up well, while gold inches lower. The US markets closed out the first half of the year well into positive territory, and we expect some level of sector or industry rotation for the second half of the year. Earnings season begins to kick off late next week and investors are also waiting the US CPI print early next week. With the first half of the year in the books, we wanted to focus on the long-term benefits of dollar cost averaging through market volatility.

Introduction to Dollar Cost Averaging
In the world of investing, it's easy to be swayed by the constant barrage of macroeconomic news, market fluctuations, and fear-inducing headlines. But successful investors understand the importance of staying focused and maintaining a disciplined approach. One such strategy that stands the test of time is dollar cost averaging (DCA). By consistently investing a fixed amount of money at regular intervals, regardless of market conditions, investors can take advantage of market volatility and build wealth over the long term. In this market update, we explore the significance of dollar cost averaging, particularly during periods of large declines and intimidating economic environments.
 
The Basics of Dollar Cost Averaging
Dollar cost averaging is a technique where an investor invests a fixed dollar amount into a particular investment at regular intervals, regardless of the investment's price. This approach removes the need for timing the market, as investments are made consistently over time. By investing a fixed amount regularly, investors buy more shares when prices are low and fewer shares when prices are high. This strategy inherently embraces the volatility of the market, allowing investors to accumulate more shares at lower prices and potentially benefit from the upward trajectory of the market over the long term.
 
The Psychological Advantage
Aside from its financial benefits, dollar cost averaging offers a psychological advantage for investors. By establishing a regular investment routine, it eliminates the need to make emotional decisions driven by fear or greed. Instead, investors develop discipline, patience, and a long-term perspective. By automating investments, investors can sidestep the temptation to time the market or make impulsive decisions based on short-term events. This disciplined approach helps to reduce stress and anxiety associated with investing, enabling investors to stay focused on their long-term financial goals. In this analysis, we will be using the S&P 500 as the investment vehicle that an individual uses a DCA strategy on.
 
In the below chart, we have analyzed an investor using a $500 bi-weekly DCA strategy on the S&P 500 beginning in 2019 and ending last week, June 26, 2023. Over the course of the ~4.5 years, this investor would have invested $57,000 of their own capital, earning a cumulative 22%, or ~$13,000 over that 4.5 year period.

Navigating Large Declines
During periods of significant market declines, it is natural for investors to experience fear, uncertainty, and doubt. The media amplifies the negative sentiment, making it tempting to sell investments and exit the market. However, dollar cost averaging encourages investors to adopt a different mindset. Instead of succumbing to fear, it presents an opportunity to capitalize on the market's downward movement.
 
Now, let’s shift our focus to an investor that did not practice a consistent and disciplined DCA approach, but rather opted to ‘sit out’ the uncertain times and did not invest when the market declined. This investor similarly would have invested $57,000 of their own capital (assuming the periods where they opted out of investment are held as $500 in cash), earned a cumulative 17% over the 4.5 years, or ~$10,000. We can see that while the investors’ strategy was still positive, they gave up the potential for an additional 5% in gains, reducing their future compounded returns. While it can be easy to wait for ‘better opportunities’ in the market, a consistent DCA strategy guides an investor to continue to invest through the drawdowns, as the exact bottom of the market is always uncertain.

Conclusion
By adhering to a predetermined investment plan, investors can take a step back from the noise and focus on their long-term goals. Whether the economic news is positive or negative, they continue to invest consistently, unaffected by short-term volatility. Over time, the power of compounding combined with dollar cost averaging can yield significant returns, irrespective of temporary market setbacks.
 
Dollar cost averaging is a powerful strategy that empowers investors to navigate market volatility, embrace market downturns, and build wealth over time. By consistently investing fixed amounts at regular intervals, investors can take advantage of market fluctuations and potentially lower their average cost per share. Moreover, dollar cost averaging allows investors to adopt a disciplined approach, remove emotional biases, and stay committed to their long-term investment plan.

Best wishes for your investing!

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