Our approach to investing begins with more than 20 years of fundamental research experience. Veritas Asset Management was founded to capitalize on the successful fundamental research of our affiliate Veritas Investment Research (‘VIR’). Throughout VIR’s 20+ years of producing independent research, it has proven that detailed, high-quality fundamental research produces better investment decisions. Our goal is to provide our investors with consistent risk-adjusted returns that beat investment benchmarks over the short and long term.
Our portfolios offer concentrated, high conviction positions in companies identified through our research and due diligence work, applying a disciplined and systematic selection process. Through our research, we identify opportunities to profit from mispriced securities, either by buying top-quality companies for long-term capital appreciation or through long-short hedging strategies. While our portfolios are primarily focused on Canadian equities, our portfolio managers also consider opportunities beyond Canada.
With most of Q1-2021 earnings in the books, 2021 estimates for the S&P 500 are up about 16% on the year. Had the index simply risen with estimates, it would also be up 16%. Instead, the S&P 500 is up about 12%. The index multiple is contracting.
There are a few reasons why this should worry investors. First, there probably aren’t many more double-digit earnings revisions ahead. Second, we may not be able to count on low bond yields forever. That means the tide may no longer lift all boats, making stock selection all the more critical.
Our funds continue to benefit from the ideas generated by one of the best equity research teams on the street, Veritas Investment Research. Following their advice, we are diligently sticking to companies with strong free cash flows, high quality reporting and room to improve their outlook. The flow of cash onto the balance sheet should grow equity value, even if multiples continue to contract.