|Edgepoint Global Portfolio Fund December Q4 Update
EdgePoint’s predecessor was a great Canadian investment firm called Trimark. Tye Bousada was the lead manager on the Trimark Global fund before he left to start EdgePoint. About twenty years ago, near the peak of the tech bubble, Trimark created a visual that caught people’s attention. The visual was extremely powerful because it captured the fact that you could buy all 47 companies in the Trimark Fund for the same market cap as Cisco Systems, but derive multiples of revenue and profits by owning the diverse set of investments in the Trimark Fund at that time. The unravelling of this absurd valuation discrepancy led to the Tech Bubble market upset.
Today, twenty years later, it’s interesting to see that a similar movie is playing out, but with a different set of characters. Now, you can own every company in the EdgePoint Global Portfolio for the same market cap as Tesla, Nvidia and Netflix combined (as at October 31, 2020). And, similar to the situation in 2000, you can derive multiples of revenue and earnings by owning the EdgePoint Global Portfolio consisting of roughly 35 attractively priced growth companies which do not have the valuation headwinds of today’s market darlings. What’s that old saying? “The more things change, the more they stay the same.” It’s so true!
The Edgepoint investment approach is not deep value, GARP, momentum or technically driven. What they do is invest the way a rational businessperson would approach buying a business. The rational being that business owners seek to buy businesses whose cash flows can be materially higher down the road (growth), but also pay a price for the business that doesn’t discount these future cash flows (value). They believe these favourable conditions exist in abundance today and they have set up the EdgePoint Global Portfolio in an optimal manner. If history is a guide, this should translate into very pleasing returns for investors who have a long-term focus and can withstand some short-term uncertainty.
The December Quarterly Update from the Edgepoint Global Portfolio team can be found here: