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There's Always Something to Do

There's Always Something to Do: The Peter Cundill Investment Approach

Christopher Risso-Gill
Copyright Date: 2011
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  • Book Info
    There's Always Something to Do
    Book Description:

    In the context of recent financial upheavals and ongoing uncertainty, Peter Cundill's wise and frequently funny reflections are more important than ever. In a seamlessly assembled narrative drawn from interviews, speeches, and exclusive access to the daily journal Cundill kept for forty-five years, Christopher Risso-Gill outlines Cundill's investment approach and provides accounts of his investments and the analytical process that led to their selection. A book for everyday investors as much as professional investors and investment gurus, There's Always Something to Do offers a compelling perspective on global financial markets and on how we can avoid their worst pitfalls and grow our hard-earned capital.

    eISBN: 978-0-7735-8109-8
    Subjects: Finance

Table of Contents

  1. Front Matter
    (pp. i-iv)
  2. Table of Contents
    (pp. v-vi)
  3. Foreword
    (pp. vii-x)

    christopher risso-gill has written this wonderful book on Peter Cundill, my friend of thirty years, which I recommend highly. Like Warren Buffett and John Templeton, Peter Cundill was a legendary practitioner of the “Value Approach according to Ben Graham.”

    Like many “value” investors, Pete’s “road to Damascus” occurred in late 1973 when he came uponSecurity Analysiswritten by Ben Graham (the same thing happened to me a year later, in 1974). Fully charged, Pete took control of the All-Canadian Venture Fund in 1975 a value investor’s dream which had fallen from $6.00 per share in 1969 to $2.00 in...

  4. 1 The Eureka Moment
    (pp. 3-6)

    ONE EVENING IN DECEMBER 1973 Peter Cundill boarded a flight from Toronto to Vancouver to return home for Christmas. He was nursing a monumental hangover and plagued by a growing sense of frustration that, having reached the mature age of thirty-five and accumulated considerable business and investment experience, all his efforts to come up with a satisfactory formula that would identify undervalued shares in the stock market with a reasonable degree of safety and consistency seemed to have led him down a series of blind alleys.

    By chance he happened to be clutching a copy ofSuper Moneyby George...

  5. 2 Getting to First Base
    (pp. 7-16)

    AS SOON AS PETER qualified he joined the well-respected Montreal investment firm of Greenshields, where he formed an immediate bond with Frank Trebell, its youthful general manager, and secured a coveted place in the firm’s Special Projects department. The group was in the initial stages of promoting the formation of the Mortgage Insurance Company of Canada (MICC) and as a CA, albeit newly qualified, Peter was charged with producing the projections for the business plan and then presenting them at board level to the prospective investing institutions, which included Alcan, the Bank of Nova Scotia, Air Canada, and the CN...

  6. 3 Launching a Mutual Fund onValue Principles
    (pp. 17-32)

    BY THE BEGINNING OF THE 1970s Peter’s relationship with Frank Trebell had deteriorated to the point where he felt his position at Yorkshire had become untenable. He suspected that as a director he was not being kept fully informed and he was increasingly doubtful about Trebell’s effectiveness as chief executive. In his view the opportunity to build on the Yorkshire’s solid reputation and turn a sleepy but sound institution into the premier financial services group in western Canada had been squandered in a series of ill-conceived expansionary moves, which had been inadequately planned and resourced and poorly executed. His unease...

  7. 4 Value Investment in Action
    (pp. 33-44)

    THE RECOVERY OF THE GLOBAL ECONOMY after the recession and the stock market collapse of 1973/4 was followed by a golden decade for value investment. The severity of the downturn meant that the choice of securities that qualified for investment under Peter’s broad criteria was bewilderingly large, and in this respect there are some similarities with today. But the stricter standards he had chosen to apply in the balance sheet analysis of the “intrinsic value” test, which he had described as “mostly Graham, a little Buffett and a bit of Cundill,” imposed their own discipline and assisted him enormously in...

  8. 5 Going Global
    (pp. 45-50)

    IN SPITE OF PETER’S WILLINGNESS to concentrate a substantial percentage of the Value Fund’s resources into a single market in which, at any given juncture, there might be a plentiful choice of value opportunities, he had taken the view early on that he would be prepared “to put money into anything, anywhere, provided that the downside is measurable and acceptable and the chances of a good profit appear to be better than 50%. I will not take gambles, but it is part of my job description to be ready to take very carefully calculated risks.” One such risk was looking...

  9. 6 Swapping Continents
    (pp. 51-56)

    PETER’S WIFE, JOANIE, WAS USUALLY quite prepared to go along with him in some of the unusual ways in which he chose to live his life. She preferred North American habits and culture and was perfectly content being in British Columbia, Washington, or California, either by the coast or in the mountains, but by the mid 1980s Peter was becoming restless in Vancouver, especially as his professional life had begun to take on a considerably more international dimension. He was hankering after the chance to explore the possibility of taking up permanent residence outside Canada and the obvious choices were...

  10. 7 A Decade of Success
    (pp. 57-64)

    IN 1984 THE CUNDILL VALUE FUND celebrated its tenth year of operation under Peter’s management. The result for the year was an appreciation of 6%, which might have been considered disappointing by contrast with the 44% gain it had enjoyed the previous year, but, since this compared with a 4% decline in the Dow Jones and a 6% decline in the Toronto Stock Exchange, Peter still had reason to be well pleased. The fund had virtually doubled in size over the year to $126 million, so that it could no longer be considered just a small “hot shot” affair, relying...

  11. 8 New Dimensions
    (pp. 65-70)

    AS WORD OF PETER’S FINANCIAL wizardry spread through the wider community, he was frequently asked to undertake charity work, much of which he had to decline because he recognized that spreading his efforts too thinly was just a waste of everyone’s time. However, he did accept Bryan Reynolds’s suggestion that he should join the board of trustees of Pearson College. It was the second oldest school in the United World Colleges group, the first of which had been founded in Wales shortly after the Second World War under the auspices of Kurt Hahn, the great German educationalist and liberal thinker....

  12. 9 Investments and Stratagems
    (pp. 71-84)

    THE LEADING POSITION that the Value Fund had assumed in North American performance tables had automatically drawn Peter into the “limelight,” so that by the early 1980s the financial press was keenly aware of him, eager to interview him and to write about him, particularly as he was no dry back-room boffin but a frank and effective communicator with a wry sense of humour. In addition to which he was an athlete of some note and he led the kind of jet-set international lifestyle that, with the zest of a little eccentricity, suited the mood of the times.

    As a...

  13. 10 Surviving a Crash
    (pp. 85-96)

    THE BEGINNING OF 1987 brought with it the development of some important relationships for Peter. He had been introduced to Peter Stormonth Darling at a wedding in 1978 and they had become good friends. Darling had spent some years working in Canada for a financial services company set up by Sir Sigmund Warburg, the founder of the eponymous merchant bank, so he and Peter had much in common, both personally and professionally. Sir Sigmund had promoted Darling to the position of vice-chair ofWarburgs and given him the task of getting rid of the bank’s asset management subsidiary, which Sir Sigmund...

  14. 11 Distressed Corporate Securities and Defaulted Sovereign Debt
    (pp. 97-112)

    DISTRESSED CORPORATE DEBT and the debt of companies under Chapter XI bankruptcy protection, or its equivalent outside the United States, was a field with which Peter was already thoroughly familiar and it had provided him with some stellar returns in the 1980s, especially in the real estate sector with Daon and NuWest. It fitted perfectly into his Graham and Dodd framework because the departure point in researching distressed corporate debt is always the balance sheet. What one needs to determine is whether, as the reorganization, or the liquidation, proceeds in an orderly fashion rather than a panic sale, the sum...

  15. 12 Dealing with Adversity
    (pp. 113-120)

    AT THE END OF 1989 the Value Fund posted its fifteenth year of unbroken positive returns, gaining a respectable 10%. Although this was less than the Dow Jones or the tse, it still firmly supported the fund’s remarkable fifteen-year compound growth record of 22%. Peter was disappointed but not despondent and the coming year seemed to hold promise. The worst of the sec investigation of Drexel Burnham now appeared to be over, so that there was good reason to expect an improvement in the high yield market, and Westar, the fund’s largest and most problematic position, looked as though it...

  16. 13 Per Ardua ad Astra
    (pp. 121-132)

    THE EARLY 1990s WERE BEDEVILLED by a succession of disappointing investments, not just ltv, and 1990 itself had been the first loss-making year in the sixteen-year history of the Value Fund – down 9%. Even more unsettling for Peter were two further years of pedestrian results: plus 5% in 1991 and plus 7% in 1992, which prompted him to confide to his journal:

    I am off balance at the moment – not in harmony. The problem is partly professional. I feel sort of stuck – no triumphs, only little glimpses of light, which have so far kept me on a level, as it...

  17. 14 The Perfect Match
    (pp. 133-138)

    ONE FEATURE THAT APPEARS to be common to most of the great investors is that they are proselytizers, exhibiting a general willingness to mentor and instruct “disciples.” Peter is no exception. He is such an enthusiast for his profession, and especially for his own particular corner of it – value investment within a Ben Graham framework, shaped along Cundill lines – that he has always been eager to share his knowledge even, in a sense, to evangelize. The results of this were not only “Pete’s Mornings” at the annual Cundill conference but a steady stream of speaking engagements at business schools, investment...

  18. 15 Entering the Big League
    (pp. 139-148)

    THE PERFORMANCE OF THE VALUE FUND in the years immediately following the stellar 43% gain of 1993 had been more pedestrian, although perfectly respectable, notching up a further 34.4% between 1994 and 1996. But Peter had made a major strategic switch out of Europe, especially the French market, into Japan and, as is so often the case with value investment, he was out too early and in too early.

    It was not that European markets were statistically particularly overvalued. They were not. The crux of the matter was that many Japanese securities were beginning to be almost as cheap again...

  19. 16 There’s Always Something Left to Learn
    (pp. 149-158)

    THE EARLY YEARS of the new millennium were generally favourable for the value investor. It was never easy but, quite often during that period, it turned out that less patience than usual was required for a value investment to be recognized by the market. Nevertheless, pitfalls always abounded. Peter has an enviable gift for avoiding the majority of them and this is not just based on doing the numbers and adhering rigorously to the Ben Graham framework. It springs from an instinct resulting from years of experience – a nose for when, even though a set of accounts may have all...

  20. 17 Dancing with theWitch Doctor
    (pp. 159-164)

    DUE DILIGENCE CAN TAKE MANY FORMS and in Peter’s case, in pursuit of thoroughness, it most certainly did. This particular investment tale begins in 2002. In the wake of 9/11 oil prices began to rise sharply, reflecting the increasing political uncertainty in the Middle East and the explosive growth being experienced in China. This rapidly turned into a hot market for oil stocks – one in which Peter was not participating since there were no net-net’s amongst the oil companies.

    Discipline in investment matters being his watchword, Peter was not listening to the arguments of some of his investment team who...

  21. 18 The Russian Bear
    (pp. 165-172)

    PETER MADE HIS FIRST VISIT to Russia in 1993, early in Boris Yeltsin’s reign as the first president of the Russian Federation and before the formation of the Moscow stock exchange. He had concluded then that there was nothing he could do until a more reliable commercial and legal framework emerged, with at least some semblance of Western accounting. He visited again in 1997 and summarized his impressions of the changes he saw:

    This is still a society in transition and confusion buttressed by some substantial economic progress. The most compelling change is that now about 65% of the work-force...

  22. 19 The Canadian Buffett
    (pp. 173-178)

    PETER FIRST MET PREM WATSA back in the 1980s when Prem was an executive at the Confederation Life Insurance Company in Toronto. As they got to know each other they discovered that they had a great deal in common. Like Peter, Prem is a convinced and practising disciple of Benjamin Graham, an admirer ofWarren Buffett, and counted Sir John Templeton as a friend, counsellor on many levels, and business mentor. Also in common with Peter, Prem regularly visited Sir John in Nassau and enjoyed his confidence. Sir John was a shareholder of Fairfax Financial, Prem’s company, as well as a...

  23. 20 Fragile X
    (pp. 179-184)

    AS EARLY AS 1998 PETER had begun to notice that he was developing a slight tremor, particularly affecting his right arm. Initially he thought little of it, but by the early 2000s it had started to become more troublesome and had spread to his left arm as well. The initial diagnosis was confused, suggesting either that Peter was exhibiting the early symptoms of Parkinson’s disease or that he had developed a vague condition referred to as “benign tremor.” He was treated with Parkinson’s medication, to which he did not respond at all. His shaking became much more severe and he...

  24. 21 What Makes a Great Investor?
    (pp. 185-190)

    FROM THE HUGE “CORPUS” of Peter’s writing – the journals, the investment notebooks, the thousands of memos and research notes as well as transcripts of speeches – it seemed that it would be a worthwhile exercise to try to distil what, in the final analysis, Peter himself believes constitute the characteristics that are common to most great investors. They are given in no particular order and it does not seem that Peter has ever sought to prioritize them either. Nevertheless, there are two characteristics that appear in his writings and speeches with greater frequency than all the rest.

    “Curiosity is the engine...

  25. 22 A Kind of Retirement
    (pp. 191-195)

    IF PETER HAD EVER IMAGINED that retirement would constitute a hiatus in activity, he was mistaken. He had not given up travelling and wherever he happened to be he continued to receive a constant stream of visitors, business and social, on top of which there was the Cundill History Prize. Peter had founded this in 2007 through McGill University, his alma mater. It is the largest history prize in the world and as well as being international – of the first two winners one, Stuart Schwartz, is American and the second, Lisa Jardine, is British – is devoted to academic works that...

  26. [Illustrations]
    (pp. 196-196)
  27. Glossary of Terms with Peter Cundill’s Comments
    (pp. 197-218)
  28. Appendix 1 Some major figures in Peter Cundill’s investment world
    (pp. 219-222)
  29. Appendix 2 Investments held by Peter Cundill entities as of 31 July 2010
    (pp. 223-224)
  30. Appendix 3 Net-net work sheet designed by Peter in 1975 and still in use today
    (pp. 225-226)
  31. Appendix 4 Performance chart showing the Mackenzie Cundill Value Fund measured against the MSCI World benchmark (C$)
    (pp. 227-228)
  32. Appendix 5 Transcription of journal on p. 2
    (pp. 229-230)
  33. Index
    (pp. 231-237)