Monthly Message

The Wutherich & Co. Composite was down 1.8% in May. This compares with the S&P/TSX being down 4.9%.

Debt ceiling battles in the US, Russia’s invasion of Ukraine, recession fears, inflation, higher interest rates, the health of the consumer, concerns about the banking environment and regulatory changes continue to weigh on markets, and on some of our stocks.

Outstanding earnings reports from most of our names during May countered some of this negativity. This affirms how strongly positioned many of our companies are to weather this environment. Notable exceptions are Alaris (AD.UN-T) and Hibbett (HIBB-Q). The drop in HIBB stock alone caused a 3% decline in the Wutherich & Company Composite in May. AD.UN, which invests in private companies, is dealing with challenges with one of its current, one of its former and select weakness in some of its other partners. HIBB, a sporting goods retailer, is dealing with the aftereffects of the COVID boom in demand for its products combined with a consumer that is re-trenching in the face of all the above-mentioned macro-economic factors. Both companies have plenty to work through but we believe they can re-establish growth in the coming years. As for the rest of our names, we find managements are more cautious but still enjoying strong fundamentals for their businesses. Good long-term outlooks and cheap valuations should support long-term capital appreciation for the portfolio. While we don’t chase it, an average dividend yield of about 4% provides us with a good underlying rate of return while equity prices sort themselves out over the next few years.

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