Verified on May 22nd, 2014

http://www.sprunginvestment.com/

We provide Canadian investors with conservative investment management with an emphasis on wealth preservation & risk reduction.

We believe clients are more concerned about losing money than making speculative gains.

With over three decades of experience, we have believe that our value investing strategy is the best way to reduce risk and volatility and earn returns consistent with our clients’ goals over time. Our diligent, patient and opportunistic approach has served our clients well. When seeking investment opportunities we consistently:

• Appraise the intrinsic value of each company over a business cycle;
• Seek long-term growth of capital by investing in companies that we perceive to be undervalued;
• Utilize an estimated margin of safety to promote return of capital…not just return on capital.

Why does our value investing approach work? Warren Buffett is credited with the observation: “In the short-term the stock market is a voting machine; in the long term it is a weighing machine.” By this statement he is referring to the short-term volatility of the market as participants react to the endless stream of news but in the longer term, companies with better fundamentals will perform outperform their weaker counterparts. We do not believe that investors can make rational assessments based on the constant noise pervading the markets day to day. We do believe that by stepping back from that noise, investors can through extensive research and due diligence improve their odds significantly of choosing investments that will perform well over time.

Once an assessment is made as to the integrity of a company’s structure, business strategy, competitive position the quality of management an investor needs to assess the value of that company to themselves, the potential shareholder. Here are some basic measures to consider:

Return On Equity
Equity represents the amount of capital that shareholders have invested in the company. Common shareholders rank last if things go wrong behind creditors, employees and other liabilities that may be outstanding. The return, or profit, that the firm can earn over time on that equity is the most relevant factor that should concern a shareholder. The return on equity (ROE) can fluctuate dramatically in short periods of time whether due to decisions management has undertaken or outside factors such as the state of the economy or geopolitical events. Over a longer period, the shareholders invested in that company will expect to earn fair compensation for the risks inherent in making that investment.

The Price-To-Book Ratio
Where equity is a measure of the amount of capital invested in the business, the price-to-book ratio (P/B) is a measure of what investors are willing to pay for the returns generated on that capital at any point in time. Book value is an estimate of all of the capital invested in the business at cost less any liabilities, depreciation or amortization that accounting conventions measure. The higher a company’s profitability, the more investors are likely willing to pay relative to alternative investments available. If the P/B is low but you are purchasing higher profitability, you may well be making a good investment. If the P/B is high but the company has poorer profitability it is likely not a wise investment. It gets more complicated if you are paying more and getting higher profitability or paying less for less profitability. In those cases, you need to measure if the additional or lesser investment will be compensated within your investment time horizon.

Reinvestment Rate
Many companies pay a dividend to shareholders out of the profit the firm earns and the remainder of the profit is reinvested in the business. The reinvestment rate is a measure of the return the company can earn on those reinvested profits.