The Manager's Commentary
We believe in buying great companies with strong management teams at good prices. Since the launch of the Pender Small Cap Opportunities Fund (the Fund) in June of this year we have started to deploy the capital in the Fund into undervalued companies we have been following for some time.
The Fund currently has 6 positions representing 44% of the portfolio. The remainder of the Fund sits in cash as we continue to search for additional opportunities while remaining cautious in these uncertain times. Despite the heavy weighting of cash in the portfolio, we have experienced a solid increase in the invested portion of the portfolio, with the NAV at $10.73 on September 30th.
While the markets have improved dramatically off of their March lows, we are still finding interesting opportunities, although it is a lot harder to find companies in the “Pender Value Zone” today than it was in March!
The Fund has a heavy weighting (26.8%) in the technology sector. We have done this for two reasons: we have been investors in the sector for some time and are therefore familiar with many names and, we believe that technology companies should thrive in a cost conscious world.
Companies, governments and other organizations worldwide are trying to cope with the recession. They are doing so primarily through cost cutting - not through revenue growth. In order to remain competitive in this type of environment, organizations have to increase the productivity of their workforce and one of the primary methods for doing so is through the adoption of technology. This is creating an environment where technology firms can prosper.
With so much volatility and contrasting opinions present in the markets today, it truly is an exciting time to be a value investor. We expect to see short term fluctuations in the market value of our investments but with patience and vigilance, we expect to see the market values of these companies reflect the intrinsic value over a three to five year time horizon.
Dave Barr
September 30th, 2009