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CUNDILL VALUE & CUNDILL SECURITY
FUND'S
PETER CUNDILL & TIM MCELVAINE
(continued from preceding
page)
BUT THE WAY WE DO IT, IT'S QUITE THE REVERSE.
Having a trade helped, but not like my
father thought...
Peter
Cundill: This is an historic
occasion because
this meeting is being held on the floor of the Toronto
Stock
Exchange. And my father was a floor trader on the
Montreal
and Canadian stock exchanges over a 40-year period -
which I think was a record at the time and may still
be...
But, in any case, when
I was a young man, he
encouraged me to become a chartered accountant because,
he said, "If you're a gambler like I am, you'll need a trade
to
be able to fall back on if you blow it in the stock
market."
I'd think that the
accountancy training was very
useful in helping establish the kind of investing that we
do
which, I would argue, is the antithesis of gambling --
and,
in fact, is low risk....
Screening 20,000 ideas a month helps.
But even better....
Cundill: We're up to a
six-man research department.
I'm a floater. Tim [McElvaine] is in Kingston for the
most
part. The other four are in Vancouver. We screen
approximately 20,000 securities on a monthly basis
looking
to see what might meet our tests as statistical
bargains.
And I imagine that
[process] probably gives us a third
of our ideas. The other two-thirds come from what has
been the global networks that have been developed for me
by wandering around for what is now 22 years. And about
75% of our holdings are usually in about 30 names.
We try not to lose. But we don't want
to try
too
hard....
Cundill: In our 22-year
tenure, we've had one loss.
The losses, of course, work against you in establishing
decent compound rates of return. And I hope we won't
have them. But I don't want to be so risk averse that we
are
always trying too hard not to lose.
In any case, our
methodology should be able to
generate consistent rates of return over longer time
periods.
AND MANY SHALL FALL THAT ARE NOW IN HONOR.
Valuations forced us to reduce our U.S.
exposure....
Cundill: What we try to
do in its most simplistic form
is buy a dollar bill for 50¢ in whatever form that
dollar bill
takes. We tend to seek out -- or, perhaps, they're
presented
to us is the better word -- unrecognized, misunderstood
and out-of-fashion securities.
We have been doing it
on a global basis since our
beginnings. But in 1980, 68% of our assets were invested
in the U.S., whereas at the end of '95, that figure was
down
to 12%....
Last year ... was a
year of repositioning. The U.S. has
almost always been our largest market. But during 1995,
valuations in the U.S. became much higher than in the
rest of the world. And by year end, we were invested 16%
in Japan, 12% in the U.S. -- and [the remainder] in
Canada, France, Germany and some other countries.
As you know, the
Cundill Security Fund, in order to
qualify for RRSP purposes, must stay 80% in Canada, but
it has participation in a number of other countries,
too.
Page 2 of 27
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