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CUNDILL VALUE AND CUNDILL SECURITY FUNDS'
PETER CUNDILL & TIM McELVAINE
"MANY HAVE BEEN RESTORED THAT WERE FALLEN
AND MANY SHALL FALL THAT ARE NOW IN HONOR."
from the Outstanding Investor Digest August 8, 1996 edition
Page
"Many Have Been Restored That Were Fallen
And Many Shall Fall That Are Now in Honor" ........................................................ 1
My Father Thought Investing Was Gambling.
But the Way We Do It, It's Quite the Reverse ........................................................ 2
Countries Can Have Many Virtues, But None More Than Riots, of Course ................. 3
We'll Buy Anything at a Price - Oil & Gas, Retailers, Even Newspapers .................... 4
On July 1st, 1997, Hong Kong Reverts to China
- And Neither of Them Will Be the Same ................................................................ 5
The 1987 Market Was Driven By Greed. This One Seems Driven By Mindlessness ...... 5
Why Don't We Buy IPOs? Because They're Dreams
and We Deal To a Certain Extent in Nightmares ...................................................... 6
I Haven't Decided to Change Professions.
But We Do Pay More Attention to the Business ....................................................... 7
With Silver, You Get a Good Investment and an Inflation Hedge Thrown In For Free . 8
A Good Chance of a Correction in the U.S.,
But I Don't Think We'll Have a Big Crash .............................................................. 9
In 1987, Things Were Expensive Worldwide.
Today, It's Primarily the United States .................................................................. 10
Our Biggest Country Is France. And Paribas Is Still Dirt Cheap .............................. 11
A Smart Acquisition, Share Repurchases and Timely, Favorable Asset Sales ............. 12
If Paribas Could Even Earn 10% on Equity,
We Could Make Good Money From Today's Price ................................................. 13
And We're Getting Takeover Potential and Any Earnings Extrapolation For Free ..... 14
Nord Est is Selling Below Net Cash and Right At 3 Times Peak Earnings.... ............. 15
There's No Such Thing As Normal, But the Math Is On Our Side ............................ 16
Now Would Be a Good Time to Buy Net-Nets.
Unfortunately, There Aren't Many Around ........................................................... 17
Canadian Retailers Are On the Bargain Counter
- Including Le Chateau At About 2/3 of Book ........................................................ 18
Excluding Misadventure and Tragedy, Chateau's Managed a Mid-Teens ROE ........... 19
Share Buybacks & Opportunistic Purchases
At 2 Times Earnings and Less Than 9% of Sales .................................................... 20
A Business with An Average ROE of 30% At 75% of Book (Net of Liquid Assets) ... 21
There's Nothing Special in Their Margins.
In Fact, Some Would Say They're Disadvantaged ................................................. 22
No Hidden Liabilities Up Their Sleeve and No Exciting (Or Expensive) Growth ....... 23
You Have To Be Smart Every Day. Fortunately, These Managers Are ..................... 24
We Don't Mind a Conservative Balance Sheet - Especially Not in This Business ...... 25
In 1996, Everything that Could Go Wrong Did.
We Don't Think That's Very Likely to Recur ........................................................ 26
China Was Hot, But Now It's Not - Two Microcosms of Market Reality.... ............... 27
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