March 27, 2015 – Value Commentary

Stock market activity over the past four weeks has been quite volatile as new economic data was released and the prospect of interest rates increasing south of the border has been delayed. Oil continues to look for direction while Alberta is causing concern for the housing and job markets in Canada. Notwithstanding the mass of contradictory economic news, we have been steadfastly searching for companies with free cash flow, strong earnings power, solid balance sheets and sustainable competitive advantages.

With March soon coming to an end, we would like to review our investment activities over the past month. Since the beginning of the year, we significantly lowered our energy and mining exposure to free up capital to be used to find better value creating opportunities. In fact, many of the value opportunities we see in today’s market are in the consumer, industrial and technology sectors.

Since our last note we have continued to reposition our portfolios and have added new holdings, which, we believe, will provide great value. Our plan of action hasn’t changed since the start of 2015. We still expect that companies tied to the US consumer and the strengthening US economy will bring in sustainable earnings and free cash flow. Accordingly, we recently purchased Cisco Systems, Parker-Hannifin Corporation and Bed Bath & Beyond and added to our shares of Qualcomm and Las Vegas Sands on price weakness. In Canada, we added to existing positions in Exco Technologies and InterRent REIT. Furthermore, with their recent price strength, we have taken partial profits by trimming Cooper Tire & Rubber, Regal-Beloit Corporation and Foot Locker and have sold our entire position of Miller Industries.

Overall, we have been very diligent in repositioning the ABC Funds to take advantage of U.S. economic growth. While we anticipate continued market volatility, we are very optimistic with regard to the balance of 2015.

Irwin A. Michael Signature

Irwin A. Michael, President
I.A. Michael Investment Counsel Ltd.

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