From the Desk of Irwin Michael – March 20, 2015

While North American equities during the month of March have been characterized by considerable price volatility, we have continued to strengthen and diversify our portfolios with attractively valued, free cash flowing equities. To exemplify what we have done, included is a brief commentary on each of our ABC Funds:

ABC Fully-Managed Fund

Our holding of Pure Industrial REIT has just been included in the main Canadian equity benchmark effective March 20, 2015. This inclusion is providing for greater investor interest, trading liquidity and a strong unit price from our original purchase in the fall of 2014.

ABC Fundamental Value Fund

A recent new purchase was The Gap Inc, a U.S. clothing retailer with strong free cash flow, which the company has used for several years to buy back a significant amount of outstanding shares. The stock has been undervalued due to weakness in its core Gap brand, however, 40% of its revenue comes from its Old Navy segment, which is doing remarkably well. Investors have become considerably more confident in The Gap’s new CEO, Art Peck and his turnaround strategy for The Gap brand.

ABC American Value Fund

Foot Locker, a sporting goods retailer, continues to move higher in price, especially after its Q4/2014 earnings beat. A number of analysts have recently raised their share target price. Although we have trimmed our share position on this recent strength, we remain confident with the company’s 2015 outlook.

ABC North American Deep Value Fund

The Fund’s holding of Carriage Services, a funeral home services and cemetery operator continues to outperform, especially after completing a successful Q4/2014. Carriage’s cash flow was considerably higher than expected and the company reaffirmed its positive outlook for 2015. Furthermore, we believe that Carriage Services will make further accretive acquisitions over the next 12-18 months.

ABC Dirt Cheap Stock Fund

A new undervalued purchase by the Fund was Industrias Bochoco, a $2.7 billion U.S. fully integrated Mexican poultry producer and processor. Industrias Bochoco controls 35% of the Mexican poultry market and is growing its presence in the United States. The company has a clean balance sheet, is free cash flowing and is using its cash to finance further growth.

Overall, we are very positive for the balance of 2015. Although we expect equity markets to remain volatile, we will be alert to take advantage of periodic investment opportunities.

Irwin A. Michael Signature

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

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