February 9, 2016

Tuesday’s markets had the S&P 500 down 0.1% while Toronto was down 2.0% as oil slid about 5%.

It’s human nature to focus on the recent declines in stock market prices. It’s impossible not to see the gloomy news about declines.

However, what really matters more is the outlook for profits on various companies over the longer term.

As long as most of the companies that we are own are not going to see their earnings slump and virtually never recover then we are likely to do well over the longer term.

Each time markets decline it tends to feel very painful. But typically, some time later most periods of market decline are proven to be short-lived or not of great consequence in the long term.

Q4 earnings reports continue to come in and typically include some views on the outlook for 2016 and beyond. These reports are likely to offer a lot more insight than is focusing on the latest stock price movement.

Boston Pizza Royalties Units are down 30% from their high. I feel quite confident that their distributable cash flows to be reported tomorrow will not be down anything close to that amount. (My guess is that distributable cash flow per unit will be roughly flat or up slightly compared to the prior year and that same-store sales will be down maybe a couple of percentage points.)