Skip to main content
Back to Investment approach
Investment approach

Our mistakes

You’ve entrusted your hard-earned savings with us and, as such, it should bring you comfort to know we always strive for perfection. What may not be as comforting to you is that we know we’ll never achieve it. We accepted a long time ago that we’ll make mistakes. Though we try to minimize the impact of any mistake by building portfolios diversified by business idea. So when they happen (and trust us, nobody is immune) the impact is typically offset by those other ideas.

Click below for the full story behind the mistake.

To zoom in on a specific period, click and drag over the dates. Click the Reset zoom button to show the full time period.

EdgePoint Global Portfolio, Series A

(Growth of C$100,000) November 17, 2008 to December 31, 2021
Total returns, net of fees, in C$.
  • What it does

    One of the world’s largest video game distributors.

    Why we liked it

    We believed gamers weren’t going anywhere so GameStop would continue to expand and also grow its sales per store. Concern at the time we bought it was that video games were increasingly being distributed on the internet. We didn’t buy into this theory given they took over 24 hours on average to download onto the most popular consoles of the day.

    What happened?

    We felt that GameStop likely wouldn’t be able to withstand competitive
    pricing pressure from stores like Toys “R” Us and Wal-Mart and sold our
    position as a result.

    Gamestop's holding-period return* was -21.4%. It detracted -1.1%†† from EdgePoint Global Portfolio’s return over that time.

    *October 15, 2009 to December 2, 2009.

  • What it does

    U.K.-based company operating in the social housing, public sector and compliance markets.

    Why we liked it

    At the time there was a shortage of social housing in England and half of all rental units were earmarked for repair. We believed Connaught was well-positioned on both the maintenance and compliance sides of its business, which would provide continued growth opportunities.

    What happened?

    Connaught’s share price fell substantially following new government legislation and budget cuts that would significantly impact the company’s future profits. The cuts were greater than we predicted and we immediately sold our entire position.

    Connaught's holding-period return* was -68.2%. It detracted -6.2%†† from EdgePoint Global Portfolio’s return over that time.

    *June 18, 2009 to July 2, 2010.

  • What it does

    Banking and financial services company.

    Why we liked it

    As a global custodian, there were few players that had BNY Mellon’s reach. Interest rates were low when we bought it and we liked the banks leverage to rising rates over time.

    What happened?

    We found a more attractive opportunity in Markel Corporation.

    Bank of New York Mellon's holding-period return* was -30.7%. It detracted -2.8%†† from EdgePoint Global Portfolio’s return over that time.

    *January 4, 2011 to September 12, 2011.

  • What it does

    An auto-parts manufacturer well known for its airbags.

    Why we liked it

    When we started looking at Takata, auto sales were at decades-low levels. It was a leading player in a small auto parts oligopoly so its competitors faced huge barriers to entry. We believed the industry would rebound and parts manufacturers would bounce back with it.

    What happened?

    We opted for what we believed were relatively more attractive opportunities in the auto parts space, including BorgWarner Inc. and Harman International Industries. Both were derivatives of the same rebound idea outlined above, but we believed they represented better risk/reward than Takata. Less than a year after we sold, Takata became embroiled in a defective airbag recall.

    Takata's holding-period return* was -25.4%. It detracted -1.6%†† from EdgePoint Global Portfolio’s return over that time.

    *November 16, 2010 to January 30, 2012.

  • What it does

    Develops, manufactures and sells networking hardware, telecommunications equipment and other high-technology products and services.

    Why we liked it

    Cisco was the largest player in IP-based networking equipment including routers and switches for direct data, voice and video traffic (think of it as the internet’s plumber). We believed Cisco was a strong business because people had become so reliant on the web that it would continue to function no matter the state of the economy.

    What happened?

    We became aware of intelligent software that could replace hardware and seriously eat into Cisco’s sales. In just over a month this development went from being a story buried in an obscure magazine to the subject of widely broadcasted conference calls. Though Cisco was in the midst of building an in-house solution, we didn’t know the long-term impact of the new technology on it. With so many questions there was no reason to stay invested, especially when we saw better opportunities.

    Cisco's holding-period return* was -6.6%. It detracted -1.0%†† from EdgePoint Global Portfolio’s return over that time.

    *November 17, 2008 to June 7, 2012.

  • What it does

    Former developer of Blackberry smartphones and tablets.

    Why we liked it

    We believed in the future of mobile computing and that RIM was at the center of it as one of three legitimate players (in addition to Apple and Android) with an operating system for smartphones and tablets. We felt that if RIM retained even a small share of the mobile market that it would substantially grow its long-term value.

    What happened?

    Missteps along the way included short-term gaps in new product releases and management’s failure to effectively promote Blackberry’s security and network efficiency. Though we saw these issues and took some profits early in our ownership, we misjudged how harsh the market’s reaction toward RIM would be. Our mistake was not selling more of the business at much higher prices when we had the chance.

    RIM's holding-period return* was -65.1%. It detracted -2.9%†† from EdgePoint Global Portfolio’s return over that time.

    *November 17, 2008 to June 29, 2012.

  • What it does

    Western Union offers person-to-person money transfers, money orders, business payments and commercial services.

    Why we liked it

    With more global penetration, its logo was once as recognizable as the golden arches. It was a world leader and often the only option for people who needed cash-to-cash transfers. At the time we bought, the lion’s share of Western Union’s earnings came from this part of its operations primarily because it didn’t have a lot of competition.

    What happened?

    Global money transfers grew, but they were mostly account based and Western Union hadn’t cornered this side of the market. While we recognized that the account-to-account segment would be the main source of future growth, we misjudged the speed at which cash-to-cash transactions declined. Western Union’s competitors were able to offer lower prices because they didn’t have physical locations whereas when Western Union did the same that ate into its profits so we sold the business.

    Western Union's holding-period return* was -25.8%. It detracted -3.0%†† from EdgePoint Global Portfolio’s return over that time.

    *January 27, 2010 to November 28, 2012.

  • What it does

    Engineering and construction firm.

    Why we liked it

    Natural gas prices had fallen and Jacobs was a feedstock for chemical plants on the Gulf Coast. Given lower gas prices, these plants in particular were suddenly the lowest-cost producers of chemicals worldwide. Jacobs had expertise in building such facilities and we thought it was going to benefit.

    What happened?

    While we were waiting for chemical plants to be built, oil prices also fell. This hurt the side of Jacobs’ business that focused on oil and gas infrastructure. More importantly, many oil-related companies saw their stock prices drop, including PrairieSky Royalty Ltd. At the lower price, PrairieSky was suddenly a better idea than Jacobs so we made the swap.

    Jacobs' holding-period return* was -9.2%. It detracted -0.1%†† from EdgePoint Global Portfolio’s return over that time.

    *May 30, 2013 to October 9, 2015.

  • What it does

    Provides maintenance services to large facilities like refineries and chemical plants.

    Why we liked it

    Team is a low-margin, cyclical business that does onsite inspections, routine service calls and small repairs during planned plant shutdowns. It can be feast or famine for Team as customers tend to put off servicing in lean times. We felt others failed to see that there’s only so long a plant can run maintenance-free before it can’t function properly. If you could stomach Team’s profit declines during a downturn, we believed that patience would be rewarded during an upturn.

    What happened?

    Team made some eyebrow-raising acquisitions and issued stock at depressed prices to acquire competitors, exposing a trend of what we believe was poor capital allocation that we missed. We also failed to identify what could be a dramatic shift toward automation. Questioning whether Team’s earnings power had been permanently impacted, we parted ways with the company after two years.

    Team’s holding-period return* was -33%.

    *August 5, 2009 to August 1, 2017.

  • What it does

    An online tire retailer based in Germany.

    Why we liked it

    We saw an opportunity for growth through growth of online tire sales.

    What happened?

    We missed a competitor that was willing to operate at losses for years in an effort to gain market share – this disrupted the profitability of Delticom.

    Delticom's holding-period return* was -79.5%. It detracted -1.3%†† from EdgePoint Global Portfolio’s return over that time.

    *June 4, 2012 to November 6, 2019.

  • What it does

    World-leading, specialty chemical company

    Why we liked it

    At the time we purchased DuPont in early 2019, it was one of three spin-offs from DowDuPont, which split into three separate businesses. Our idea was based on two future factors not being priced into its shares: operational improvements and strategic re-organization. We believed that DuPont’s ability to successfully execute these initiatives was tied to the company’s Executive Chair, Ed Breen. Along with leading the re-organization of DuPont’s predecessor since 2015, he had a history of transforming both Tyco and Motorola’s broadband communication division. Our analysis suggested that Breen could achieve value by cutting costs, taking advantage of pricing power and improving margins.

    What happened?

    When DuPont sold its best business to International Flavours and Fragrances, we re-deployed our capital into the purchaser.

    DuPont's holding-period return* was -13.9%. It detracted -0.6%†† from EdgePoint Global Portfolio’s return over that time.

    *June 3, 2019 to January 30, 2020.

  • What it does

    Chinese technology company with a focus on web searches and other applications

    Why we liked it

    Sogou operates China’s second-largest search engine and we believed it had the potential to grow its 18% market share. It also makes the fourth largest app in China (a keyboard input app), the most widely used Chinese speech search app and has a stake in the Chinese equivalent to Quora. Future lines of growth included both healthcare and law-related apps, two potentially large markets. Sogou partnered with Chinese tech giant Tencent to integrate its search engine into two of Tencent’s applications – WeChat and its main search page. With WeChat responsible for 60% of the country’s mobile usage, we believed this would result in significant increase in market share.

    What happened?

    Sogou’s growth was affected by the slowdown in the Chinese economy as advertising growth rates declined. We were concerned about the management team’s decision not to repurchase shares despite a drop in the share price (the stock was trading just above their cash balance) despite the significant cash available.

    Sogou's holding-period return* was -44.2%. It detracted -0.2%†† from EdgePoint Global Portfolio’s return over that time.

    *July 31, 2018 to January 31, 2020.

  • What it does

    Canada's largest domestic and international airline service

    Why we liked it

    We initially purchased Air Canada after it brought its loyalty program, Aeroplan, back in-house. Our view was that Air Canada was transitioning from a decade-long period of investing in the company to reaping the benefits of those investments. We believed that this change would result in improved income without additional significant costs. Our internal projections showed that it could generate about 50% of its market value between 2019 and 2021 in income after expenses. Management indicated that this money would be returned to shareholders in the form of share repurchases. While Air Canada looked objectively attractive based on this 2019-2021 forecast, we believed Air Canada was also an appealing business based on how we expected it to perform in a downturn. The business had materially improved its costs and overall finances. We believed Air Canada could withstand events like the previous SARS pandemic and 2008/09 Financial Crisis with minimal long-term effect.

    What happened?

    COVID-19 materially worsened Air Canada's outlook and the near-term impacts on its business were harsher than any scenario we ever envisioned. As an example, Air Canada announced that it would reduce its Q2-2020 capacity by 85% to 90%. A similar decrease in revenue could be assumed for Q3-2020. This was far worse than the annual 15% decline in revenues Air Canada experienced during SARS and the 2008/09 Financial Crisis. Our initial assumption of its finances not being materially impaired following a downturn would likely be incorrect. This also meant a very high probability that our assumptions about income and capital return wouldn’t materialize, invalidating our original idea in Air Canada. In order to own Air Canada from this point forward, one needs to take a view on an economic recovery and the progression of physical distancing measures, along with many other questions we did not envision when we purchased the business. We sold Air Canada at a loss and redeployed this capital into other ideas where we had stronger convictions in.

    Air Canada's holding-period return* was -64.8%. It detracted -1.5%†† from EdgePoint Global Portfolio’s return over that time.

    *May 13, 2019 to Apr. 6, 2020.

  • What it does

    Real estate franchisor providing real estate and relocation services around the globe

    Why we liked it

    When we first purchased Realogy in 2014, it was the largest real estate broker in the U.S. with 20% market share. It owned several real estate brands such as Century 21, Coldwell Banker and Sotheby's. Realogy had two main sources of income: royalties (real estate agents operating under a Realogy brand) and brokerage (directly employing agents). Our thesis focused on real estate transactions keeping pace with population growth and inflation, along with a return to historical averages of real estate transactions compared to total population as the country recovered from the Financial Crisis. We believed that Realogy could grow by double-digits each year based on this. Its management team paid down existing debt and the business required minimal capital deployment and therefore high returns on capital.

    What happened?

    Although we predicted both traditional competitors and possible disruption from other sources, we didn’t foresee another competitor with both a willingness to lose money for several years and well-financed backers. Compass, funded by Japan’s SoftBank, began gathering top agents by offering them 100% of the commission. This meant that Compass earned no money but created relationships with the best performers. Compass started to adjust the commission split, but when COVID-19 struck, we believed that the industry’s business model may have changed and decided the sell the remaining position because we didn’t think neither buyers nor sellers would be interested in traditional home sales involving open houses and visits.

    Realogy's holding-period return* was -77.1%. It detracted -3.4%†† from EdgePoint Global Portfolio’s return over that time.

    *May 5, 2014 to April 9, 2020.

  • What it does

    A global provider of food, facilities and uniform services

    Why we liked it

    Aramark is one of the world’s largest foodservices providers and the second-largest uniform services company in the world. The foodservice industry, which represents 85% of the company’s operating profit, has attractive growth potential as a significant chunk was still performed in-house. In the U.S. only about 35% of foodservice was outsourced. Given most of the Aramark’s food service business is in the U.S., we believed it had potential to benefit from higher future growth rates. The company focused on the two industries with the lowest outsourcing adoption rates – education and healthcare/senior facilities. In 2018, Aramark purchased a large food buying organization, closing the gap with its competitors and allowing for more competitive bids on new contracts. We believed its organic growth in the low single-digits combined with expanding margins could result in both double-digit earnings per share and returns.

    What happened?

    The management team’s history of handling recessions in the early 2000s and the Financial Crisis made us believe that Aramark would be able to weather any storm. We knew this was a business that could do well in recessions. The main issue was that 20% of Aramark’s business was related to sporting event concessions and we couldn’t predict what the next three-to-five years would look like given COVID-19 and its impacts on social events. We redeployed the capital into other areas.

    Aramark's holding-period return* was -12.6%. It detracted -0.8%†† from EdgePoint Global Portfolio’s return over that time.

    *November 15, 2018 to April 22, 2020.

  • What it does

    A top U.S. bank and diversified financial services company

    Why we liked it

    We believed the company was undervalued following the Financial Crisis and it had the potential to grow faster than the economy, cut expenses and use their excess capital for stock buybacks and dividends. Several regulatory issues occurred during our holding period and the bank became subject to consent orders while also being hindered by an unprecedented Federal reserve cap on its balance sheet growth. A new CEO was brought in who had spent over half of his career working for Jamie Dimon, a leader we admire. We believed he would be able to reignite the business, accelerate earnings growth with share buybacks and add significant shareholder value by growing the business once they weren’t subjected to government restrictions due to previous violations.

    What happened?

    Despite overcoming several regulatory hurdles, politicians and regulators continued making Wells Fargo an example for previous violations and maintained the US$1.95 trillion asset cap, the maximum amount the bank could manage. After pleading with the regulators to let them participate in the small business lending program to help businesses during the COVID-19 pandemic, the regulators temporarily and narrowly lifted this restriction. We concluded that regulators were not going to permanently lift the asset cap any time soon (other than exceptional events like COVID-19). In addition, their high cost structure relative to revenue was a headwind during the COVID-19 downturn, as their competitors were able to weather the storm better. We exited the position and deployed the proceeds into another financial business.

    Wells Fargo's holding-period return* was -12.9%.

    *November 23, 2009 to May 8, 2020.

  • What it does

    Japanese insurance company

    Why we liked it

    We believed T&D was a misunderstood business for two reasons. First, the low interest rates make it difficult for insurers investing only in government bonds to make money. But T&D has a different asset mix, it also holds corporate bonds and equities. Second, despite the aging population in Japan, the market is still very large. T&D is still gaining market share and growing their book value by about 5% per year. We thought that the combination of the asset mix and market share growth meant that it could grow by high-single digits each year.

    What happened?

    We chose to sell T&D because we didn’t agree with management’s decision to buy another company, Fortitude Re, instead of buying back more shares.

    T&D's holding-period return* was -26.6%. It detracted -0.3%†† from EdgePoint Global Portfolio’s return over that time.

    *November 17, 2017 to May 19, 2020.

Mistake was defined as any name previously held in EdgePoint Global Portfolio where our holding period return was worse than -2% from inception (November 17, 2008) to December 31, 2021. Fixed-income holdings, warrants, call options and subscription receipts were excluded.

††A holding’s contribution is based on a combination of weight and timing of transactions. This may result in a difference from a security’s holding period return.