INVESTMENT MARATHON #6 • May 26th, 2022

A short monthly newsletter where Alex Vozian, CFA, Associate Portfolio Manager, shares the building blocks of our long-term investment strategy.


Camas lily fields from Mt. Tolmie, Victoria, BC


  • Why 2022 market decline is a long-awaited opportunity for long term investors?
  • Performance update
  • MasterCard – a holding we own
  • Busy spring of 2022 – fundraising, dance festival, Raymond James conference, and Victoria Day parade


The Canadian stock market is down ~2% and the US market is down ~14% from the start of 2022, after witnessing massive gains in 2021.

The list of worries driving this decline is the same as in our last update:

  • The Covid pandemic has created large economic imbalances (excessive demand in some products / areas and shortage in some supplies).
  • Gradual reopening has reverted some of the imbalances while some pandemic imbalances got even worse.
  • Russia-Ukraine war has added another layer of imbalances.
  • All these factors have led to record high inflation levels.
  • To reduce the inflationary pressure, central banks started raising interest rates.
  • Market participants are extremely worried that all these 5 factors might lead to a global recession and additional market declines.

the opportunity

It is very easy to get caught up in negative thoughts, right now, when newspapers and TV broadcasts are filled with negative economic and social news.

Long term investors, however, are viewing the current market decline as a long-awaited opportunity to invest more money into extraordinary companies at more reasonable prices than compared to the last year.

While nobody can guarantee where market prices will go during the next 3-6 months, we are optimistic about the medium and long run opportunities for our primary investment strategy - The Dividend Value Discipline™ Equities (DVD):

  • The market sentiment is at record low (extremely fearful) levels. Remember that Warren Buffett once said that it is wise for investors to be “fearful when others are greedy, and greedy when others are fearful.”
  • There are signs that inflation is starting to slow down – that might cause central banks to increase interest rates by a smaller amount than the market is currently expecting.
  • Even if we end up with a recession in North America – the stock market might have already priced that in. Remember that the stock market is a leading indicator, so it usually starts recovering several months/quarters before the official end of the recession.
  • Market sell-offs are NORMAL and must be expected - even during broader bull market cycles.
  • Our current exposure seems appropriate in our view – we own a lot of high quality companies, supplemented by a sizable exposure to industries that do well in an inflationary environment, and we also have about 6% cash level ready to be deployed when unique opportunities arise.


Our primary investment strategy – The Dividend Value Discipline™ Equities (DVD) - is down ~5% year to date in 2022 - significantly better than the average of Canadian and US stock markets. GAME strategy is down 8%, while our Canada-only strategies continue to do really well – KMI is up 17% and NCRF is up 42% since the start of 2022.

While these results are outstanding, we place no weight on short-term results, good or bad, and neither should you. In fact, we occasionally make decisions that negatively impact short-term performance if we think we can improve our long-term returns and/or lower risk level.

A HOLDING WE OWN – MAstercard (MA)

MasterCard  is  “a  technology  company  in  the  global  payments  industry  that  connects  consumers,  financial  institutions,  merchants, governments,  digital  partners,  businesses  and  other  organizations  worldwide,  enabling  them  to  use  electronic  forms  of  payment instead  of  cash  and  checks.” Their latest annual report is available here.

We started buying MasterCard in the middle of 2020 and added more in 2022, as shares continued to appear relatively cheap while MasterCard scored high on our 5 proprietary quality factors.


  • Debit and credit card payments are witnessing an increasing market share in total global payments. There are still a lot of cash- and cheque-based payments in both developed and developing world – we expect these less efficient payment forms to lose market share to more efficient alternatives.
    • Fun fact - my first 3 years in the financial services industry (2000-2003) were actually very close to MasterCard products. I was involved in the launch of the first international debit/credit cards for two commercial banks from the Republic of Moldova. MasterCard was the exclusive partner for both banks as it was more globally oriented than Visa.
  • Growth of ecommerce in total retail spending is another growth driver for MasterCard and its peers.
  • Global re-opening after COVID pandemic is re-accelerating the international travel. Cross-border card payments are actually more profitable than local card payments and this explains why MasterCard and its peers witnessed a revenue decline in 2020 and slow recovery in 2021.
  • The largest headwind is the current war in Ukraine and Russian sanctions, but we assume the situation will gradually improve from here.


  • MasterCard, like its closest peer Visa, has a huge competitive advantage from the scale (3 billion cards used in 200 countries) and network effects (the more participants are included in the network, the more value each participant gets).
  • The competitive advantage is “confirmed” by very high profitability ratios – during the last 5 years, for each $1 of revenue MasterCard generated $0.5-$0.6 of free cash flow!
  • The huge profitability is, in fact, a problem! It is attracting dozens of new companies every year who are trying to disrupt the MasterCard and Visa. We continue to believe that risk of the disruption is relatively small and that payment market growth is large enough to accommodate few additional market players.


  • Management seems focused on the right things - talent is rewarded with promotions, good work-life balance – and these factors contribute to a strong employee satisfaction as confirmed by reviews on Glassdoor and Indeed.
  • Large insider ownership – 27 officers and directors, as a group, owned 3 million shares & options currently worth ~$1 billion, including half owned by the former CEO/Chairman.


  • Last increase in MasterCard’s dividend was 10% and the current level is almost double (up 96%) vs 2018 levels.
  • Strong cash flow generation and low dividend payout might result in acceleration of dividend growth in the near future.


  • Both MSCI and Sustainalytics are rating MasterCard with better-than-average ESG score.



The months of April and May were extremely busy - both at work and home.

  • Fundraising: we have raised a few thousand dollars at multiple events in Victoria by selling crafts made by kids, pastries baked by my wife and a couple of my own paintings. Our donations are a drop in the ocean compared to the massive social and economic disaster that Ukraine witnessed in the past 3 months, but we still hope that it helped a few families during the worst experience of their lifetimes.
  • Ukrainian dance: life is clearly returning back to normal in Canada:
    • 25th annual Ukrainian Dance Festival finally took place in Mission, BC, after being cancelled for 2 years. It was great to see my daughter and hundreds of other dancers and parents from BC – keeping the culture alive in these challenging times for Ukraine.
    • Victoria Day parade followed, and the same dance group participated in the parade and performed on Centennial Square from Victoria, BC.
  • Raymond James National Conference was another sign of things getting back to normal. Chris, Joanne and I travelled to Vancouver to learn about current developments in the investment & regulatory landscape, in order to continue to serve our clients well.


25th BC Ukrainian Dance Festival, Mission, BC.


If you found this letter insightful, please share it with a family member who might enjoy it, too.

  • BOOK AN HOUR with Alex Vozian, CFA. He is happy to discuss subjects covered in this letter, as well as any other questions you might have.
  • READ previous letters on our website.

Alex joined Chris Raper & Associates in 2013 where he leads the investment research side of the business. Born and raised in the “Kingdom of World’s Largest Wine Cellars” (Moldova), he was lucky to start a career in the North American stock market back in 2003 – a field which encompasses several areas of his interests - psychology, mathematics, economics, and computer science.

Alex has a Chartered Financial Analyst designation, has completed multiple Canadian securities courses, as well as a few modern applied psychology courses. Full bio is available here.

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