Monthly Letter September 2012

Reporting season is coming up. Like a clock that keeps ticking. Four times a year companies come out with hard numbers and forward looking statements. We at Madrague are information-junkies. We enjoy the challenge of interpreting the information and signals we get from the companies and the market during the reporting season. From the companies we are watching for the obvious things like the actual numbers and how they see the world in which they are active in. What that might mean for capex, expansion or contraction and of course future profitability. In a normal world it is a little bit like putting your finger in the air in a warm summer breeze and trying to gauge any change of direction.

In 2008 it was more like holding on to your hat in the Lehman storm. What is just as interesting and useful for us is the market reaction to the flood of corporate information. Madrague is one of the thousands of investors looking for any change in the tealeaves. The accumulated wisdom of that crowd decides how the share prices move. They decide if the move should be up, down or just be left unchanged. The deviation from expectation is normally a good indicator of where the market goes. Million dollar question: what’s in the price?

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