Xebec Absorption designs, engineers, and manufactures products to transform raw gases into marketable sources of clean energy. The company has three segments to their business model: systems, infrastructure, and support. After speaking with management their guidance is being maintained as they face headwinds in their system business but there are tailwinds in the infrastructure business. The good news on this front is that the infrastructure garners significant better margins than the system business. The company’s backlog continues to grow through the adverse conditions, and we are excited about the company and their prospects. I suspect the timing of revenue recognition may be hard to forecast but the company has replenished their treasury in December and are well positioned. I continue to add to this position on weak market days.

With respect to the portfolio, I have had contact with most companies via conference calls. Although many companies have justifiably pulled their guidance, most of the portfolio’s names are positioned with strong balance sheets and should weather the current storm. Energy companies pose the most risk to the portfolio but also provide the largest potential upside.


There are many questions facing equity investors right now; how long will businesses need to be shut down, how will the economy begin to function as we start to unwind the closures, how will social/business behaviours change post the pandemic, and what will be the long-term impact from all the government spending?

All these questions have no easy answers. However, we can look to other economies as they come out from the pandemic and we can look to other challenging periods in history to guide us to some of these answers.

Firstly, there will be long and damaging repercussions to the consumer. Canadians are entering this downturn with historically stretched balance sheets. Unemployment in small and medium size businesses is a given and will have an impact on consumer demand. Secondly, with central banks around the world providing unlimited liquidity and quantitative easing, the backdrop for golds is extremely favourable. Already the long-term inflation rate has spiked, and gold bullion has appreciated to greater than $1700/oz.

1 2 3 4 5