Anodyne, Inc. Offering Prospectus

Another game, born of sitting at New Maple Wonton House on Broadway with broccoli beef, hot and sour soup, and a stack of annual reports. Local Art World Luminary slid into the booth opposite me, did a double-take, and tried and failed to reconcile Mr. Hardcore Capitalist with the kinder, gentler cjb that apparently exists in his imagination.

I started stock-picking in fourth or fifth grade (c. 1978? 79?), when Brian Herrin, the best non-university teacher I ever had, asked everyone in my class to construct and maintain a model portfolio for a month. Mine had Imperial Oil and and a few other large-cap TSE favorites in it. We ignored frictional transaction costs (brokerage charges, etc.). I came in third or fourth out of thirty-two or thirty-three participants, and was hooked for life.

In 1989, I was running Anodyne, the short-lived "independent nonprofit art exhibition space" this weblog takes its name from, out of a second floor office in a heritage building on Granville Street. I was open Saturdays and Sundays 12-5pm, and had lots of time between visitors. To pass the time, I paid off my fines, reactivated my Vancouver public library card, and started checking out stacks of books, including Roger Lowenstein's Buffett: The Making of an American Capitalist. This lucid, well-written, and tough but fair biography of Omaha-based investor Warren Buffett is the most life-changing book I have ever read (Appropriately enough, it was agented by Thomas Pynchon's wife, Melanie Jackson). There would be no Pulpfiction Books without it, and definitely no CSA Space.

Lowenstein, a gifted financial journalist and early investor in Buffett's Berkshire Hathaway, Inc., somehow synthesized a whole spectrum of information that I had absorbed but never processed further. He (and, later, Buffett himself, in publications like his Columbia University talk "The Superinvestors of Graham and Doddsville") provided a conceptual framework for me, demonstrating that successful securities analysis is, at heart, a cross between book scouting and art criticism, the sort of thing that I, with my constant depression and weird personality quirks, am apparently well-suited to perform.

A simple public challenge: outperform the TSE (80%+ of Canadian mutual funds don't, on a year-by-year basis). Tonight I took $100,000CDN in play money, and invested it in a number of Canadian companies and income trusts, according to my amateur understanding of "deep value investing" as promulgated by Benjamin Graham, Buffett, David Dreman, Marty Whitman, Irwin Michael, & etc. Anodyne, Inc.'s initial portfolio is as follows:

Dominion Citrus Income Fund (DOM.UN) 12,346 units @ .81 = $10000.26
E-L Financial Corporation (ELF) 7 shares @ $610 = $4270.00
Hart Stores (HIS) 5769 shares @ $5.20 = $29998.80
Loblaw Companies (L) 217 shares @ $46.15 = $10014.55
Norbord, Inc. (NBD) 1208 shares @ $8.26 = $9978.08
North West Company Fund (NWF.UN) 600 units @ $16.80 = $10080.00
Parkland Income Fund (PKI.UN) 746 units @ $33.65 = $25102.90

Total Cash Invested: $99444.59
Transaction Charges ($25 each buy/sell): $175.00
Cash Balance: $380.41

Today's SP/TSX: 12341.65

Some provisios:

• This is a serious game, but a game nonetheless. Anodyne Inc.'s positions aren't suggestions to buy or sell any security. I own some of these securities in real life as components of a diversified RRSP portfolio.

• Transaction charges: $25 per buy and sell. "Odd lot" charges ignored. Dividends and income trust distributions credited to cash on the date received. Cash earns no interest.

• The TSE index figure is included because I aim to beat the index's total return (eg.. growth plus reinvested dividends). There is no speculation involved in buying the index; if I represent myself as a skilled investor, this is a hurdle I should be easily able to clear.

• I will grade my performance (as should you) over a three to five year horizon. Over shorter periods of time, the portfolio may fluctuate in value, sometimes impressively. These short-term variations don't bother me, and they shouldn't bother you, either.

• Despite grading my performance over the medium to long-term, I will report on the portfolio's progress, positively or negatively, once every 3 months.
- posted by cjb @ 8:23 PM