Power Results Met With an Icy Reception

It’s a safe bet the Desmarais family isn’t losing sleep over weaker than expected results out of its two holding companies. You shouldn’t either.

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The Motley Fool

There was plenty of weakness across the S&P/TSX Composite on Wednesday, as the Canadian market fell by slightly more than 1%.

Two names that typically don’t show up on a “worst of” list but were significant negative contributors to today’s decline are Power Corporation (TSX:POW) and Power Financial (TSX:PWF).  The stocks were down by about 3% as both companies reported lower than expected results.

Results

The table below contains a snapshot of each company’s results.  Clearly, 2012 was a challenging year as low-interest rates and wonky equity markets continue to weigh on the financial subsidiaries embedded within these holding companies.

Operating Earnings

Net Income

2012

2011

Change

2012

2011

Change

Power Corp.

$2.09

$2.50

-16.4%

$1.81

$2.24

-19.2%

Power Fin’l

$2.38

$2.44

-2.5%

$2.30

$2.43

-5.3%

Source:  Company reports

Worry?  Who us?

You’d be hard pressed to find an entity outside of Omaha, Nebraska that could care less about quarterly results than the Desmarais family controlled Power Group.  Today’s earnings release makes no mention of a conference call to discuss the results and is void of any commentary.

The Power Group invests for the long-term and doesn’t let quarterly fluctuations distract them from their objective of owning companies that have a proven ability to dominate.

Their patience and focused strategy has paid off, especially for long-term shareholders.  The table below outlines the total returns provided by both Power Corp. and Power Financial over several historical periods.  With dividends included, these companies just don’t lose to the Canadian market.

 

POW

PWF

S&P/TSX

2 Year

9.8%

8.7%

-5.4%

5 Year

5.8%

12.7%

-3.1%

10 Year

111.8%

131.0%

106.8%

20 Year

1102.1%

2106.0%

263.0%

Source:  Capital IQ

The Foolish Bottom Line

Companies like Power Corp. and Power Fin are somewhat rare on the Canadian landscape.  These are companies that you can essentially buy and forget about.  Sure they’ll have days like today, but over the long-term, odds are that you’ll be well served by having one (or both) of them in your portfolio.

We have created a special report that identifies several other Canadian companies that have similar buy and forget characteristics.  To find out who these companies are, simply click here and the report will be delivered to your inbox, absolutely free!   

Follow us on Twitter and Facebook for the latest in Foolish investing.

Fool contributor Iain Butler does not own shares in any of the companies mentioned in this report at this time.  The Motley Fool has no positions in the stocks mentioned above.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

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