This cartoon about a normal day at the stock exchange, which I featured in my recent Annual Address presentation, is a good illustration of what has been happening in the market lately.

The investment crowd doesn’t seem to know if it’s coming or going, and a lot of the time it’s very hardto make sense of the daily ups and downs.

The funny thing is, I’ve started to notice similar behaviour with my 14-year-old son. Friends witholder boys warned that at 14 they start to mumbleand grunt, travel in a herd and become unable tomake a decision without first checking with all of their friends. And, boy, is that ever true! I’m toldthey regain independence and more rational behaviour as they get older, but watching investorslately makes me believe that we never outgrow the herd instinct.

Recently, investor sentiment has swung from pessimism to optimism – the price of oil is up; resource stocks have rallied; and the Canadian dollar is back above US$0.75.

We never believed that there was a big recessionaryrisk around the corner, as many feared not long

ago, so we think the crowd is right to be more upbeat. Still, we don’t think that robust globalgrowth is on the horizon either. Slow growth, withfits and starts, remains our expectation.

The dramatic shift in sentiment and the associatedmarket action caused the Odlum Brown ModelPortfolio to have a rough start to the year. FromJanuary 1, 2016 through to March 15, the Model was down 2.8%, whereas the Canadian equitybenchmark, S&P/TSX Total Return Index, was up3.6%. This performance gap is almost entirely dueto currency, as the value of our significant foreignholdings was hurt by the recent appreciation in the value of the Canadian dollar.

We continue to believe that quality is paramountin a slow-growth world, and that it’s more important

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ODLUMBROWNREPORT

04 2016

INSIDE THIS ISSUE

Page 1Bet on Businesses, Not the Crowd

Page 3When Should I Start CollectingCPP?

Page 4Odlum Brown in the Community

Bet on Businesses, Not the Crowd

YTD

-2.8%

3.6%

-4.3%

1YEAR

-2.0%

-6.2%

4.8%

3 YEAR

15.3%

4.6%

21.7%

5YEAR

14.8%

2.8%

18.9%

10YEAR

9.0%

4.0%

8.3%

20 YEAR

15.0%

7.5%

7.8%

INCEPTION2

15.2%

8.2%

9.1%

Odlum Brown Model Portfolio

S&P/TSX Total Return Index

S&P 500 Total Return Index ($CDN)

COMPOUND ANNUAL RETURNS1 (Including reinvested dividends, as of March 15, 2016)

1 Except for YTD period. 2 December 15, 1994.

Imag

e Cred

it: Kevin KAL

Kallaug

her, Ka

ltoon

s.com

Continued on next page

BET ON BUSINESSES, NOT THE CROWD Continued from page 1

2

to own great businesses with economic moatsthan lower-quality cyclical businesses. While thecyclical businesses will periodically outperform, it’sthe higher-quality businesses that will create moreshareholder value in the long run. This strategy hasserved us well. Over the last five years, the Modelhas roughly doubled in value, appreciating morethan six-and-a-half times as much as our cyclicallygeared benchmark.

We recently made a number of trades within theModel to take advantage of situations where stockprices deviated from our assessment of marketreality. Specifically, we sold General Motors (GM)and increased our positions in The Howard HughesCorporation (HHC), TRI Pointe Homes (TPH) andCarMax (KMX) by 50% each. Consistent with a“buy low, sell high” strategy, we also reduced our holding in Markel Corporation (MKL) and re-established a position in Berkshire Hathaway(BRK.B). Since we sold Berkshire to buy Markelback in November 2013, shares of Markel have appreciated by 60%, roughly three times as muchas shares of Berkshire.

While we believe GM has decent upside potential, wesold the position because we are more enthusiasticabout the other companies. Howard Hughes andTRI Pointe are currently the worst-performingstocks in the Model this year, and, like CarMax,they are priced as if the U.S. economy is heading for a recession. In our opinion, though, the chanceof a near-term economic contraction in the UnitedStates is very low. Consequently, we see excellentshort-term and long-term upside potential for the shares of these three economically sensitivebusinesses.

The Howard Hughes Corporation (NYSE: HHC)

The Howard Hughes Corporation develops andmanages residential, commercial and mixed-usereal estate spanning 16 U.S. states. Yet the stockprice has been crushed due to concern over thecompany’s exposure to just one state: Texas. HowardHughes has two sizable assets in Houston: 1) TheWoodlands, which is home to over 110,000 residents;and 2) Bridgeland, which is an early-stage master

planned community. Houston’s local economy hasbeen challenged by low oil prices, which has led tohigher office vacancy rates, lower sales velocity ofresidential land and uncertainty over all futurecommercial development. Such assets only makeup about a quarter of HHC’s total asset value, yetshares are down almost 40% from recent highs. We don’t believe that these assets are impaired invalue. Rather, it will be the best-positioned assets,such as The Woodlands and Bridgeland, that shouldoutperform competitors during tough times andthrive in the long run. In the bigger picture, the company continues to build material value throughits development activities. For instance, operatingproperties currently generate over $150 million incash flow per year, over twice as much as just twoyears ago, when we trimmed our position at a 50%higher price.

TRI Pointe Homes (NYSE: TPH)

TRI Pointe was born out of the ashes of the financialcrisis in 2009, when three longtime home buildingexecutives teamed up with real estate mogul BarrySternlicht to take advantage of depressed real estate prices. The company is now a top nationalhomebuilder with vast land holdings in key regionsacross the United States, and recently won the2015 Builder of the Year award from Builder magazine. Despite management’s track record and impressive execution thus far, the stock tradesat a discount to the overall market because ofskepticism about the U.S. housing recovery.

U.S. housing starts are currently trending near 1.1million annually, which is well below the 50-yearaverage of almost 1.5 million. We think that theU.S. housing recovery will continue, and starts willeventually revert back to the long-run average.Household formations are a key driver of the housing market. We believe there is pent-up demand from potential new households that will be realized as the U.S. economy improves andmore young people start having families. Vacancyrates for renters are also near a multi-decade low,which should encourage more people to becomehomeowners and avoid paying rising rents. Moreover, higher prices and gradual debt

repayment have improved the financial situationfor existing homeowners, making it possible forthem to move up into more desirable homes.

CarMax Inc. (NYSE: KMX)

CarMax is America’s largest retailer of used cars,with 155 superstores in 77 metropolitan markets.By taking a disciplined approach and listening tocustomers, CarMax has turned a commodity businessinto a brand and service story. The company hasnumerous competitive advantages, including:

• a low, no-haggle pricing policy;• a customer-friendly sales process, whereby clients only deal with one person;

• a large inventory of CarMax Quality Certified vehicles;

• superior information systems and market intelligence;

• a very profitable in-house finance subsidiary; and

• the third-largest vehicle auction company in the U.S.

Many of the company’s competitive advantages,such as inventory depth, customer credit profilesand car-pricing history, will become more formidableand enduring as the company gets bigger.

Recession fears have caused investors to worryabout the near-term outlook for the business andhave created an excellent opportunity to add to our position at a discounted price. Regardless of economic conditions this year, CarMax is very wellpositioned to create value for shareholders overthe next few years through new store openingsand market share growth.

MURRAY LEITH, CFA

Executive Vice President and Director, Investment Research

@murrayleith

The Odlum Brown Model Portfolio was established by the ResearchDepartment in December 1994, with a hypothetical investment of$250,000. Trades are made using the closing price on the day achange is announced. These are gross figures before fees. Past performance is not indicative of future performance.

You can apply to begin receiving your Canada Pension Plan (CPP) retirement

benefit between the ages of 60 and 70. ServiceCanada uses age 65 as the benchmark age atwhich to start receiving your pension benefitsuch that:

• If you collect CPP before age 65, benefits are reduced by 0.6%/month (7.2%/year).

• If you collect CPP after age 65, benefits are increased by 0.7%/month (8.4%/year).

Your contributory period begins when you turn 18and ends when you start collecting CPP or turn 70,whichever comes first. Your benefits are based onthe amounts contributed and period of contribution;therefore, years of low or no income (subject to the drop-out provisions noted below) reduce yourbenefit amount. So, if you are under 65 and neithercontributing to nor collecting CPP, you may be inadvertently reducing your pension benefits.

The following chart shows, on a cumulative basis,the difference in CPP benefits received over yourlifetime should you start collecting at age 60, 65 or70, based on the 2016 maximum CPP benefitamount of $1,092.50/month. For example, if youstart to collect CPP at age 65 versus age 60, yourbreak-even point (not taking into account the time-

value of money) is age 74. This means that the cumulative benefits of delaying CPP until age 65will surpass the benefits accumulated from age 60 once you reach age 74.

Qualitative Considerations

Health. If you have any health concerns or a shortened life expectancy, you may want to consider collecting CPP early to maximize the benefits received.

Cash flow needs. If you are 60 or older and experiencing cash flow difficulties, it may make sense

to collect CPP early to meet your immediate needs.On the other hand, if you expect to depend on stableCPP benefits in your later years as a core source ofincome, you may wish to delay your application.

Other sources of income. If you have othersources of taxable income and do not need the additional cash flow, consider delaying receipt asyour CPP benefits will be added to your taxable income and potentially be taxed at a higher rate.

Did You Know?

You may share your pension. Sharing your CPPwith your spouse may result in tax savings by shift-ing taxable income from the higher to lower incomespouse. Both spouses must be at least 60 years oldand apply for sharing through Service Canada.

There is a general drop-out provision. Up to eightyears of your lowest earnings will be dropped fromthe benefit calculation, thereby potentially increasingyour benefit.

There is a child-rearing provision. If you stoppedworking or reduced your work hours to raise youngchildren, you may be eligible to have the child-rearingperiod excluded from the contributory period, thusensuring you receive the highest possible benefit.

To get the most recent estimate of your CPP retirement benefits, contact Service Canada at 1-800-277-9914 or online through the My Service Canada Account. For more information,contact us through your Odlum Brown InvestmentAdvisor or Portfolio Manager.

KARISA SCHAITEL, CPA, CA, CMA, CFP

Financial & Tax Planner, Odlum Brown Financial Services Limited

Odlum Brown Financial Services Limited is a wholly-owned subsidiaryof Odlum Brown Limited, offering life insurance products, retirement,estate and financial planning exclusively to Odlum Brown clients.

3

When Should I Start Collecting CPP?

ODLUM BROWN FINANCIAL SERVICES LIMITED

LIFETIME CPP BENEFITS BASED ON START AGE

Total Benefits Received Over Lifetime if CPP is Started at Age:

Age 60 65 70

90 $251,712 $327,750 $372,324

85 $209,760 $262,200 $279,243

80 $167,808 $196,650 $186,162

75 $125,856 $131,100 $ 93,081

70 $ 83,904 $ 65,550 -

65 $ 41,952 - -

Odlum Brown Honoured Among the Elite in Canadian Business

For the 17th consecutive year,

Odlum Brown Limited has been

named one of Canada’s Best

Managed Companies.

Canada’s Best Managed Companies

is a leading business awards

program that recognizes Canadian-

owned and operated businesses

that excel in leadership, innovation

and best business practices. Every

year, hundreds of companies

compete for this designation in a

rigorous and independent process

that evaluates their management

skills and practice.

We are proud to maintain the

highest level of distinction this

year as a Platinum Club member,

a designation bestowed upon

companies with an established

track record of excellence within

the Canada’s Best Managed

Companies program.

4

DISCLAIMER & DISCLOSURE

Odlum Brown Limited is an independent, full-service investment firm focused on providing professional investment advice and objective research. We re-

spect your right to be informed of relationships with the issuers or strategies referred to in this report which might rea-sonably be expected to indicate potential conflicts of interestwith respect to the securities or any investment strategies dis-cussed or recommended in this report. We do not act as amarket maker in any securities and do not provide investmentbanking or advisory services to, or hold significant positionsin, the issuers covered by our research. Analysts and their associates may, from time to time, hold securities of issuersdiscussed or recommended in this report because they per-sonally have the conviction to follow their own research, butwe have implemented internal policies that impose restric-tions on when and how an Analyst may buy or sell securitiesthey cover and any such interest will be disclosed in our report in accordance with regulatory policy. Our Analysts receive no direct compensation based on revenue from in-vestment banking services. We describe our research policiesin greater detail, including a description of our rating systemand how we disseminate our research, on the Odlum BrownLimited website at odlumbrown.com.

This report has been prepared by Odlum Brown Limited andis intended only for persons resident and located in all theprovinces and territories of Canada, where Odlum BrownLimited's services and products may lawfully be offered forsale, and therein only to clients of Odlum Brown Limited. Thisreport is not intended for distribution to, or use by, any personor entity in any jurisdiction or country including the UnitedStates, where such distribution or use would be contrary tolaw or regulation or which would subject Odlum Brown Limitedto any registration requirement within such jurisdiction or country. As no regard has been made as to the specific investment objectives, financial situation, and other particularcircumstances of any person who may receive this report,clients should seek the advice of a registered investment advisor and other professional advisors, as applicable, regard-ing the appropriateness of investing in any securities or anyinvestment strategies discussed or recommended in this report.

This report is for information purposes only and is neither a solicitation for the purchase of securities nor an offer of securities. The information contained in this report has beencompiled from sources we believe to be reliable, however, wemake no guarantee, representation or warranty, expressed orimplied, as to such information’s accuracy or completeness.All opinions and estimates contained in this report, whetheror not our own, are based on assumptions we believe to bereasonable as of the date of the report and are subject tochange without notice.

Please note that, as at the date of this report, the ResearchAnalyst responsible for the recommendations herein, associ-ates of such Analyst and/or other individuals directly involvedin the preparation of this report may hold securities of the issuer(s) referred to directly or through derivatives.

No part of this publication may be reproduced without the ex-press written consent of Odlum Brown Limited. Odlum BrownLimited is a Member-Canadian Investor Protection Fund.

Odlum Brown Limited respects your time and your privacy. If you no longer wish us to retain and use your personal information preferring to have your name removed from ourmailing list, please let us know. For more information on ourPrivacy Policy please visit our website at odlumbrown.com.

Pink Shirt Day

Pink Shirt Day is an event that is dedicated to raisingfunds and awareness for anti-bullying programs inour local communities. On February 24, Odlum Brownemployees supported this initiative by wearing pinkto work and purchasing buttons in support of theCKNW Orphans’ Fund. For more information, visitpinkshirtday.ca.

Purple Day

On March 24, Odlum Brown employees wore purpleclothing and purchased wristbands in support ofPurple Day, the global day for epilepsy awareness(officially Saturday, March 26). As the founder ofCare-AliveTM (The Caroline Cunningham Foundationfor Epilepsy), Odlum Brown’s Hank Cunninghamjoined Eric Sinclair, President, TMX Datalinx and GroupHead of Data Services, TMX Group, to open theToronto Stock Exchange on Tuesday, March 1 tokick off Epilepsy Awareness Month. Founded in 2009, Care-AliveTM offers support to families and individuals living with epilepsy. For more information, visit care-alive.com.

Jeans DayTM

Odlum Brown is proud to once again support the BCChildren’s Hospital Foundation as the School Sponsorof Jeans DayTM 2016 on April 28. Funds raised will go toward the Hospital’s Excellence in Child HealthFund, which is critical to the programs and servicesprovided by BC Children’s Hospital, Sunny Hill HealthCentre for Children and the Child & Family ResearchInstitute. For more information, visit jeansday.ca.

Odlum Brown in the CommunityOdlum Brown employees are committed to supporting initiatives that matter to our communities: