The Mawer Canadian Equity Fund (Trades, Portfolio), part of Mawer Investment Management, released its portfolio for the first half of the year earlier this month.
Managed by Vijay Viswanathan, the Calgary, Alberta-based fund primarily invests in large-cap Canadian companies to achieve long-term, above-average growth. To achieve its objectives, the fund executes a highly disciplined, research-driven, bottom-up process.
During the six months ended June 30, the fund entered seven new positions, sold out of four stocks and added to or trimmed a number of other existing holdings. The most notable trades included the divestment of Shaw Communications Inc. (TSX:SJR.B, Financial), new positions in Colliers International Group Inc. (TSX:CIGI, Financial) and Dollarama Inc. (TSX:DOL, Financial) as well as increased bets on Bank of Montreal (TSX:BMO, Financial) and Bank of Nova Scotia (TSX:BNS, Financial).
Shaw Communications
The fund exited its 3.5 million-share stake in Shaw Communications (TSX:SJR.B, Financial), impacting the equity portfolio by -2.4%. The Class B stock traded for an average price of 35.36 Canadian dollars ($27.94) per share during the quarter.
GuruFocus estimates Mawer gained 30.66% on the investment, which was established in 2014.
The Calgary, Alberta-based telecommunications company has a CA$18.46 billion market cap; its Class B shares closed at CA$36.99 on Thursday with a price-earnings ratio of 20.78, a price-book ratio of 3.12 and a price-sales ratio of 3.43.
The GF Value Line suggests the stock is significantly overvalued based on historical ratios, past performance and future earnings projections.
GuruFocus rated Shaw’s financial strength 4 out of 10. In addition to having insufficient interest coverage, the Altman Z-Score of 1.84 indicates the company is under some pressure. The return on invested capital, however, overshadows the weighted average cost of capital, indicating value is being created as the company grows.
The company’s profitability scored a 7 out of 10 rating. Despite having a declining operating margin, the returns on equity, assets and capital outperform over half of its competitors. Shaw also has a high Piotroski F-Score of 7 out of 9, suggesting business conditions are healthy, and a predictability rank of one out of five stars. According to GuruFocus, companies with this rank return an average of 1.1% annually over a 10-year period.
The ishares MSCI ACVI ex. U.S. ETF is currently the only investor with 0.01% of outstanding shares.
Colliers International Group
The Canadian Equity Fund invested in 549,100 shares of Colliers International (TSX:CIGI, Financial), dedicating 1.95% of the equity portfolio to the holding. Shares traded for an average price of CA$129.42 each during the quarter.
The company headquartered in Toronto, which provides commercial real estate brokerage and investment management services, has a market cap of CA$7.48 billion; its shares closed at CA$170.01 on Thursday with a price-book ratio of 11.81 and a price-sales ratio of 1.69.
According to the GF Value Line, the stock is significantly overvalued currently.
Colliers International’s financial strength was rated 4 out of 10 by GuruFocus. Despite the company issuing approximately $451.2 million in new long-term debt over the past three years, it is at a manageable level due to adequate interest coverage. The Altman Z-Score of 2.07, however, indicates it is under some pressure since assets are building up at a faster rate than revenue is growing. The ROIC eclipses the WACC, indicting good value creation is occurring.
The company’s profitability fared better with a 6 out of 10 rating, driven by an expanding operating margin and moderate Piotroski F-Score of 4, which indicates operations are typical for a stable company. Colliers International’s returns, however, are negative and underperform a majority of industry peers. The one-star predictability rank is also on watch.
The Mawer New Canada Fund (Trades, Portfolio) also has a position in the stock with 1.26% of outstanding shares. The Canadian Equity Fund holds 1.25%.
Dollarama
The Canadian Equity Fund picked up 1.23 million shares of Dollarama (TSX:DOL, Financial), allocating 1.79% of the equity portfolio to the position. The stock traded for an average per-share price of CA$53.12 during the quarter.
The Montreal, Quebec-based company, which operates a chain of discount retail stores, has a CA$21.07 billion market cap; its shares closed at CA$58.20 on Thursday with a price-earnings ratio of 30.47, a price-book ratio of 126.53 and a price-sales ratio of 4.39.
Based on the GF Value Line, the stock appears to be fairly valued currently.
GuruFocus rated Dollarama’s financial strength 4 out of 10. While the company has sufficient interest coverage and robust Altman Z-Score of 4.55, it may be becoming less efficient since assets are building up at a faster rate than revenue is growing. The ROIC surpasses the WACC, however, so value is being created.
The company’s profitability scored a 9 out of 10 rating on the back of an expanding operating margin, strong returns that outperform a majority of competitors and a moderate Piotroski F-Score of 6. Consistent earnings and revenue growth also contributed to Dollarama’s five-star predictability rank. GuruFocus says companies with this rank return an average of 12.1% annually.
With a 0.4% stake, Mawer is the company’s largest guru shareholder. The iShares MSCI ACWI ex. U.S. ETF also has a position in Dollarama.
Bank of Montreal
With an impact of 1.69% on the equity portfolio, the fund increased its Bank of Montreal (TSX:BMO, Financial) stake by 72.02%, buying 521,610 shares. During the quarter, the stock traded for an average price of CA$112.13 per share.
It now holds a total of 1.24 million shares, which represent 4.04% of the equity portfolio and is its sixth-largest position. GuruFocus data shows the fund has gained an estimated 40.83% on the investment since establishing it in 2011.
The Canadian investment bank, which is headquartered in Montreal, Quebec, has a market cap of CA$82.74 billion; its shares closed at CA$127.67 on Thursday with a price-earnings ratio of 11.91, a price-book ratio of 1.54 and a price-sales ratio of 3.22.
The GF Value Line suggests the stock is modestly overvalued currently.
Bank of Montreal’s financial strength was rated 3 out of 10 by GuruFocus. In addition to low debt-related ratios, the company’s assets are building up at a faster rate than its revenue is growing, indicating it may be becoming less efficient.
The bank’s profitability scored a 6 out of 10 rating as its margins and returns beat at least half of its industry peers. The company is also supported by a high Piotroski F-Score of 7. Despite recording a slowdown in revenue per share growth over the past 12 months, it still has a five-star predictability rank.
Of the gurus invested in Bank of Montreal, Mawer has the largest stake with 0.19% of its outstanding shares. Other guru shareholders are the Leith Wheeler Canadian Equity (Trades, Portfolio) Fund, iShares MSCI ACWI ex. U.S. ETF and the Signature Select Canadian Fund (Trades, Portfolio).
Bank of Nova Scotia
Impacting the equity portfolio by 1.32%, the fund upped its position in Bank of Nova Scotia (TSX:BNS, Financial) by 81.81%, buying 643,025 shares. During the quarter, shares traded for an average price of CA$76.32 each.
It now holds a total of 1.43 million shares, accounting for 2.94% of the equity portfolio and is its ninth-largest holding. GuruFocus estimates the fund has gained 24.24% on the investment since establishing it in 2011.
The Toronto-based bank, which operates as Scotiabank, has a CA$96.96 billion market cap; its shares closed at CA$79.80 on Thursday with a price-earnings ratio of 12.87, a price-book ratio of 1.53 and a price-sales ratio of 3.21.
According to the GF Value Line, the stock is fairly valued currently.
GuruFocus rated Scotiabank’s financial strength 3 out of 10 on the back of weak debt-related ratios. In addition, assets are building up at a faster rate than revenue is growing, indicating that it is becoming less efficient.
The bank’s profitability scored a 5 out of 10 rating due to its margins and returns outperforming around half of its competitors. It also has a moderate Piotroski F-Score of 4. Steady earnings and revenue growth also contributed to a four-star predictability rank. GuruFocus data shows companies with this rank return, on average, 9.8% annually.
The Leith Wheeler Canadian Equity (Trades, Portfolio) Fund is Bank of Nova Scotia’s largest guru shareholder with a 0.13% stake. Signature Select and the iShares AMSCI ACWI ex. U.S. ETF also have positions in the stock.
Additional trades and portfolio performance
Other significant changes to the portfolio included a reduction in the Choice Properties Real Estate Investment Trust (TSX:CHP.UN, Financial) stake, the sale of Kinaxis Inc. (TSX:KXS, Financial), a boost to the position in Manulife Financial Corp. (TSX:MFC, Financial) and new holdings in BRP Inc. (TSX:DOO, Financial), Softchoice Corp. (TSX:SFTC, Financial) and Lundin Mining Corp. (TSX:LUN, Financial).
Mawer’s $3.92 billion equity portfolio, which is composed of 47 stocks, is heavily invested in the financial services sector at 28.84%. It has slightly smaller exposures to the industrials (16.91%) and technology (14.31%) spaces.
According to its website, the Canadian Equity Fund posted a 14.5% year-to date return as of June 30, slightly underperforming the S&P/TSX Composite Index’s return of 17.3%.
