The CI Can Am Small Cap (Trades, Portfolio) Fund, part of CI Investments Inc., disclosed it established three new positions when it released its semi-annual portfolio earlier this week.
Managed by Joe Jugovic, the Toronto-based fund seeks long-term capital growth by investing in small-cap, Canadian companies. It will also take positions in foreign securities.
Based on these criteria, the fund invested in Linamar Corp. (TSX:LNR, Financial), ARC Resources Ltd. (TSX:ARX, Financial) and Element Fleet Management Corp. (TSX:EFN, Financial).
Linamar
The portfolio manager invested in 95,090 shares of Linamar for an average price of 62.77 Canadian dollars ($46.98) per share, dedicating 3.01% of the equity portfolio to the holding.
The Canadian auto parts manufacturer has a CA$3.03 billion market cap; its shares closed at CA$46.42 on Wednesday with a price-earnings ratio of 5.10, a price-book ratio of 0.86 and a price-sales ratio of 0.41.
The Peter Lynch chart shows the stock is trading below its fair value, suggesting it is undervalued.
GuruFocus rated Linamar’s financial strength 6 out of 10. While the company has adequate interest coverage, the Altman Z-Score of 2.54 indicates it is under some fiscal pressure. The company’s profitability and growth scored an 8 out of 10 rating, boosted by an expanding operating margin, good returns, a moderate Piotroski F-Score of 6, which implies conditions are stable, and a business predictability rank of one out of five stars. According to GuruFocus, companies with this rank typically see their stock prices gain an average of 1.1% per year.
The fund holds 0.15% of the company’s outstanding shares.
ARC Resources
The fund picked up 322,190 shares of ARC Resources for an average price of CA$14.29 per share, allocating 2.47% of the equity portfolio to the position.
Based in Calgary, Alberta, the oil and gas producer has a market cap of CA$3.22 billion; its shares closed at CA$9.12 on Wednesday with a price-earnings ratio of 24.64, a price-book ratio of 0.90 and a price-sales ratio of 2.23.
According to the Peter Lynch chart, the stock is overvalued.
ARC Resources’ financial strength was rated 6 out of 10 by GuruFocus. Although it has adequate interest coverage, the Altman Z-Score of 0.99 warns the company is at risk of going bankrupt. Despite posting margins and returns that outperform industry peers, the company’s profitability and growth scored a 5 out of 10 rating. It also has a moderate Piotroski F-Score of 5 and a one-star business predictability rank, which is on watch as a result of declining revenue per share.
With its purchase of 0.09% of outstanding shares, the Small Cap Fund became the company’s largest guru shareholder. The Signature Select Canadian Fund (Trades, Portfolio) also holds the stock.
Element Fleet Management
The Small Cap Fund purchased 314,850 shares of Element Fleet Management for an average price of CA$6 per share, giving it 1.11% space in the equity portfolio.
The Toronto-based company, which provides management services and financing for vehicles and equipment, has a market cap of CA$3.08 billion; its shares closed at CA$7.12 on Wednesday with a forward price-earnings ratio of 8.73, a price-book ratio of 0.98 and a price-sales ratio of 2.14.
Based on the Peter Lynch chart, the stock appears to be overpriced.
As a result of issuing approximately CA$458.19 million in new long-term debt over the last three years, GuruFocus rated Element’s financial strength a poor 3 out of 10. The company has also seen a slowdown in revenue per share growth over the last 12 months. Boosted by margins and returns that outperform competitors, the company’s profitability and growth scored a 6 out of 10 rating.
The Oakmark International Small Cap Fund has the largest stake in Element Fleet Management with 2.74% of outstanding shares. The Mawer New Canada Fund (Trades, Portfolio) is also a shareholder.
Additional trades
Jugovic also divested several holdings: New York Community Bancorp Inc. (NYCB, Financial), Westinghouse Air Brake Technologies Corp. (WAB, Financial), Domtar Corp. (TSX:UFS, Financial) and Ritchie Bros. Auctioneers Inc. (TSX:RBA, Financial).
The $187.9 million portfolio, which is composed of 35 stocks, is largely invested in the energy and financial services sector. According to its fact sheet, the fund returned 1.4% in 2017.
Disclosure: No positions.
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