The Signature Select Canadian Fund (Trades, Portfolio), part of CI Investments, disclosed this week its top six buys during the period from October 2018 to March 2019 were Total SA (TOT, Financial)(XPAR:FP, Financial), Power Financial Corp. (TSX:PWF, Financial), Novartis AG (NVS, Financial)(XSWX:NOVN, Financial), Banco Santander SA (XMAD:SAN, Financial), Cenovus Energy Inc. (TSX:CVE) and Marathon Petroleum Corp. (MPC).
Led by Chief Investment Officer Eric Bushell, the Toronto-based fund seeks long-term capital appreciation through Canadian and global securities that pay regular income. The fund’s managers and analysts combine research and develop a comprehensive picture of a company and its securities. Key factors in the fund’s stock selection include qualitative characteristics like financial disclosure and governance structure.
The fund releases portfolio updates semiannually. As of March, the $856 million equity portfolio contains 104 stocks, of which 20 represent new holdings. The fund has 34.24% weight in financial services and 17.34% weight in energy, its top two sectors in terms of portfolio weight.
Total
The fund purchased 299,200 shares of Total, giving the position 2.60% weight in the equity portfolio. Shares averaged 48.86 euros ($55.01) during the three months ending March 31.
The French petroleum company explores for, produces and refines oil around the globe. GuruFocus ranks Total’s profitability 5 out of 10: Although the company’s net profit margin of 6.39% outperforms 56.60% of global competitors, its operating margin of 9.34% underperforms 51.72% of global integrated oil and gas companies. Despite this, Total’s operating margin has increased approximately 2.80% per year over the past five years, a sign of good profitability potential.
Other gurus with holdings in Total include the Tweedy Browne (Trades, Portfolio) Global Value Fund and Sarah Ketterer (Trades, Portfolio)’s Causeway International Value (Trades, Portfolio) Fund.
Power Financial
The fund purchased 371,100 shares of Power Financial, giving the holding 1.35% equity portfolio weight. Shares averaged 28.1 Canadian dollars ($21.49) during the March quarter.
Power Financial, a subsidiary of Power Corp. of Canada (TSX:POW, Financial), operates in the life insurance industry through controlling interests in Great-West Lifeco and IGM Financial. GuruFocus ranks Power Financial’s financial strength 4 out of 10 on a few weak signs, which include a cash-to-debt ratio of 0.70 and an equity-to-asset ratio of 0.05, both underperforming over 68% of global competitors. The website warns that Power Financial’s long-term debt has increased by CA$6.3 billion over the past three years.
Novartis
The fund purchased 69,100 shares of Novartis, giving the position 1.04% equity portfolio weight. Shares averaged 78.85 Swiss francs ($79.67) during the March quarter.
The Basel, Switzerland-based company develops and manufactures health care products within four main operating segments: branded drugs, generic pharmaceuticals, eye care products and consumer products. GuruFocus ranks Novartis’ profitability 7 out of 10: Even though operating margins outperform just 59.25% of global competitors, the net margin and Joel Greenblatt (Trades, Portfolio) return on capital are outperforming over 84% of global drug manufacturers.
The Vanguard Health Care Fund (Trades, Portfolio) also has a position in Novartis.
Banco Santander
The fund purchased 1,180,800 shares of Banco Santander, giving the stake 0.86% equity portfolio space. Shares averaged 4.19 euros ($4.72) during the quarter.
The Madrid-based bank focuses on retail and commercial banking. GuruFocus ranks Banco Santander’s financial strength 6 out of 10: Although the bank has no long-term debt, its equity-to-asset ratio of 0.07 underperforms 77.53% of global banks.
Cenovus Energy
The fund purchased 603,900 shares of Cenovus Energy, giving the holding 0.82% weight in the equity portfolio. Shares averaged CA$10.89 during the March quarter.
The Calgary, Alberta-based company develops oil sand assets and engages in several energy operations, which include the production of conventional crude oil, natural gas liquids and natural gas. GuruFocus ranks Cenovus Energy’s financial strength 3.8 out of 10 on several weak signs, which include a weak Piotroski F-score of 3, a debt-to-equity ratio that underperforms 62.90% of global competitors and an Altman Z-score that suggests possible financial distress.
Marathon Petroleum
The fund purchased 86,700 shares of Marathon Petroleum, giving the position 0.81% weight in the equity portfolio. Shares averaged $65.33 during the March quarter.
The Findlay, Ohio-based company operates seven oil refineries in the midcontinent and Gulf Coast of the U.S. GuruFocus ranks Marathon Petroleum’s profitability 6 out of 10: Operating margins are outperforming just 62.50% of global competitors despite expanding 7.50% per year over the past five years. Additionally, gross margins have contracted approximately 6.50% per year over the past five years, a sign of declining profitability.
Disclosure: No positions.
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