On Monday, the CI Can Am Small Cap (Trades, Portfolio) Fund, part of CI Investments Inc., disclosed it established two new positions in the third quarter.
Managed by Joe Jugovic and Ian Cooke, the Toronto-based fund, which releases its portfolio biannually, invests primarily in Canadian small-cap companies to achieve long-term capital growth. It will take positions in foreign securities as well.
Based on these criteria, the portfolio managers revealed they established holdings in SmartCentres Real Estate Investment Trust TSX:SUR.UN and Stella-Jones Inc. TSX:SJ during the quarter.
SmartCentres
The fund invested in 57,540 shares of SmartCentres, dedicating 1.69% of the equity portfolio to the position. The stock traded for an average price of 33.19 Canadian dollars ($25.23) per share during the quarter.
The Vaughan, Ontario-based REIT, which specializes in retail real estate, has a CA$5.21 billion market cap; its shares closed at CA$30.93 on Monday with a price-earnings ratio of 16.46, a price-book ratio of 1.17 and a price-sales ratio of 6.42.
The Peter Lynch chart indicates the stock is trading above its fair value, suggesting it is overpriced.
GuruFocus rated SmartCentres financial strength 4 out of 10 on the back of a large debt load and low interest coverage. In addition, the Altman Z-Score of 1.14 warns the company is in financial distress and could be at risk of going bankrupt.
The REIT’s profitability fared a bit better, scoring a 7 out of 10 rating. Although the operating margin is in decline, it still outperforms over half of its competitors. In addition, SmartCentres has strong returns and a moderate Piotroski F-Score of 4, which indicates the company has stable operations. It also has a business predictability rank of one out of five stars, which is on watch as a result of a decline in revenue per share over the past 12 months. According to GuruFocus, companies with this rank typically see their stocks gain an average of 1.1% per annum over a 10-year period.
The fund holds 0.06% of the REIT’s outstanding shares.
Stella-Jones
CI Can AM Picked up 29,990 shares of Stella-Jones, allocating 1.05% of the equity portfolio to the holding. During the quarter, the stock traded for an average per-share price of CA$43.38.
The Canadian company, which produces pressure-treated wood products like railway ties, utility poles and products for residential and industrial construction projects, has a market cap of CA$2.56 billion; its shares closed at CA$37.40 on Monday with a price-earnings ratio of 16.54, a price-book ratio of 1.94 and a price-sales ratio of 1.19.
According to the Peter Lynch chart, the stock is overvalued.
Stella-Jones’ financial strength was rated 5 out of 10 on the back of adequate interest coverage and a robust Altman Z-Score of 4.03, which suggests the company is in good financial standing.
The company’s profitability scored a 9 out of 10 rating, driven by solid margins and returns that outperform over half of its industry peers. Stella-Jones also has a moderate Piotroski F-Score of 5 and, despite recording a slowdown in revenue growth over the past year, a perfect five-star business predictability rank. GuruFocus says companies with this rank typically see their stocks gain an average of 12.1% per year.
The Mawer New Canada Fund (Trades, Portfolio) is the company’s largest guru shareholder with2.02% of outstanding shares. The Small Cap fund holds 0.04%.
Additional trades and portfolio composition
During the quarter, the fund also boosted its holdings of Westshore Terminals Investment Corp. TSX:WTE, Shawcor Ltd. TSX:SCL, PrairieSky Royalty Ltd. TSX:PSK and ARC Resources Ltd. TSX:ARX.
CI Can Am’s $111 million equity portfolio, which is composed of 33 stocks, is largely invested in the energy and financial services sectors.
According to GuruFocus, the fund returned -15.6% in 2018.
Disclosure: No positions.
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