The Mawer New Canada Fund (Trades, Portfolio) disclosed this week that it established four new positions during the second half of 2019: AltaGas Canada Inc. TSX:ACI, Badger Daylighting Ltd. TSX:BAD, Andlauer Healthcare Group Inc. TSX:AND and Morguard Corp. TSX:MRC.
Managed by Jeff Mo, the fund seeks long-term capital appreciation through investments in smaller-cap Canadian companies. Mo employs a disciplined, research-driven, bottom-up process to select equity investments.
The fund releases its interim portfolio reports semiannually. As of December 2019, the $1.42 billion equity portfolio contains 50 stocks, with a turnover ratio of 12%. The top four sectors in terms of portfolio weight are consumer cyclical, industrials, technology and real estate.
The fund reported in its 2019 annual report that it returned 28.8% for the year, outperforming the S&P / TSX Small-Cap benchmark’s return of 15.8%. The outperformance stemmed from both sector allocation and security selection: The fund’s relatively low exposure to energy and underweight allocation to health care boosted returns.
AltaGas
The fund purchased 512,100 shares of AltaGas, giving the position 1.21% weight in the equity portfolio. Shares averaged 28.59 Canadian dollars ($20.21) apiece during the fourth quarter.
The Calgary, Alberta-based company operates natural gas distribution utilities and renewable power generation assets. GuruFocus ranks the company’s profitability 5 out of 10: Although AltaGas’ operating margin outperforms approximately 70% of global competitors, its three-year revenue decline rate of 1.6% underperforms over 76% of global utility companies.
Badger Daylighting
The fund purchased 369,752 shares of Badger Daylighting, giving the position 0.92% weight in the equity portfolio. Shares averaged CA$40.44 each during the fourth quarter.
The Calgary, Alberta-based company provides nondestructive hydrovac excavation services based on its core technology, the Badger Hydrovac System. GuruFocus ranks the company’s profitability 9 out of 10 on several positive investing signs, which include a 4.5-star business predictability rank and operating margins that are outperforming over 80% of global competitors.
Andlauer Healthcare
The fund purchased 478,251 shares of Andlauer Healthcare, giving the holding 0.68% weight in the equity portfolio. Shares averaged CA$19.81 each during the fourth quarter.
The Vaughan, Ontario-based company provides supply chain management solutions with a platform of third-party logistics and specialized transportation solutions for the health care sector. GuruFocus ranks the company’s financial strength 5 out of 10: Although it has solid interest coverage and high Altman Z-scores, the company’s debt-to-equity ratio of 0.46 underperforms 86% of global competitors.
Morguard
The fund purchased 33,822 shares of Morguard, giving the position 0.48% weight in the equity portfolio. Shares averaged CA$201.90 during the fourth quarter.
The Mississauga, Ontario-based company acquires, owns and develops properties in the U.S. and Canada. GuruFocus ranks Morguard’s profitability 8 out of 10: Operating margins are outperforming over 78% of global competitors despite contracting over the past five years. Additionally, the company’s business predictability ranks 3.5 stars out of five.
Disclosure: No positions.
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