The Signature Select Canadian Fund (Trades, Portfolio), part of CI Investments, disclosed this week that its top five buys for the six months ending March 31 were Taiwan Semiconductor Manufacturing Co. Ltd. TSM, The Toronto-Dominion Bank TSX:TD, Power Corporation of Canada TSX:POW, Bank of Montreal TSX:BMO and ABN AMRO Bank NV XAMS:ABN.
Led by Eric Bushell, the Toronto-based fund seeks long-term capital appreciation primarily through investments in the common stock of Canadian companies that pay regular income. Signature makes investment decisions based on an analysis of the company’s full capital structure, emphasizing qualitative characteristics like management, financial disclosure and governance structure.
The fund releases interim portfolio updates semiannually, one for the six months ending March and one for the six months from April to September. As of the March portfolio date, Signature’s $599 million equity portfolio contains 103 stocks, including 23 new positions. The top three sectors in terms of weight are financial services, technology and consumer staples, representing 31.36%, 13.83% and 9.68% of the equity portfolio.
Taiwan Semiconductor Manufacturing
Signature Select purchased 214,254 shares of Taiwan Semiconductor Manufacturing, giving the position 2.40% equity portfolio weight. Shares averaged $54.04 during the first three months of 2020.
GuruFocus ranks the Taiwanese semiconductor company’s financial strength 8 out of 10 on several positive investing signs, which include a high Altman Z-score of 9, robust interest coverage and debt ratios that are outperforming over 66% of global competitors.
Gurus with large holdings in Taiwan Semiconductor include Ken Fisher (Trades, Portfolio), First Eagle Investment (Trades, Portfolio) and Sarah Ketterer (Trades, Portfolio).
Toronto-Dominion Bank
The fund purchased 229,192 shares of Toronto-Dominion Bank, giving the holding 2.29% equity portfolio weight. Shares averaged 71.89 Canadian dollars ($52.59) during the March quarter.
Toronto-Dominion operates three businesses: Canadian banking, U.S. banking and wholesale banking. According to GuruFocus, the Toronto-based bank’s cash-to-debt and debt-to-equity ratios are outperforming over 80% of global competitors despite equity-to-asset ratios underperforming 85.32% of global banks.
Gurus with large holdings in Toronto-Dominion include the Leith Wheeler Canadian Equity (Trades, Portfolio) Fund and the Mawer Canadian Equity Fund (Trades, Portfolio).
Power Corporation
Signature Select added 444,580 shares to its Power Corporation holding, increasing it 159.09% and the equity portfolio 1.68%. Shares averaged CA$30.90 during the quarter.
The Montreal-based company holds, through Power Financial, controlling interests in insurance conglomerate Great-West Lifeco and nonbank asset manager IGM Financial. According to GuruFocus, Power Corporation’s debt ratios are underperforming over 60% of global competitors, suggesting low financial strength.
Bank of Montreal
Signature Select purchased 85,781 shares of Bank of Montreal, giving the holding 1.02% weight in the equity portfolio. Shares averaged CA$95.24 during the first quarter of 2020.
Bank of Montreal operates four business segments: Canadian personal and community banking, U.S. personal and community banking, wealth management and capital markets. According to GuruFocus, the bank’s equity-to-asset ratio of 0.05 underperforms 91.28% of global competitors, suggesting high financial leverage.
ABN AMRO
Signature Select purchased 447,510 shares of ABN AMRO, giving the position 0.87% equity portfolio weight. Shares averaged 13.43 euros ($15.08) during the March quarter.
ABN AMRO provides retail and commercial banking services primarily in the Netherlands. According to GuruFocus, the bank’s cash-to-debt and equity-to-debt ratios underperform over 80% of global competitors, suggesting low financial strength.
Disclosure: The author has no positions in the stocks mentioned. The trades discussed in this article reflect information from the fund’s interim portfolio report for the six-month period from October 2019 to March 2020 and thus do not include any trades made during April to June 2020.
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