The Mawer Canadian Equity Fund (Trades, Portfolio), which operates as part of Mawer Investment Management, recently disclosed its portfolio updates for the second half of 2020, which ended on Dec. 31 (the fund files semi-annually, once for the first half of the year and once for the second half of the year).
Based in Calgary, Alberta, the fund primarily invests in large-cap Canadian companies to achieve long-term capital growth. It is managed by Vijay Viswanathan and Jim Hall, with a strategy that focuses on companies that create wealth, have excellent management teams and are trading at a discount to intrinsic value.
Based on its investing strategy, the fund disclosed three new common stock holdings that it added during the second half of 2020: Stella-Jones Inc. (TSX:SJ, Financial), Fortis Inc. (TSX:FTS, Financial) and Dye & Durham Ltd. (TSX:DND, Financial).
The fund took up a 1,468,433-share stake in Stella-Jones Inc. (TSX:SJ, Financial), impacting the equity portfolio by 2.07%. During the fourth quarter, shares traded for an average price of 43.79 Canadian dollars ($34.82).
Stella-Jones is a Canadian logging company that operates through two segments: pressure-treated wood and logs and lumber. The products it produces include railway ties, utility poles, residential lumber and industrial lumber products.
On April 1, shares of Stella-Jones traded around C$51.71 for a market cap of C$3.38 billion. According to the GuruFocus Value chart, the stock is fairly valued.
The company has a financial strength rating of 6 out of 10 and a profitability rating of 8 out of 10. The interest coverage ratio of 12.36 and Piotroski F-Score of 7 out of 9 indicate the company has a very healthy financial situation. The return on invested capital is consistently higher than the weighted average cost of capital, indicating the company is creating value for shareholders.
Based in St. John's, Canada, Fortis is a major North American regulated gas and electric utility company. It has operations under a variety of names in Canada, the United States, Central America and the Caribbean, providing electricity to approximately 25,800 kilometers of service territory.
On April 1, shares of Fortis traded around C$54.46 for a market cap of C$25.54 billion. According to the GuruFocus Value chart, the stock is fairly valued.
The company has a financial strength rating of 3 out of 10 and a profitability rating of 6 out of 10. While the cash-debt ratio of 0.01 is lower than 93% of industry peers, the Piotroski F-Score of 6 out of 9 indicates the company is financially stable. The dividend yield of 3.61% is about average for the industry and for the company; as we can see in the chart below, the dividend yield has remained in the same range since 2008.
Dye & Durham
The fund also bought 520,566 shares of Dye & Durham Ltd. (TSX:DND, Financial), which had a 0.80% impact on the equity portfolio. During the fourth quarter, shares traded for an average price of C$25.53.
Dye & Durham is a software company specializing in legal technology. Based in Vancouver, it is a leading provider of cloud-based solutions designed to improve efficiency and increase productivity for customers in the fields of law and business.
On April 1, shares of Dye & Durham traded around C$40.76 for a market cap of C$2.81 billion. Since the company went public in July of 2020, the stock has gained 175%.
The company has a financial strength rating of 5 out of 10 and a profitability rating of 5 out of 10. The cash-debt ratio of 0.61 is lower than 76% of industry peers, though the Altman Z-Score of 2.86 indicates the company is not likely to face liquidity issues. The three-year revenue growth rate is 54.6%, but the three-year earnings per share without non-recurring items growth rate is -47.6%.
As of the end of 2020, the fund consisted of 44 common stock holdings valued at a total of $3.28 billion. The top holdings were Royal Bank of Canada (TSX:RY, Financial) with 5.45% of the equity portfolio, Canadian Pacific Railway Ltd (TSX:CP, Financial) with 5.32% and The Toronto-Dominion Bank (TSX:TD, Financial) with 5.24%.
In terms of sector weighting, the fund was most invested in financial services, industrials and technology.
Disclosure: Author owns no shares in any of the stocks mentioned. The mention of stocks in this article does not at any point constitute an investment recommendation. Portfolio updates reflect only common stock positions as per the regulatory filings for the period in question and may not include changes made after the period ended.
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