The Mawer New Canada Fund (Trades, Portfolio) has released its portfolio for the second half of 2020. Major trades for the fund include new buys into Dye & Durham Ltd. (TSX:DND, Financial) and Tucows Inc. (TSX:TC, Financial) alongside additions to the People Corp. (TSXV:PEO, Financial) and North American Construction Group Ltd. (TSX:NOA, Financial) holdings.
The investment objective of the Mawer New Canada Fund (Trades, Portfolio) is to invest for above-average, long-term returns in securities of smaller Canadian companies. Treasury bills or short-term investments, not exceeding three years to maturity, may also be used from time to time. This is a smaller capitalization fund and it is suited for investors seeking long-term, above-average growth who can tolerate significant volatility, which means higher risk.
Portfolio overview
At the end of the second half of 2020, the fund's portfolio contained 48 stocks with three new holdings. It was valued at $1.63 billion and has seen a turnover rate of 15%. Top holdings at the end of the year were Dye & Durham, Boyd Group Services Inc. (TSX:BYD, Financial), People Corp., Colliers International Group Inc. (TSX:CIGI, Financial) and Stella-Jones Inc. (TSX:SJ).
By weight, the top three sectors represented are industrials (21.76%), technology (21.37%) and consumer cyclical (17.96%).
Dye & Durham
During the second half of 2020, the fund established a new holding in Dye & Durham (TSX:DND, Financial) as the top position in the portfolio. It was established with the purchase of 1.96 million shares that traded at an average price of 25.53 Canadian dollars ($20.30). Overall, the purchase had a 6.08% impact on the portfolio and GuruFocus estimates the total gain of the holding at 59.66%.
Dye & Durham is engaged in providing cloud-based software and technology solutions designed to improve efficiency and increase productivity for legal and business professionals. The company has business operations in Canada and the United Kingdom. The customers include law firms, financial service institutions and government organizations.
On April 1, the stock was trading at C$40.76 per share with a market cap of C$2.81 billion. There is not currently enough data for the GF Value Line or the Peter Lynch Chart to be displayed.
GuruFocus gives the company a financial strength rating of 5 out of 10 and a profitability rank of 5 out of 10. There is currently one severe warning sign issued for a Sloan ratio indicating poor quality of earnings. The company has an average operating margin of 2.75% compared to the industry, but its profitability rank is drug down by a negative net margin percentage.
Tucows
The fund also established a new buy into Tucows (TSX:TC, Financial) with the purchase of 262,400 shares. During the second half of 2020, the shares traded at an average price of C$96.86. GuruFocus estimates the total gain of the holding at 1.79% and the purchase had an impact of 1.52% on the portfolio.
Tucows has a predominant technology market in the United States, and to a lesser extent in Canada and Germany. Its services touch upon two segments in the technology sector; Domain Services and Network Access. The Domain Services make for the bulk of the company's revenue through the registration fees charged to resellers in connection with new, renewed and transferred domain name registrations, the sale of retail internet domain name registration and email services. Its Network Access Services on the other hand deal with the retail sale of mobile phones, broadband services, internet hosting and consulting through the Ting website in the United States.
As of April 1, the stock was trading at C$98.59 per share per share with a market cap of C$1.06 billion. According to the GF Value Line, the shares are trading at a significantly overvalued rating.
GuruFocus gives the company a financial strength rating of 4 out of 10, a profitability rank of 8 out of 10 and a valuation rank of 2 out of 10. There are currently five severe warning signs issued, including new long-term debt and declining revenue per share. The company has seen debt skyrocket since 2017.
People
The fund boosted People (TSXV:PEO, Financial), one of its largest holdings, by 52% with the purchase of 1.53 million shares. During the second half of 2020, the shares traded at an average price of C$10.84 per share. The fund has gained an estimated 69.27% on the holding and the portfolio saw a 1.42% impact from the addition.
People is a Canada-based provider of group benefits, group retirement and human resource services. It offers various employee services, including career transition and career management, employee benefits consulting, group retirement solutions, integrated solutions, student benefits, recruitment, third-party administration, wellness and human resource consulting services, among others. Geographically, it operates only in Canada.
The stock was trading at C$15.21 per share with a market cap of C$1.09 billion. The GF Value Line gives the shares a significantly overvalued rating.
GuruFocus gives the company a financial strength rating of 5 out of 10, a profitability rank of 7 out of 10 and a valuation rank of 1 out of 10. There is one severe warning sign issued for assets growing faster than revenue. Value has suffered for the company as the weighted average cost of capital exceeds the return on invested capital.
North American Construction Group
The fund's North American Construction Group (TSX:NOA, Financial) position was increased by 349.59% with the purchase of 1.83 million shares. During the second half of 2020, the shares traded at an average price of C$10.17 per share. Overall, the purchase had a 1.40% impact on the portfolio and GuruFocus estimates the total gain of the holding at 38.79%.
North American Construction Group is Canada's provider of heavy civil construction and mining contractors. The company has provided services to oil, natural gas and resource companies.
On April 1, the stock was trading at C$14.17 per share with a market cap of C$424.39 million. The shares are modestly overvalued according to the GF Value Line.
GuruFocus gives the company a financial strength rating of 4 out of 10, a profitability rank of 5 out of 10 and a valuation rank of 4 out of 10. There are currently three severe warning signs issued for new long-term debt, assets growing faster than revenue and an Altman Z-Score of 1.29 placing the company in the distress column. Revenue and net income have started to make a comeback for the company after 2016 when they hit a low point.
Dislcosure: Author owns no stocks mentioned.
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