The Mawer New Canada Fund (Trades, Portfolio) disclosed it established three new holdings when it released its fourth-quarter portfolio.
Managed by Jeff Mo, the fund invests in mostly smaller Canadian companies with the goal of achieving long-term, above-average growth.
Mawer New Canada’s new positions for the quarter were Cogeco Inc. (TSX:CGO, Financial), Richards Packaging Income Fund (TSX:RPI.UN, Financial) and People Corp. (TSXV:PEO, Financial).
Cogeco
The fund’s largest new purchase for the quarter was 103,600 shares of Cogneco for an average price of 88.3 Canadian dollars ($70.03) per share, giving it 0.76% portfolio space.
Headquartered in Montreal, the media and telecommunications company has a market cap of CA$1.12 billion; its shares closed around CA$67.69 on Wednesday, down 1.1%, with a price-earnings ratio of 10.47, a price-book ratio of 1.87 and a price-sales ratio of 0.48.
The Peter Lynch chart below shows the stock is trading below its fair value, suggesting it is undervalued.
GuruFocus rated Cogeco’s financial strength 4 out of 10 as it has a low debt-to-equity ratio and poor interest coverage. In addition, its Altman Z-Score of 0.96 indicates the company could face bankruptcy in the near future. In contrast, the company’s profitability and growth was rated 9 of 10, boosted by its expanding operating margin, high Piotroski F-Score of 7 and a 3.5-star (out of five) business predictability rating.
The fund holds 0.63% of the company’s outstanding shares.
Richards Packaging Income Fund
Mawer bought 251,400 shares of Richards Packaging Income for an average price of CA$29.28 per share, expanding the portfolio 0.64%.
The Canada-based open-ended investment fund, which invests in packaging distribution businesses throughout North America, has a market cap of CA$374.18 million; its shares closed at CA$32 on Wednesday with a price-earnings ratio of 22.54, a price-book ratio of 3.80 and a price-sales ratio of 1.27.
According to the Peter Lynch chart below, the stock is overpriced as it is trading higher than its fair value.
The company’s financial strength was rated 6 out of 10 by GuruFocus as it has sufficient interest coverage and a strong Altman Z-Score of 5.07. Since Richards’ operating margin is expanding and it has a high Piotroski F-Score of 9, the company’s profitability and growth was rated 9 of 10. In addition, it has a one-star business predictability rating.
The fund holds 2.15% of the company’s outstanding shares.
People
The fund invested in 194,967 shares of People for an average price of CA$6.83 per share. The trade had an impact of 0.12% on the portfolio
Based in Winnipeg, Manitoba, the employee benefit, pension and human resource consulting company has a market cap of CA$395.04 million; its shares closed at CA$7.20 on Wednesday, down 0.69%, with a price-earnings ratio of 90.01, a price-book ratio of 4.22 and a price-sales ratio of 3.40.
Based on the Peter Lynch chart below, the stock appears to be overpriced as it is trading well above its fair value.
Since People has sufficient interest coverage and a strong Altman Z-Score of 3.47, GuruFocus rated its financial strength 6 out of 10. Boosted by an expanding operating margin, its profitability and growth was rated 8 of 10. In addition, the company has a moderate Piotroski F-Score of 6, which implies stable business operations.
Mawer holds 0.36% of the company’s outstanding shares.
Other trades
During the quarter, the fund also added to its positions in Sleep Country Canada Holdings Inc. (TSX:ZZZ, Financial), Boyd Group Income Fund (TSX:BYD.UN, Financial), CES Energy Solutions Corp. (TXS:CEU), Jamieson Wellness Inc. (TSX:JWEL) and Currency Exchange International Corp. (TSX:CXI), among others.
Mawer’s portfolio of 55 holdings is largely composed of stocks in the consumer cyclical sector. According to GuruFocus data, the fund underperformed the S&P 500 in 2017 with a 3.9% return. The index returned 21.71%.
Disclosure: No positions.
