The Mawer Canadian Equity Fund (Trades, Portfolio) listed two new positions when it released its fourth-quarter portfolio: Kinder Morgan Canada Ltd. (TSX:KML, Financial) and Shopify Inc. (TSX:SHOP, Financial).
Managed by Vijay Viswanathan and Jim Hall, the fund invests in larger Canadian companies to achieve long-term, above-average growth.
Kinder Morgan Canada
The fund invested in 968,813 shares of Kinder Morgan Canada for an average price of 16.86 Canadian dollars ($13.41) per share, giving it 0.6% portfolio space.
Headquartered in Calgary, Alberta, the midstream oil and gas company has a market cap of CA$5.97 billion; its shares closed at CA$17.24 on Friday with a price-earnings ratio of 36.68, a price-book ratio of 1.64 and a price-sales ratio of 2.14.
The Peter Lynch chart below shows the stock is trading higher than its fair value, suggesting it is overpriced.
GuruFocus rated Kinder Morgan Canada’s financial strength 7 out of 10. While the company has no debt and good interest coverage, its Altman Z-Score of 1.3 indicates it is under some financial pressure. The company’s profitability and growth was rated 6 of 10 as its operating margin outperforms 63% of competitors and it has a moderate Piotroski F-Score of 6.
Mawer holds 0.28% of the company’s outstanding shares.
Shopify
Mawer purchased 117,600 shares of Shopify for an average price of CA$130.35 per share, expanding the portfolio 0.54%.
The Ottawa, Ontario-based cloud commerce platform has a market cap of CA$15.59 billion; its shares closed at CA$148 on Friday with a forward price-earnings ratio of 1,250, a price-book ratio of 11.56 and a price-sales ratio of 16.42.
According to Shopify’s median price-sales chart, the stock is trading above its historical value.
Since Shopify has no debt and a strong Alman Z-Score, its financial strength was rated 9 out of 10 by GuruFocus. In contrast, its profitability and growth was rated 4 of 10 because its operating margin is negative and underperforms 73% of competitors. It also has a moderate Piotroski F-Score of 6.
With 0.11% of outstanding shares, the Canadian Equity Fund is the company’s largest guru shareholder. The Signature Select Canadian Fund (Trades, Portfolio) also holds the stock.
Other trades
While the fund did not exit any positions during the quarter, it did add to and trim many others.
Some of the positions it added to were Finning Internaitonal Inc. (TSX:FTT, Financial), Prairie Sky Royalty Ltd. (TSX:PSK, Financial), Canadian Pacific Railway Ltd. (TSX:CP, Financial) and Canadian Natural Resources Ltd. (TSX:CNQ), among others.
Holdings that were reduced include CLL Industries Inc. (TSX:CLL.B), Imperial Oil Ltd. (TSX:IMO), Constellation Software Inc. (TSX:CSU) and Nutrien Ltd. (TSX:NTR), among others.
The current portfolio of 45 stocks is largely invested in the financial services sector. According to its fact sheet, the fund outperformed the S&P/TXS Composite Index in 2017 with a 2.4% return. The index posted a 1.7% return.
Disclosure: No positions.
