Lead managers Rui Cardoso and Glenn Fortin look for high quality,
well-managed companies that have a history of generating stable cash flows
and that have earned a level of return that is greater than the company’s
cost of capital.
Given the value bias, any company considered for inclusion in the portfolio
must not only be undervalued but must also have the potential to grow its
share price closer to its intrinsic value within a three-year period.
When evaluating a company, Beutel Goodman’s managers pay attention to key
fundamental metrics such as the price-to-earnings, price-to-cash flow, and
price-to-book ratios in the context of not only the company’s historical
numbers but also compared with the market and what the management believes
to be the company’s sustainable earnings growth rate.
The portfolio is concentrated, holding U.S.-based large-cap companies that
are leaders in their field. As of Oct. 31, the fund held less than 30
stocks, with the top 10 making up nearly 51% the portfolio. Top holdings
included communications giant
Verizon Communications Inc. (NYSE: VZ), medical distribution firm
Amerisource Bergen Corp. (NYSE: ABC), software company
Oracle Corp. (NYSE: ORCL), bank
American Express Co. (NYSE: AXP), and advertising firm
Omnicom Group Inc. (NYSE: OMC).
The managers are patient in implementing their process, with portfolio
turnover averaging roughly 30% for the past five years. However, they are
not afraid to use periods of heightened volatility as an opportunity to
improve the quality of the portfolio. This happened in 2008 and again in
the first half of 2012 when several new names were added to the portfolio.
Performance, particularly over the long-term has been excellent with the
fund delivering a 5-year average annual compounded rate of return of 14.6%
to Oct. 31, slightly trailing the S&P 500 but outpacing the category
The fund also has a history of decent downside protection, holding up well
in 2008, for example, with a loss of less than half the index’s 23%
decline. It has a down capture ratio of 77% over the past three years.
Volatility has been lower than the category average but was roughly in line
with the broader market.
In most cases, I would suggest investors use a low-cost passive option for
their U.S. equity exposure. However, this is one of the few actively
managed U.S. equity funds worth taking a look at and remains one of my
Beutel Goodman American Equity Fund
Beutel Goodman & Company
FundGrade A+ Awards:
Large Cap Value
Glenn Fortin since June 1997; Rui Cardoso since June 2013
Dave Paterson, CFA, is the Director of Research, Investment Funds for
D.A. Paterson & Associates Inc., a consulting firm specializing in providing research and due
diligence on a variety of investment products. He is also the publisher
Dave Paterson’s Top Funds Report,
offering regular commentary and in-depth analysis of Canada’s top
investment funds. He uses a unique analytical approach to identify
funds with strong, risk-adjusted returns, and regularly publishes his
insights and analyses in Fund Library.
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amount of your investment in the fund will be returned to you. Fund values
change frequently and past performance may not be repeated. No guarantee of
performance is made or implied. This article is for information purposes
only and is not intended as personalized investment advice.