“Quebec certainly has resources in the ground, but the market here is less exposed to that sector,” says Christine Décarie, Montreal-based senior
vice-president with IG Investment Management, Ltd., and portfolio manager of the Enterprise Fund. “The Quebec market is closer in composition to the [U.S.]
S&P500 – it’s more diversified, with less resource exposure and more industrial and consumer goods. Quebec also has close trade connections with the
U.S. That is what makes the difference.”
Indeed, this difference is reflected in the fund’s portfolio. Energy stocks comprise less than 11% of total assets and basic materials represent 6%, while
industrial goods and services comprise 23%, financials 27% and consumer goods almost 12%; the rest of the holdings are spread amongst utilities, tech, and
The fund’s investment style is “definitely bottom-up,” although Décarie acknowledges that top-down factors are given some consideration as well. “You need
to have a view of the economic outlook,” she says, adding that the fund’s outlook at this point in time is still positive. “We’re positioned for expansion.
The outlook is weaker than normal, but we still feel we’re not heading into a recession.”
While the fund invests in all caps, Décarie says there is a $50-million cap minimum, as well as an overall limit on small-cap holdings. “We want a good
level of liquidity, so we’ll never go all small-caps, even though it sometimes looks we’re finding all the good ideas in smaller companies,” she explains.
“And we don’t want to take on too high of a market float in any company.”
The stock selection process is somewhat different too, given the smaller market in Quebec. “We don’t run huge screens, but we do meet with management
regularly, look at balance sheets and do the normal due diligence,” says Décarie. “We look for companies that can grow their earnings, generate good cash
flow, and have proven they can create value.”
One recent such purchase has been Lumenpulse Inc. (TSX: LMP), an award-winning
Montreal-based designer and manufacturer of LED lighting systems for commercial and other applications worldwide. “They’re a strong company, and right now
there is a big need for sustainable renovation and infrastructure,” says Décarie. “Lumenpulse is one way of playing that sector. We also have a lot of
engineering companies, so we have significant exposure related to infrastructure.”
On the large-cap side, the fund’s top 10 holdings also include a number of Quebec-based household names, such as Alimentation Couche-Tard Inc. (TSX: ATD.B) and Quebecor Inc. (TSX: QBR.B) (both in the consumer services
category), as well as a few more nationally-recognized firms such Royal Bank of Canada (TSX: RY), which is still technically
headquartered in Montreal, and Canadian National Railway Company (TSX: CNR).
As a result of its unique portfolio mix, to the end of September, the Investors Quebec Enterprise Fund managed to generate a 1-year return of 16% and a
3-year average annual compounded return of 9.7%, compared with 12.3% and 7.1% respectively for Canadian equity funds overall. As such, the fund offers an
attractive way to diversify one’s equity holdings without wading further into the unknowns of foreign markets.
is an experienced financial and business journalist and a frequent contributor to the Fund Library.
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