The fund holds a concentrated portfolio of Canadian stocks and is managed
using BG’s bottom-up, fundamentally-driven, value-tilted investment
approach. While lead managers
Mark Thomson and Stephen Arpin favour large-cap companies that are leaders in their industry, they will
consider small- and mid-cap names that show the potential of becoming
industry leaders. This exposure is obtained by buying units of the
Beutel Goodman Small Cap Fund.
In addition to trading at least 30% below their estimate of its worth, any
company the managers consider for the portfolio must have recurring,
dependable earnings, free cash flow, and competitive advantages in its
industry. The company must also have the ability to close the valuation gap
within three years.
The result is a concentrated portfolio of just over 70 names, with the top
10 making up more than half of the fund. It is overweight financial and
consumer services names, and underweight industrial services and consumer
goods. Portfolio turnover has been quite low, averaging well below 20% for
the past five years.
Top holdings as of April 30 included
Toronto-Dominion Bank (TSX: TD),
Bank of Nova Scotia (TSX: BNS),
Royal Bank of Canada (TSX: RY) Rogers Communications Inc. (TSX: RCI.B),
Magna International Inc. (TSX: MG), and, of course the Beutel Goodman Small Cap Fund.
The managers also have an interesting sell discipline. Once a holding hits
its price target, they automatically sell one third of the holding and
undertake an updated detailed review. If the review shows an increased
price target is justified, they will hold the remaining shares. If it is
not, they will immediately exit the position.
Performance, particularly over the long term, has been excellent, with the
fund consistently outpacing the index. It posted a 3-year average annual
compounded rate of return of 5.6% to April 30, with 5-year annualized
return at 9.3% and 10-year at 6.5%. Volatility has been roughly in line
with the broader market, with a 3-year average standard deviation of 8.2%,
giving it a 6/10 Fundata volatility ranking. The fund has also tended to
modestly outperform in falling markets.
On balance, this is an excellent core equity holding for most investors.
Over the long term, I would expect it to continue to do what it has done in
the past – deliver above-average returns with less volatility.
Beutel Goodman Canadian Equity Fund
Beutel Goodman & Company
FundGrade Rating: A
FundGrade A+ Award: 2015
Large Cap Blend
Mark Thomson since June 1999; Stephen Arpin since July 1994
1.39% (No-load units)
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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before investing. Mutual funds are not guaranteed and are not covered by
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insurer. There can be no assurances that the fund will be able to maintain
its net asset value per security at a constant amount or that the full
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.