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Mackenzie Canadian Growth Fund has a concentrated portfolio of well-managed, niche companies with sustainable competitive advantages, a history of strong free-cash-flow generation, and a growth rate higher than both the economy and their peers. Managed by the team of Dina DeGeer and David Arpin of the Mackenzie Bluewater Team, The fund is a perennial strong performer, posting first-quartile returns and outperforming its benchmark and category averages in virtually every time period. As a result, the fund currently carries a monthly FundGrade A grade, and has garnered the annual FundGrade A+ Award every year since 2015.
Furthermore, unlike some other growth-focused managers, valuation plays a part of DeGeer and Arpin’s security selection process. To make sure they don’t overpay for growth, they build out a valuation model based on a company’s free cash flow to provide them with an idea of what the company is truly worth. Only those companies trading at a meaningful discount to what they believe a company is worth are added to the portfolio.
The portfolio is concentrated, holding 30 to 35 names, with the top 10 making up nearly 45% of the portfolio weight.
Not surprisingly, the portfolio has a growth tilt to it. As of April 30, the portfolio was overweight financials, industrials, information technology, consumer staples, and healthcare. As result, valuation levels are well above the broader market. However, the forward-looking growth rate looks very strong, which makes the valuation levels more reasonable.
As of April 30, top holdings included cable and satellite provider Quebecor Inc., insurance firm Intact Financial Corp., IT consulting firm Accenture PLC, financial exchange and data provider TMX Group Ltd., and food retailer Metro Inc.
With central banks having dropped interest rates at rock bottom because of the COVID-19 pandemic, and likely to remain there for some time, it is expected that growth-focused investments may benefit compared with more value-focused names, which is a positive for this fund.
Following the March market meltdown, the fund has bounced back, rallying 9.5% in April. At a recent NAVPS of $34.85, it is still shy of its high of about $39 in February. While I don’t expect fireworks anytime soon, the skilled management team and their disciplined investment process should allow the fund to continue to perform better than average in the near to medium term.
Given its growth tilt and current levels of valuation, I would suggest being very active in taking profits in this fund. If you experience a reasonable level of growth, take some profits and bring the allocation back to a level that is in line with your investment objectives and risk tolerance. This will help to increase your overall returns over the long term and help to preserve capital in the event of another significant selloff in the markets.
Mackenzie Canadian Growth Fund
Fund company: Mackenzie Investments
Fund type: Canadian Focused Equity
FundGrade: A (April)
FundGrade A+ Awards: 2015-2019
Style: Bottom-up
Risk level: Medium
Load status: Optional
RRSP/RRIF suitability: Good
Managers: Dina DeGeer since August 1995; David Arpin since November 2012
MER: 2.46%
Fund codes: MFC640 (Front-end load); MFC091 (Fee-based)
Minimum investment: $500
Dave Paterson, CFA, is a money manager and an expert on investment fund research and due diligence on a variety of investment products
Notes and Disclaimer
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Commissions, trailing commissions, management fees and expenses all may be associated with fund investments. Please read the simplified prospectus before investing. Mutual funds are not guaranteed and are not covered by the Canada Deposit Insurance Corporation or by any other government deposit 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. Dave Paterson is employed as an advising representative (portfolio manager) by Empire Life Investments Inc. (ELII), a subsidiary of Empire Life Insurance Company. ELII is the investment fund manager and portfolio manager of the Empire Life Mutual Funds and the portfolio manager of the Empire Life Segregated Funds (collectively, the Empire Funds). As such, his employment and his compensation may be connected to the success of ELII and the Empire Funds. From time to time, the Empire Funds may buy, sell, hold, or otherwise have an interest in securities that may be discussed in this report.
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