Has your mutual fund manager caught the wave of climbing resource shares this month, riding energy and forest products stocks to big profits? Probably not.
Except for a handful of superrisky energy funds, hardly any Canadian stock manager has come anywhere close to matching the big 16.8-per-cent advance in oil and gas stocks or 13.5-per-cent rise in forest shares so far in March.
Oil stocks have soared this month after the price of crude rose to almost $14.50 (U.S.), up from barely $12 at the start of the year, on a deal by oil producers to cut output.
And investors have warmed to the forest sector as its profit picture brightens.
On Monday, broker Bunting Warburg Dillon Read raised its rating on forest stocks to "strong buy" from "hold." Analyst Richard Kelertas said profits will show up in the second and third quarters as a result of corporate restructuring and consolidation around the world.
Paper and pulp capacity growth is falling around the world after the cancellation and delays of projects, Mr. Kelertas said, which bodes well for prices. Asian demand is also improving.
But few managers have risked taking big positions in the battered energy or forest sectors, which slumped 30 and 12 per cent, respectively, during 1998.
Most Canadian equity funds have less than 8.5 per cent of their assets in oil and gas, barely higher than the 7.8-per-cent weighting given to the oil patch in the bellwether Toronto Stock Exchange 300-share index, according to The Globe and Mail's Globe HySales data base. And most fund managers have allocated less than 2.6 per cent of their portfolios to forest products, compared with the industry's tiny 2.2-per-cent share of the index.
The besieged managers of Trimark Financial Corp.'s giant Canadian equity funds, which have lagged their rivals for more than two years because of a heavy weighting in resource stocks, are finally getting some satisfaction. "Things are going our way," said Ian Hardacre, manager of the $3.7-billion Trimark Select Canadian Fund.
As of Monday, Trimark Select Canadian had gained 5.8 per cent in March and the $1.9-billion Trimark RSP Equity Fund was up 5 per cent, beating the 3.7-per-cent advance posted by the median Canadian equity fund.
"We're still . . . significantly overweight in the oil stocks," said Keith Graham, manager of the RSP Equity Fund, which has about 14 per cent of its assets in oil and gas. "[But] the oil stocks still have a long way to go," Mr. Graham said. "We've only seen the beginning of the turn."
Another 8.8 per cent was in forest companies at the end of February, more than three times the weighting given to forest products in the TSE 300. Big holdings included MacMillan Bloedel Ltd. and Fletcher Challenge Canada Ltd. "That's helped us a little bit as well," Mr. Graham said.
Select Canadian's Mr. Hardacre, who had put about 16 per cent of the fund in oil and gas at the end of last month, agrees that energy stocks are still a buy. "Even at these prices, they represent very good value."
The real winners so far have been specialized energy funds, with Royal Bank's $165.7-million Royal Energy Fund jumping almost 19 per cent in March.
And broadly based resource funds have also thrived. Mackenzie Financial Corp's $177.7-million Universal Canadian Resource Fund, Canada's biggest diversified resource fund, gained 11.9 per cent this month. As of Feb. 28, manager Fred Sturm's biggest weighting was oil and gas, at 38 per cent of his portfolio.
But not everyone has got in on the party. Unitholders in Altamira Management Ltd.'s $92-million AltaFund Investment Corp. have made only about 3.8 per cent in March even though the fund has a mandate to emphasize "securities of companies that have a significant business presence in Western Canada."
That usually means the fund holds lots of oil and gas stocks. But as of Feb. 28, only three of AltaFund's top holdings were energy companies. Portfolio manager David Taylor refused to comment yesterday.
CHANGE CHANGE
THIS MONTH THIS YEAR
Oil and gas shares 16.8% 1.8%
Paper and forest 13.5 11.4
Metals and minerals 6.4 5.2
TSE 300 4.9 2.1
have lifted resource fundsLargest 15 resource funds, excluding gold funds
% RETURN
THIS THIS
FUND NAME MONTH* YEAR*
Universal Canadian Res +11.9 +2.4
Royal Energy +18.7 0.0
20/20 Canadian Res +11.0 +3.4
Investors Cdn. Nat. Res +8.8 +2.6
Altamira Resource +7.0 -0.4
Green Line Resource +7.6 +5.0
Green Line Energy +15.0 +6.0
Middlefield Growth +8.5 +2.6
Spectrum United Cdn. Res +11.9 -5.4
CIBC Canadian Res +8.9 +1.0
First Canadian Res +8.7 +1.9
MAXXUM Natural Res +9.4 -0.2
CIBC Energy +16.2 +4.3
BPI Canadian Res +9.4 +2.5
Dynamic Global Res +10.1 +2.4
but not Canadian equity funds
Median Cdn. equity fund +3.7 +0.6-*Fund returns are to Monday March 15
Source: http://www.globefund.com and Bloomberg Financial Services