Canada has been a happy hunting ground for the manager of the Montrusco Bolton Canadian Equity Plus Fund.
The $79-million fund gained 32.22 per cent in the 12 months ended July 31, but has eased back this month -- it's up 7.15 per cent to date this year. The three-year annualized return is 22.97 per cent and the fund is up 13.52 per cent annually over the past five years.
Marc Lalonde, vice-president of Moncton-based Louisbourg Investments Inc., has run the fund since its inception in February, 1998. He notes that apart from health care and technology, the Canadian stock market has in all sectors been outperforming most other major markets for at least the last 12 months, and suspects for several years. He expects that the overall Canadian market will continue to outclass its U.S. counterpart in the next two to three years, thanks to its weighting in resource and energy issues.
But he warns there could be a short-lived correction in the near term.
Mr. Lalonde currently favours selected issues in the industrials sector, particularly those connected with the aerospace industry. His holdings include Northstar Aerospace Inc. He also likes a number of machinery stocks, including Ritchie Bros. Auctioneers Inc., which auctions industrial equipment. And the fund has a stake in heavy equipment dealer Finning International Inc., which stands to benefit from the oil sands.
Another "bias -- I am not sure it is a theme" in the fund is toward companies based in Western Canada because of the superior growth prospects there, he said. Canadian Western Bank, a small regional bank, fits in with that philosophy.
In selecting stocks, Mr. Lalonde looks for what he thinks are the best Canadian ideas first among the large-capitalization issues, then among the smaller caps and possibly among the income trusts. The portfolio is rounded out with the best international ideas.
Among his current holdings is Teck Cominco Ltd. (TEK.SV.B-TSX). The Vancouver based miner has "good projects [and] good management" and they have excess cash flow that "is running at, depending on commodity prices, about $1.4-billion a year," he says. Moreover, there "are ample opportunities" for the company to make strategic acquisitions and opportunities to improve the efficiency of their operations. He is upbeat about the midterm outlook for copper prices. Copper provides about half of Teck's profit; coal and zinc the other 50 per cent. Teck's B shares closed up 30 cents yesterday at $46 on the Toronto Stock Exchange.
Transat A.T. Inc. (TRZ.B-TSX) is another pick. The travel company's class B shares have eased in recent months and now stand not far off the 52-week low of $19.50 set last September, weighed down by high fuel prices and competition in Ontario. Transat is "cash-rich" and can put the squeeze on some smaller players in a price war, Mr. Lalonde says. Transat shares ended fell 65 cents to $20.87 yesterday.
CVS Corp., the U.S. drugstore chain, also caught his attention. CVS (CVS-NYSE) is continuing to produce better-than-expected numbers as it integrates the more than 1,200 Eckerd stores it acquired in the southern U.S. last year, but "the share price remains quite reasonable," Mr. Lalonde says. Besides, "the pharmacy business is a very good business, both in up and down cycles," he adds. CVS shares fell 23 cents (U.S.) yesterday to close at $29 on the New York Stock Exchange.
Made in Canada
Montrusco Bolton Canadian Equity Plus Fund
Marc Lalonde, vice-president of Moncton-based Louisbourg Investments, looks for what he thinks are the best ideas first among the Canadian large caps, then among the smaller cap issues and sometimes among the income trusts.
|Load status||No load|
|Management expense ratio||1.35%|
|Globefund rating (out of 5)||*****|
RETURNS TO JULY 31, 2005
|1-year simple rate of return||32.22%|
|3-year compound annual||22.97|
|5-year compound annual||13.52|
TOP 10 HOLDINGS AS OF JULY 31, 2005
|Toronto Dominion Bank||5.50%|
|Bank of Montreal||4.5|
|Canadian National Railway||3.4|
|Power Corp of Canada||3.1|
|Centurion Energy Int.||3|
SOURCES: THOMSON DATASTREAM, BLOOMBERG FINANCIAL SERVICES
© 2007 The Globe and Mail. All rights reserved.
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