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Mutual Fund News

Value investing rewards top-performing funds

swon@globeandmail.com

WHAT ARE WE LOOKING FOR?

Canadian stock funds that have escaped relatively unscathed in the recent market downdraft.

By Wednesday, the S&P/TSX composite index had tumbled 11 per cent from a peak of 15,073 points on June 18.

Commodity stocks, which have been the engine for markets earlier this year as financials have stumbled, have taken a big haircut. Falling crude prices have taken a toll on energy stocks, while gold and fertilizer stocks have also been under selling pressure.

TODAY'S SEARCH

We checked out the returns from June 18 to Aug. 6 for Canadian equity and Canadian focused equity funds (which can invest up to 50 per cent in foreign stocks). We went with the class of the fund with the most assets.

SO WHAT DID WE TURN UP?

Most top performers were Canadian focused equity funds, which use a value-investing approach of buying cheap stocks in the hope they will eventually be rewarded by the market. These funds have been among the laggards over the past year because they hold little if any commodity stocks.

Trimark Canadian Endeavour led by Clayton Zacharias narrowly managed to stay in positive territory with a 0.1-per-cent gain. The fund, which has had a rough time over the past year, was 30 per cent invested in financial stocks, and 32 per cent in consumer discretionary names at June 30.

Top holdings included Power Corp. of Canada, Toronto-Dominion Bank, IGM Financial Corp. Inc., Bank of Nova Scotia, and Thomson Reuters Corp. Consumer names included Liz Claiborne Inc. and Pool Corp.

Mackenzie Cundill Canadian Security, led by manager Wade Burton, who uses a deep-value approach to investing, was off 0.2 per cent.

At June 30, the fund's top names included Celestica Inc. and BCE Inc., but it also held battered stocks like West Fraser Timber Co., MI Developments Inc. and Loblaw Cos. Ltd. "The year ending June 2008 has undoubtedly been one of the most difficult in the history of the fund," its managers said in a report.

Mackenzie Ivy Canadian Fund, led by veteran manager Jerry Javasky, was only down by 0.7 per cent. At June 30, it was 31-per-cent invested in consumer staples, while 12 per cent was in energy stocks and nearly 7 per cent in cash.

The biggest holdings included McDonald's Corp., Shoppers Drug Mart Corp., Imperial Oil Ltd., Enbridge Inc., Manulife Financial Corp., and Toronto-Dominion Bank.

Jonathan Wellum's AIC Diversified Canada Fund fell 3.7 per cent. The fund was 52 per cent invested in the financial sector at June 30, while 15 per cent was in energy stocks.

Among its top holdings were names such as Toronto-Dominion Bank, Power Financial Corp., Manulife Financial, Thomson Reuters and Royal Bank of Canada. Non-financial stocks include Brookfield Asset Management Inc., and Canadian Oil Sands Trust.

Top 25 best-performing funds

% return
Assets ($-mil)LatestJune 18% return (as of July 31 '08)
Fund nameCategoryas of June '08MERto Aug 6 YTD1-year3-year5-year
Trimark Canadian EndeavourCdn. Focused Equity1,073.62.130.1-13.2-26.7-4.43.9
Mackenzie Cundill Cdn Security 'C'Cdn. Focused Equity1,861.32.41-0.2-9.5-16.6-0.85.4
AGF Canadian ValueCdn. Focused Equity220.72.40-0.7-10.4-12.92.36.5
Mackenzie Ivy CanadianCdn. Focused Equity2,542.02.36-0.7-5.8-7.2-1.03.8
Beutel Goodman Canadian IntrinsicCdn. Focused Equity2.21.44-0.7-2.8-6.66.17.4
NexGen North American Large Cap-CGCdn. Focused Equity0.12.65-1.7-2.8-6.3
Mackenzie Ivy Canadian (Hedged)-ACdn. Focused Equity3.7-1.8-7.6-6.5
Standard Life Diversified Income-ACdn. Focused Equity7.72.44-2.3-1.1-0.41.7
Alto MI Global Growth Port ACdn. Equity14.7-2.7
Trimark Canadian Focus Class ACdn. Equity6.62.61-3.0-6.4-9.2
Sarbit Canadian Equity TrustCdn. Equity2.23-3.2-1.9
Investors Cdn Large Cap Value-ACdn. Focused Equity2,608.02.69-3.3-4.2-8.86.011.4
AIM Trimark Core Canadian Equity ClCdn. Focused Equity101.92.21-3.3-6.3-10.24.010.4
AIC Diversified CanadaCdn. Focused Equity1,056.42.44-3.7-5.7-8.32.24.9
Sentry Select Diversified Total RtnCdn. Focused Equity8.02.47-3.8-7.0-9.94.7
Mackenzie Univ Canadian GrowthCdn. Focused Equity1,022.52.36-3.9-0.5-1.46.210.1
Trimark Cdn Plus Dividend Class ACdn. Focused Equity14.52.48-3.9-6.7-12.9
Trimark Select Canadian GrowthCdn. Focused Equity2,692.02.31-4.0-7.4-10.42.17.3
Trimark Canadian Equity Private PlCdn. Focused Equity48.62.07-4.0-6.9-9.9
NexGen Canadian Large Cap-CGCdn. Focused Equity0.12.65-4.1-0.8-4.4
Northwest Canadian EquityCdn. Focused Equity319.42.52-4.2-11.2-20.70.97.5
Trimark Canadian-SCCdn. Focused Equity742.81.65-4.2-7.1-15.40.05.4
Mackenzie STAR Cdn Max Equ GrowthCdn. Focused Equity3.22.65-4.6-7.7-10.10.54.0
Beutel Goodman Canadian Equity PlusCdn. Focused Equity0.81.29-4.7-4.5-7.44.79.4
RBC North American ValueCdn. Focused Equity157.72.00-4.8-1.0-1.09.312.6
S&P/TSX composite index -10.7 -1.7 -2.0 9.3 13.4

Note: Funds are valued daily SOURCE: GLOBEFUND

© 2007 The Globe and Mail. All rights reserved.

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