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Mutual Fund News

Fund relies on dividends, diversity

swon@globeandmail.com

What are we looking for?

This is our last look this week at what the pros are buying for their funds. The top holdings are usually posted on their company's website. Today, we check out CIBC Canadian Small-Cap Fund at http://www.cibc.ca.

More about the fund

The $373.5-million Canadian small or mid-cap equity fund has been run since 2003 by Jennifer Law of CIBC Global Asset Management Inc. The fund gained 37 per cent for the year ending Oct. 31, compared with 37.9 per cent for the BMO Nesbitt Burns Canadian Small Cap Index. Over five years, the fund has an annualized return of 8.1 per cent.

Ms. Law, who looks for growth stocks trading at a reasonable price, runs a diversified portfolio of stocks and income trusts with just over 50 per cent in the resource sector. Her sector weightings are similar to the index, but she is currently overweight in energy stocks by about 6 per cent.

"I am still the most bullish on copper stocks, such as Copper Mountain Mining Corp.," and then gold and energy stocks equally, she said. "Energy has done well ... but it is not firing on all cylinders because natural gas prices are still fairly low. In the next 12 to 18 months, we are hoping to see a recovery in the natural gas price."

What did we find?

Diverse dividend-paying securities trading mostly near 52-week highs.

Canadian Energy Services & Technology Corp., a provider of drilling fluid systems to the oil and gas industry, has more potential upside even though it already has been a strong performer this year, Ms. Law said. "Over 95 per cent of its activity is in horizontal drilling [for unconventional wells]...What will continue to drive earnings growth is that it has made a smart acquisition in the United States, and now its market share there is about 5 or maybe 6 per cent. I think there is room to grow." She has a two-year target of $35 to $40 for the stock.

Ms. Law also likes junior gold miner Canaco Resources Inc., which has a project in Tanzania. "It has no production, and yet it has a market capitalization over $1-billion," she said. Canaco's gold discovery in the Handeni region has "delivered excellent drilling results," while investors are embracing the fact that Tanzania is a fairly stable African country, she added.

Glentel Inc., a mobile phone retailer, recently acquired U.S.-based Diamond Wireless LLC and Ms. Law expects the acquisition to be a big catalyst for results the next 12 months, she said. "[Diamond has] 132 stores in the northwest region of the United States." She likes the fact that Glentel management have "a lot of skin in the game" as holders of more than 50 per cent of the firm's stock. Her two-year target is $32.75 a share.

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TOP 10 EQUITY HOLDINGS IN CIBC CANADIAN SMALL CAP FUND AT OCT. 31

Company nameSymbol$ Price Dec. 852-wk high $52-wk low $YTD % price chgP/E% YieldMarket cap ($-mil)Volume
Cdn. Energy Services & Tech.CEU-T26.2527.3510.60123.421.74.646650,669
Cineplex Galaxy Incm FundCGX.UN-T22.7123.1617.1923.920.65.61,285114,496
Canadian Western BankCWB-T28.7428.9619.8531.013.41.81,915299,946
Anatolia Minerals Dev. Ltd.ANO-T7.658.942.48151.6N/A01,062352,711
Glentel Inc.GLN-T24.7024.7012.5084.316.11.62736,193
Intact FinancialIFC-T49.7551.1834.5533.913.92.75,619231,619
Killam Properties Inc.KMP-T10.2610.927.4016.6205.25.546173,932
Metro Inc.MRU.A-T46.4047.4736.3718.312.61.54,875264,745
Vicwest Income FundVIC.UN-T15.1519.2412.61-19.815.910.326439,285
Canaco ResourcesCAN-X5.285.980.36896.2N/A04801,190,941
Source: Globe Investor

© 2007 The Globe and Mail. All rights reserved.

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