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Top equity fund's watchword? Innovation

jnelson@globeandmail.com

What are we looking for?

Canadian-focused stock funds that soared in 2013.

Resources stocks, the Canadian stock market's former bread and butter, have struggled in recent years. Let's see which funds excelled without the help of these former staples.

The screen

We searched for the 15 best performers among Canadian equity, Canadian focused equity (which can invest up to 49 per cent in foreign stocks) and Canadian dividend and income equity funds for one year to Nov. 30, 2013. U.S. dollar, segregated and duplicate versions of funds were excluded. We also omitted funds with a minimum investment of more than $25,000 and those catering to a professional group.

What did we find?

Fidelity Canadian Growth Company B rose to the top with a 45.7-per-cent gain.

But only four of the fund's top 10 positions are actually Canadian stocks, where the fund usually has about half of its holdings internationally, particularly in the United States.

"Growth in Canada is tricky because the Canadian economy is so cyclical and resource heavy," said Mark Schmehl, the fund's portfolio manager. Staying away from gold and resources was a simple way to avoid trouble this year, he said.

But there were a few winning investments. Manulife Financial Corp. climbed 60 per cent in the one-year period to Nov. 30. Mr. Schmehl also owns a few banks.

Still, Mr. Schmehl is less concerned with geography than he is with finding innovative companies that are changing things for the better. He names big data software company Splunk Inc. and commercial real estate company CoStar Group Inc. as examples.

Social media stocks LinkedIn Corp. and Facebook Inc. performed well for the fund this year. Mr. Schmehl was attracted to them for their innovative work.

"They're changing the way we do things - the way we consume media, and the way we live our lives," he said. "They're also harvesting all this data about people and what we do. ... It's very exciting as a growth investor."

***********

15 BEST PERFORMING FUNDS

(in $ mil.)% Return to Nov. 30% return
FundTickerMERAssets1 Year3 years5 years10 years2012201120102009Category
Fidelity Canadian Growth Company-B2.29875.745.72%15.44%15.11%8.62%14.51%-8.76%17.56%23.35%Canadian Focused Equity
BMO S&P/TSX EW Ind Index ETFZIN-T0.55m*10.741.27%Canadian Equity
Fidelity Canadian Large Cap B2.27108940.37%18.52%19.78%12.99%5.99%10.55%17.57%37.23%Canadian Focused Equity
Omega Canadian Equity2.5518.835.76%16.25%14.94%10.28%18.15%-4.90%10.92%23.32%Canadian Focused Equity
PH&N Vintage Series D1.534.335.27%9.79%15.36%4.28%8.35%-11.47%10.50%48.65%Canadian Equity
First Asset Mstar NB Quebec Idx ETFQXM-T0.5739.833.37%Canadian Equity
RBC O'S All-Cn Eq Srs A1.81302.233.18%11.55%15.92%9.34%-5.73%23.95%27.89%Canadian Equity
RBC O'Shaughnessy Canadian Equity1.54972.232.46%11.87%13.50%7.89%14.07%-8.66%13.33%27.31%Canadian Focused Equity
Caldwell Canadian Value Momentum Fd1.512.731.11%15.79%Canadian Equity
Redwood Equity Growth Class3.2811.730.89%3.60%-0.73%-18.52%22.39%Canadian Equity
Trimark Canadian Opportunity Class2.5152.230.60%8.59%11.88%7.51%6.56%-10.20%9.40%28.31%Canadian Equity
First Asset Mstar Can Val Idx ETFFXM-T0.6882.231.24%Canadian Equity
Mackenzie Cundill Can Sec Sr A2.211487.630.03%13.62%15.53%7.50%20.42%-10.02%19.44%27.38%Canadian Focused Equity
Manulife Canadian Focused2.41981.828.88%1.27%Canadian Focused Equity
AGF Social Values Equity3.0837.428.25%4.96%12.91%5.07%-0.14%-12.30%14.53%47.33%Canadian Focused Equity
S&P/TSX Total Return12.95%4.11%10.89%8.27%7.19%-8.71%17.61%35.06%
* 'm' stands for 'maximum' (it's a new fund) Source: Lipper

© 2007 The Globe and Mail. All rights reserved.

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