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Analysis: Manager David Fingold takes a fundamentally driven, bottom up value focused approach to securities selection, buying stocks trading at a significant discount to their intrinsic value and selling when they become fully priced. The portfolio is quite concentrated, typically holding about 30 names and he places large bets on stocks he likes. The top 10 holdings make up more than 42% of the total portfolio.
The manager has a flexible cap structure, meaning that he can invest in any size company – small caps, mid caps, or large caps – wherever the best opportunity for the fund lies. The fund is still small enough at $595 million where the manager can still take a meaningful position in a small or mid cap stock in the portfolio. However, for all practical purposes, the focus of the fund will be in the large cap names. Currency is tactically managed to help protect against the impact of a rising Canadian dollar.
Long term performance numbers have been very strong, outpacing the S&P 500 by 2.7% per year for the past five year period. As of November 30, the fund had posted an annual compound return of 0.2% while the index was down an average of 2.43% per year in the same time period. Short term, the performance hasn’t been as strong, posting a 2.3% loss versus a gain of 3.4% for the index.
The manager does a stellar job in managing volatility. The fund has delivered a level of volatility that is significantly below the category average and roughly in line with the benchmark.
Despite the short term underperformance, we like this fund, particularly for the current environment. The manager’s focus on managing volatility combined with his active management style lead us to believe that this fund will be a solid performer in the coming year.