Leith Wheeler Canadian Equity Fund's Top 5 Trades in 2nd Half of 2020
- By James Li
The Leith Wheeler Canadian Equity (Trades, Portfolio) Fund released its portfolio report for the second half of 2020 this week, revealing that its top trades included position boosts in Bank of Montreal (NYSE:BMO)(TSX:BMO) and CGI Inc. (NYSE:GIB)(TSX:GIB.A) and position reductions in Toromont Industries Ltd. (TSX:TIH), First Quantum Minerals Ltd. (TSX:FM) and The Toronto-Dominion Bank (NYSE:TD)(TSX:TD).
The fund, which is part of Canada-based Leith Wheeler Investment Counsel Ltd., seeks long-term investment returns by investing in Canadian common shares, convertible debentures and other equity-related securities. The investment team emphasizes on the discrepancy between a company's price and business value and selects undervalued stocks through fundamental research.
The fund releases its portfolios twice per year, at the end of June and at the end of December. As of December 2020, the fund's $3.30 billion equity portfolio contains 42 stocks, with three new positions and a six-month turnover ratio of 6.24%. The top three sectors in terms of weight are financial services, industrials and technology, representing 34.78%, 20.07% and 11.86% of the equity portfolio.
Bank of Montreal
The fund purchased 536,760 shares of Bank of Montreal (TSX:BMO), increasing the position 94.13% and the equity portfolio 1.58%. Shares averaged 83.27 Canadian dollars ($66.27) during the fourth quarter; the stock is modestly overvalued based on Thursday's price-to-GF Value ratio of 1.13.
GuruFocus ranks the Montreal-based bank's financial strength 3 out of 10 on the back of equity-to-asset ratios underperforming over 83% of global competitors despite debt ratios topping more than half of global banks.
Gurus with holdings in Bank of Montreal's U.S.-listed shares (NYSE:BMO) include Pioneer Investments (Trades, Portfolio) and Jim Simons (Trades, Portfolio)' Renaissance Technologies.
CGI
The fund purchased 465,700 shares of CGI Inc. (TSX:GIB.A), boosting the position 88.6% and the equity portfolio 1.42%. Shares averaged C$91.87 during the fourth quarter; the stock is fairly valued based on Thursday's price-to-GF Value ratio of 1.05.
GuruFocus ranks the Montreal-based information technology service company's profitability 8 out of 10 on several positive investing signs, which include a three-star business predictability rank and an operating margin that has increased approximately 0.6% per year on average over the past five years and is outperforming over 80% of global competitors.
Ray Dalio (Trades, Portfolio)'s Bridgewater Associates established during the December 2020 quarter a holding in CGI's U.S.-listed shares (NYSE:GIB).
Toromont Industries
The fund sold 499,085 shares of Toromont Industries (TSX:TIH), shrinking the position 15.87% and the equity portfolio 1.18%. Shares averaged C$80.34 during the fourth quarter; the stock is significantly overvalued based on Thursday's price-to-GF Value ratio of 1.39.
GuruFocus ranks the Concord, Ontario-based industrial company's profitability 8 out of 10 on several positive investing signs, which include a four-star business predictability rank and profit margins and returns outperforming over 82% of global competitors.
First Quantum Minerals
The fund sold 2,939,700 shares of First Quantum Minerals (TSX:FM), slashing 67.95% of the holding and 1.11% of the equity portfolio. Shares averaged C$14.77 during the fourth quarter; the stock is significantly overvalued based on Thursday's price-to-GF Value ratio of 1.40.
GuruFocus ranks the Toronto-based metals and mining company's profitability 7 out of 10 on the back of returns outperforming over 70% of global competitors.
Despite good profitability, First Quantum Minerals' interest coverage and debt ratios underperform more than 66% of global competitors, suggesting low financial strength.
Toronto-Dominion Bank
The fund sold 489,730 shares of Toronto-Dominion Bank, trimming the position 18.25% and the equity portfolio 1.04%. Shares averaged C$64.09 during the fourth quarter; the stock is fairly valued based on Thursday's price-to-GF Value ratio of 1.02.
GuruFocus ranks the Toronto-based bank's financial strength 3 out of 10 on the back of equity-to-asset ratios underperforming over 84% of global competitors despite debt ratios topping more than half of global banks.
Disclosure: The author has no positions in the stocks mentioned. Due to the fund's semiannual portfolio release schedule, the mention of trades in this article reflect trades and holdings information as of the December 2020 portfolio report. The trades do not include any possible buys or sells the fund made during January to March.
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This article first appeared on GuruFocus.
