The Mawer New Canada Fund (Trades, Portfolio), a fund primarily investing in smaller Canadian securities, disclosed this week its five buys for the first six months of 2019 were Neo Performance Materials Inc. (TSX:NEO), HLS Therapeutics Inc. (TSX:HLS), AutoCanada Inc. (TSX:ACQ), Calian Group Ltd. (TSX:CGY) and StorageVault Canada Inc. (TSXV:SVI).
Fund manager Jeff Mo seeks long-term capital appreciation through Canadian securities with small market cap and employs a highly-disciplined, research-driven, bottom-up process and a long-term holding period to allow for investor recognition or corporate growth, and to minimize transaction costs. The fund said in its interim report that net assets increased to $1.3 billion at quarter-end; additionally, the fund returned 16.4% for the six-month period, outperforming the Standard & Poor's / Toronto Stock Exchange Small Cap Index's return of 10.4%.
As of June 30, the fund's $1.26 billion equity portfolio contains 50 stocks, which has 32.75% weight in consumer cyclical, 13.38% weight in technology and 13.33% weight in real estate. The fund said in its report that relatively low exposure to the energy sector and the overweight allocations in technology and industrials contributed to portfolio outperformance.
Neo Performance Materials
The fund purchased 1,513,600 shares of Neo Performance Materials, giving the stake 1.50% weight in the equity portfolio. Shares averaged 13.85 Canadian dollars ($10.42) during the quarter.
The Toronto-based company engages in the innovation, development, processing and manufacturing of rare earth and rare metal-based functional materials. According to GuruFocus data, the company's debt ratios are outperforming over 92% of global competitors, suggesting good financial strength.
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The fund purchased 806,800 shares of HLS Therapeutics, giving the position 1.02% equity portfolio space. Shares averaged CA$15.43 during the quarter.
The Toronto-based specialty pharmaceutical company acquires and commercializes branded drugs in North American markets. According to GuruFocus, HLS Therapeutics' cash-to-debt and equity-to-asset ratios underperform over 63% of global competitors, suggesting moderately poor financial strength.
The fund purchased 274,300 shares of AutoCanada, giving the holding 0.25% equity portfolio weight. Shares averaged CA$11.40 during the quarter.
The Edmonton, Alberta-based company operates car dealerships that offer new and used vehicles, spare parts, maintenance services and customer financing. GuruFocus ranks AutoCanada's financial strength 4 out of 10 on several warning signs, which include a weak Piotroski F-score of 2 and low interest coverage of 1.36.
The fund purchased 66,200 shares of Calian Group, giving the position 0.18% equity portfolio weight. Shares averaged CA$32.20 during the quarter.
The Ottawa, Ontario-based company operates two business segments: Systems Engineering and Business and Technology Services. GuruFocus ranks the company's financial strength 8 out of 10 on several positive signs, which include a strong Altman Z-score of 5, solid interest coverage of 29.26 and debt ratios that outperform over 82% of global competitors.
The fund purchased 210,065 shares of StorageVault Canada, giving the position 0.05% equity portfolio weight. Shares averaged CA$2.72 during the quarter.
The Toronto-based company owns, operates and leases storage to individual and commercial customers across Canada. According to GuruFocus, the company's debt ratios are underperforming over 90% of global competitors, suggesting poor financial strength.
Disclosure: No positions.
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This article first appeared on GuruFocus.
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