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Mawer New Canada Fund Buys 5 Stocks During 1st Half of Year

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%.

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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.

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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.

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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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HLS Therapeutics

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.

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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.

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AutoCanada

The fund purchased 274,300 shares of AutoCanada, giving the holding 0.25% equity portfolio weight. Shares averaged CA$11.40 during the quarter.

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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.

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Calian Group

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.

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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.

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StorageVault Canada

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.

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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.

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Disclosure: No positions.

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This article first appeared on GuruFocus.