Managed by Vijay Viswanathan and Jim Hall, the Calgary, Alberta-based fund primarily invests in large-cap Canadian companies to achieve long-term, above-average growth.
According to GuruFocus portfolio data, the fund established positions in Choice Properties Real Estate Investment Trust (TSX:CHP.UN) and Alimentation Couche-Tard Inc. (TSX:ATD.B) during the quarter.
The fund invested in 4.39 million shares of Choice Properties, allocating 2% of the equity portfolio to the stake. The stock traded for an average price of 13.41 Canadian dollars ($10.08) per share during the quarter.
The Toronto-based real estate investment trust has a CA$4.29 billion market cap; its shares closed at CA$13.86 on Tuesday with a forward price-earnings ratio of 14.14, a price-book ratio of 1.38 and a price-sales ratio of 3.08.
The Peter Lynch chart shows the stock is trading below its fair value, suggesting it is undervalued.
Weighed down by CA$2.2 billion in new long-term debt and poor interest coverage, GuruFocus rated Choice Properties' financial strength 2.8 out of 10. In addition, the low Altman Z-Score of 0.32 warns the REIT could be at risk of going bankrupt.
The company's profitability and growth fared a bit better, scoring a 5 out of 10 rating. Despite having a strong operating margin that outperforms a majority of competitors, the REIT's returns are negative and underperform a majority of industry peers. In addition, Choice Properties has a low Piotroski F-Score of 3, which indicates poor business conditions, and the company has recorded a decline in revenue per share over the past three years.
Mawer holds 1.42% of the REIT's outstanding shares.
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The Canadian Equity Fund picked up 394,700 shares of Alimentation Couche-Tard, dedicating 1.08% of the equity portfolio to the holding. Shares traded for an average price of CA$82.28 during the quarter.
The Canadian company, which operates a chain of convenience stores, has a market cap of CA$46.19 billion; its shares closed at CA$81.78 on Tuesday with a price-earnings ratio of 19.07, a price-book ratio of 3.87 and a price-sales ratio of 0.59.
According to the Peter Lynch chart, the stock is overvalued.
Alimentation Couche-Tard's financial strength and profitability and growth were both rated 6 out of 10 by GuruFocus. Although the company has issued approximately $1.6 billion in new long-term debt over the past three years, it is at a manageable level due to adequate interest coverage. In addition, the robust Altman Z-Score of 4.93 suggests the company is in good financial standing.
In addition to an expanding operating margin, the company is being supported by strong returns that outperform over half of its competitors. Alimentation Couche-Tard also has a moderate Piotroski F-Score of 4, which indicates operations are stable, and a business predictability rank of one out of five stars. GuruFocus says companies with this rank typically see their stocks gain an average of 1.1% per annum over a 10-year period.
Of the gurus invested in Alimentation Couche-Tard, David Herro (Trades, Portfolio) has the largest position with 0.19% of outstanding shares. The Signature Select Canadian Fund (Trades, Portfolio) is also a shareholder.
The fund also added to many of its other positions during the quarter, including Loblaw Companies Inc. (TSX:L), Fairfax India Holdings Corp. (TSX:FIH.U), Enbridge Inc. (TSX:ENB), Nutrien Ltd. (TSX:NTR), Suncor Energy Inc. (TSX:SU), Kinder Morgan Canada Ltd. (TSX:KML), BCE Inc. (TSX:BCE) and Canadian Natural Resources Ltd. (TSX:CNQ).
Mawer's $3.01 billion equity portfolio, which is composed of 41 stocks, is heavily invested in the financial services sector.
According to its website, the Canadian Equity Fund has posted a 14.5% return year to date, slightly underperforming the S&P/TSX Composite Index's return of 16.2%.
Disclosure: No positions.
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This article first appeared on GuruFocus.
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