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Top 5 Buys of the Signature Select Canadian Fund

- By Sydnee Gatewood

The Signature Select Canadian Fund (Trades, Portfolio), part of CI Investments Inc., released its semi-annual portfolio this week, listing 20 new positions.


Managed by Eric Bushell, the Toronto-based fund invests in a diverse assortment of Canadian companies to achieve long-term capital appreciation and dividend income. It will also diversify into foreign securities.

The fund's five largest buys for the period were Bank of America Corp. (BAC), Crescent Point Energy Corp. (CPG.TO), Agilent Technologies Inc. (NYSE:A), Asos PLC (ASC.L) and UBS Group AG (UBSG.SW).

Bank of America

After selling out of Bank of America in the first quarter, the portfolio manager established a new 331,600-share holding for an average price of $30.13 per share. The position was given 1.23% space in the equity portfolio.

The Charlotte, North Carolina-based bank has a $256.64 billion market cap; its shares were trading around $26.15 on Friday with a price-earnings ratio of 12.45, a price-book ratio of 1.07 and a price-sales ratio of 3.05.

The Peter Lynch chart shows the stock is trading below its fair value, suggesting it is undervalued.

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GuruFocus rated Bank of America's financial strength 4 out of 10 as a result of a low cash-debt ratio of 0.73, meaning it was not able to cover its outstanding debt with cash on hand in the most recent quarter. The company's profitability and growth fared even worse, scoring a 3 out of 10 rating. While its net margin and return on assets outperform competitors, its return on equity underperforms industry peers. The company also has a business predictability rank of one out of five, which, according to GuruFocus, means it sees its stock gain an average of 1.1% per year.

Of the gurus invested in the bank, Warren Buffett (Trades, Portfolio) has the largest stake with 8.94% of outstanding shares. Other top guru shareholders include Dodge & Cox, Pioneer Investments (Trades, Portfolio), Bill Nygren (Trades, Portfolio), Barrow, Hanley, Mewhinney & Strauss, PRIMECAP Management (Trades, Portfolio), Hotchkis & Wiley, Richard Pzena (Trades, Portfolio), First Pacific Advisors (Trades, Portfolio) and Steven Romick (Trades, Portfolio).

Crescent Point Energy

Having previously closed a position in Crescent Point, the fund opened a new 1.06 million-share stake for an average price of 9.39 Canadian dollars ($7.07) per share, dedicating 0.85% of the equity portfolio to the position.

The Canadian oil producer has a market cap of CA$2.28 billion; its shares closed at CA$4.15 on Thursday with a forward price-earnings ratio of 4.91, a price-book ratio of 0.27 and a price-sales ratio of 0.70.

According to the median price-sales chart, the stock is trading below its historical value.

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Weighed down by debt and poor interest coverage, Crescent Point's financial strength was rated 5 out of 10 by GuruFocus. The Altman Z-Score of -0.36 also warns the company is in danger of bankruptcy. The company's profitability and growth scored a 4 out of 10 rating. Although the company's operating margin outperforms half of industry peers, its net margin and returns are all negative. The company also has a moderate Piotrsoki F-Score of 5, which suggests operations are stable and a one-star business predictability rank, which is on watch as a result of declining revenue per share.

The fund holds 0.19% of the company's outstanding shares.

Agilent Technologies

The fund purchased 83,000 shares of Agilent for an average price of $65.67 per share, allocating 0.74% of the equity portfolio to the holding. It previously sold out of the stock in the first quarter of 2015.

Headquartered in Santa Clara, California, the company, which manufactures analytical laboratory instruments, has a $22.5 billion market cap; its shares were trading around $70.77 on Friday with a price-earnings ratio of 72.22, a price-book ratio of 4.94 and a price-sales ratio of 4.67.

Based on the Peter Lynch chart, the stock appears to be overvalued.

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GuruFocus rated Agilent's financial strength 7 out of 10. Although the company has issued approximately $162 million in new long-term debt over the last three years, it is at a manageable level as a result of good interest coverage. In addition, the Altman Z-Score of 4.79 indicates it is in good financial standing. The company's profitability and growth scored an 8 out of 10 rating, boosted by an expanding operating margin, a high Piotroski F-Score of 7 and a one-star business predictability rank.

With 1.45% of outstanding shares, Primecap is the company's largest guru shareholder. Jim Simons (Trades, Portfolio)' Renaissance Technologies, Steven Cohen (Trades, Portfolio), Pioneer, the Vanguard Health Care Fund (Trades, Portfolio), Jana Parnters, the Eaton Vance Worldwide Health Sciences Hund, Paul Tudor Jones (Trades, Portfolio), Ron Baron (Trades, Portfolio) and Jeremy Grantham (Trades, Portfolio) also own the stock.

Asos

Bushell invested in 75,323 shares of Asos for an average price of 60.47 British pounds ($77.09) per share, giving it 0.71% space in the equity portfolio.

The British online retailer of fashion and cosmetics has a market cap of 3.87 billion pounds; its shares closed at 46.15 pounds on Thursday with a price-earnings ratio of 46.70, a price-book ratio of 8.73 and a price-sales ratio of 1.59.

The Peter Lynch chart suggests the stock is overvalued.

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Asos' financial strength and profitability and growth were both rated 8 out of 10 by GuruFocus. Driven by no long-term debt and comfortable interest coverage, the Altman Z-Score of 7.69 indicates the company is financially stable. Although the operating margin is in decline, the retailer is supported by good returns, a moderate Piotroski F-Score of 5 and a 3.5-star business predictability rank. In addition to having consistent earnings and revenue growth, GuruFocus says companies with this rank typically see their stock prices gain an average of 9.3% per year.

With 0.13% of outstanding shares, the Wasatch International Growth (Trades, Portfolio) Fund is the company's largest guru shareholder. Signature Select holds 0.09%.

UBS Group

The fund picked up 333,500 shares of UBS for an average price of 15.48 Swiss francs ($15.61) per share, dedicating 0.66% of the equity portfolio to the holding.

The Swiss investment bank has a market cap of 48.19 billion francs; its shares closed at 12.5 francs on Thursday with a price-earnings ratio of 30.49, a price-book ratio of 0.92 and a price-sales ratio of 1.62.

According to the Peter Lynch chart, the stock is overvalued.

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UBS Group's financial strength and profitability and growth were both rated 3 out of 10 by GuruFocus. In addition to issuing new long-term debt over the last several years, the company's margins and returns underperform a majority of competitors. The company also has a one-star business predictability rank.

Charles de Vaulx (Trades, Portfolio) has the largest stake in UBS among the gurus with 0.09% of outstanding shares. The IVA International Fund (Trades, Portfolio) and the Invesco European Growth Fund (Trades, Portfolio) are also shareholders.

Other new buys

Additional stocks Bushell added to the portfolio included Sanofi SA (SAN.PA), E.ON SE (XTER:EOAN), Danske Bank AS (OCSE:DANSKE), Great-West Lifeco Inc. (GWO.TO) and Cimarex Energy Co. (XEC), among others.

The fund's $1.03 billion portfolio, which is composed of 119 stocks, is largely invested in the financial services and energy sectors. According to its fact sheet, it returned 15.8% in 2017.

Disclosure: No positions.

Read more here:

  • Signature Select Canadian Fund's Top 5 New Buys
  • The Top 5 New Buys of the Signature Select Canadian Fund
  • Which Canadian Bank Would Make the Best Investment?


This article first appeared on GuruFocus.