In building the portfolio
Andrew Marchese, the fund manager, relies heavily on Fidelity’s team of analysts covering
the Canadian market. He tends to like stocks that have a history of
delivering above-average earnings growth, and strong cash flow generation
that are trading at a valuation level they believe is reasonable. The fund
can invest in companies of any size, but it tends to heavily favour
large-cap names, which comprise the bulk of the portfolio.
Not surprisingly, as of Dec. 31, the portfolio held many of the names found
in the S&P/TSX Composite Index such as
Royal Bank of Canada (TSX: RY),
Toronto-Dominion Bank (TSX: TD),
Suncor Energy Inc. (TSX: SU),
Canadian National Railway Co. (TSX: CNR), and
Enberidge Inc. (TSX: ENB). The portfolio is fairly concentrated, holding only 68 names, and with the
top 10 making up 49% of the fund value. Somewhat surprisingly, the fund has
no exposure to some index heavyweights, including Bank of Nova Scotia, Bank
of Montreal, and BCE Inc.
Performance has been decent, with an average annual 5-year compounded rate
of return of 8.4%, ending Jan. 31, compared with a 7.5% return for the
Volatility has been modestly lower than the broader market, and the fund
has done a solid job in protecting capital. It has participated in about
80% of the upside movement of the market, yet only participated in about
70% of the drawdowns for the five years ending Jan. 31.
I have to admit I have mixed feelings about this fund. On one hand, the
track record and process show that the managers have the ability to add
some value through their stock-picking ability over time. On the other
hand, the sector-neutral mandate effectively handcuffs the managers,
preventing them from overweighting or underweighting certain sectors. This
can be particularly troubling in a market that is as narrow as the
S&P/TSX Composite Index.
Still, this can be a solid holding for medium-risk investors.
C (January 2017)
Large Cap Growth
Andrew Marchese since March 2009
FID224 (Front-end load)
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Dave Paterson, CFA, is the Director of Research, Investment Funds for
D.A. Paterson & Associates Inc., a consulting firm specializing in providing research and due
diligence on a variety of investment products. He is also the publisher
Dave Paterson’s Top Funds Report,
offering regular commentary and in-depth analysis of Canada’s top
investment funds. He uses a unique analytical approach to identify
funds with strong, risk-adjusted returns, and regularly publishes his
insights and analyses in Fund Library.
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amount of your investment in the fund will be returned to you. Fund values
change frequently and past performance may not be repeated. No guarantee of
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only and is not intended as personalized investment advice.