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Value focus drives Beutel Goodman’s North America fund
2/19/2018 4:27:22 PM
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By Dave Paterson  | Wednesday, January 24, 2018


 

Beutel Goodman is one of the most respected money managers in Canada. With the Beutel Goodman North American Focused Equity Fund, managers use a disciplined, bottom-up, value-focused investment process, looking to build a concentrated portfolio of North American stocks that are trading at levels well below what they believe it to be worth. The true value of a company is determined by using the present value of its sustainable free cash flow. To be included in the portfolio, a stock must offer a return of at least 50% over a three-year period.

The fund has a Canadian bias, and the maximum invested in foreign securities is 49% of the fund’s net assets. The portfolio will often look much different than the index. At the end of December, it was overweight financial services, consumer discretionary, and industrials. Valuation levels are much better than the index or peer group, providing a higher margin of safety.

The fund’s focus is on capital preservation, and the managers tend to take a longer-term view when analyzing companies. They will typically take a three- to five-year outlook, and this is reflected by the low levels of portfolio turnover. For the past five years, turnover has averaged around 25%, which is consistent with a four-year hold on positions.

The managers remain disciplined in ignoring short-term noise, and focus instead on the longer-term outlook. They have a unique sell discipline. When a stock reaches their price target, they will automatically sell one third of the position, and initiate a review of the holding. If they see an improvement in the outlook, they will continue to hold the stock, or even add to it. If they don’t see any improvement, they will sell out the remainder.

Performance has been excellent, with a 10-year average annual compounded rate of return of 8.4% to Dec. 31, outpacing both the index and its peers.

Considering the managers’ low cost, disciplined investment process, I expect this fund to continue to deliver superior risk-adjusted returns.

Beutel Goodman North American Focused Equity Fund
Fund company:
Beutel Goodman & Company
Fund type:
Canadian Focused Equity
FundGrade rating: A (December)
Style: Large Cap Value
Risk level: Medium
Load status: No load
RRSP/RRIF suitability: Excellent
Manager: Pat Polozzi since April 2004; Glenn Fortin since August 2008
MER: 1.51%
Fund code: BTG870 (no load)
Minimum investment: $5,000

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 of 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.

Notes and Disclaimer

© 2018 by Fund Library. All rights reserved. Reproduction in whole or in part by any means without prior written permission is prohibited.

Commissions, trailing commissions, management fees and expenses all may be associated with fund investments. Please read the simplified prospectus before investing. Mutual funds are not guaranteed and are not covered by the Canada Deposit Insurance Corporation or by any other government deposit insurer. There can be no assurances that the fund will be able to maintain its net asset value per security at a constant amount or that the full 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 performance is made or implied. This article is for information purposes only and is not intended as personalized investment advice.

 

 
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