Schmehl uses a slightly unconventional approach, looking for companies that
are undergoing some sort of fundamental change he believes will be a
catalyst to unlock share price appreciation and ideally deliver
above-average growth over the next 12 to 18 months.
The fund can invest in companies of any size but tends to favour the mid-
to large-cap space and can invest up to 49% of assets outside Canada.
The process is bottom-up, meaning the sector mix is the byproduct of stock
selection. Schmehl is not overly concerned with traditional valuation
metrics. Instead, he’s more likely to play the momentum, allowing his
winners to run, regardless of the valuation.
Top holdings recently included
Shopify Inc. (TSX: SHOP),
Lennar Corp. (NYSE: LEN),
D.R. Horton Inc. (NYSE: DHI),
Etsy Inc. (NASDAQ: ETSY), and
Suncor Energy Inc. (TSX: SU).
Schmehl is also a very active manager, with portfolio turnover that could
charitably be described as “robust.” For the past five years, turnover has
averaged more than 200% per year. At the end of March, the fund had 50% in
Canadian equity and 47% in foreign equities, with tech the largest sector,
comprising nearly 32% of assets. What is somewhat surprising is that
consumer cylical is the next largest sector at 23%.
The fund has delivered top-quartile performance every year since Schmehl
took the helm, except for 2016 when he was in the second quartile. For the
past five years, he has generated an average annual compounded rate of
return of more than 11%, well above the index and peer group
The tradeoff is that the fund’s volatility well above the index and peer
group, with a 3-year average standard deviation of 14.5%, for a Fundata
volatility ranking of 10/10. But Schmehl has also done an excellent job
protecting capital, participating in less than 20% of the downside of the
Despite the excellent track record, I’m concerned that the fund may
struggle when we see market leadership rotate to value. For that reason,
I’m reluctant to use this as a core holding, favouring it instead as part
of a well-diversified portfolio. I see this pairing fund up nicely with a
more value-focused offering such as
Fidelity Canadian Large Cap Fund.
Fidelity Canadian Growth Company Fund
Fidelity Investments Canada
Canadian Focused Equity
FundGrade A+ Awards:
Mark Schmehl since March 2011
2.27% (Front-end load)
FID265 (Front-end load)
Dave Paterson, CFA, is a money manager and an expert on investment fund
research and due diligence on a variety of investment products.
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only and is not intended as personalized investment advice.