Last updated: Jun-15-2018

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By Dave Paterson  | Wednesday, September 14, 2016


Historically, the U.S. has been one of the toughest markets to beat on a consistent basis. Beutel Goodman American Equity Fund consistently pulls it off, and is one of the higher quality U.S. equity funds. Its performance has earned it the annual Fundata FundGrade A+™ Award for three years running and places it regularly on the monthly FundGrade A-Grade list. Here’s a look at how the managers do it.

The fund is managed using a highly disciplined, bottom-up value approach that places emphasis on capital preservation, with a focus on delivering absolute returns and managing risks. To achieve this, managers Glenn Fortin and Gavin Ivory of Beutel Goodman look for high-quality, well-managed, dividend-paying companies that have a history of generating stable cash flows and that have earned a level of return that is greater than the company’s cost of capital.

Given the fund’s value bias, any company considered for inclusion in the portfolio must not only be undervalued, but also have the potential to grow its share price closer to its intrinsic value within a three-year period. When evaluating a company, Fortin and Ivory pay particular attention to the price-to-earnings, price-to-cash-flow and price-to-book ratios in the context of not only the company's historical numbers, but also compared to the market and what the management believes to be the company's sustainable earnings growth rate.

The result is a concentrated portfolio of U.S.-based large-cap companies that are leaders in their field. As of the end of August, the fund held just under 30 names, with a top 10 making up over half the asset weighting of the fund. As of August 31, top holdings included telco Verizon Communications Inc. (NYSE: VZ), banker JPMorgan Chase & Co. (NYSE: JPM), software giant Oracle Corp. (NYSE: ORCL), IT security firm Symantec Corp. (NASDAQ: SYMC), industrial motion-and-control technology firm Parker-Hannifin Corp. (NYSE: PH).

The fund managers are patient in implementing their process, with portfolio turnover averaging 33% for the past five years. However, they are not afraid to use periods of heightened volatility as an opportunity to improve the quality of the portfolio. This happened in 2008 and again in the first half of 2012 when several new names were added to the portfolio.

Performance has been excellent, with the fund delivering an average annual compounded rate of return of 21.08% for the past five years ending Aug. 31. That slightly trails the S&P 500’s 21.58% return, but handily outpaces the U.S. Equity category average of 16.52%.

The fund also has decent downside protection, holding up well in 2008, losing less than half of the index’s 23% drop. Volatility has been lower than the category average, but has matched the broader market. For those looking for actively managed U.S. equity exposure, this fund is one of my favourites.

Fund company: Beutel Goodman & Company
Fund type:
U.S. Equity
FundGrade Rating: A
FundGrade A+ Award: 2013, 2014, 2015
Style: Large Cap Value
Risk level: Medium
Load status: No load
RRSP/RRIF suitability: Good
Managers: Glenn Fortin since June 1997; Gavin Ivory since Feb. 2006
MER: 1.47%
Fund code: BTG774 (no load)
Minimum investment: $5,000

See the Fundata Fund SnapShot for more details.

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

© 2016 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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