Equity Fund

September 30, 2021

Market Context

  • The Canadian stock market (S&P/TSX Composite Index) rose 0.2% in the third quarter. Consumer staples, industrials, and real estate were the strongest sectors.
  • Global stocks, as measured by the Morningstar Developed Markets Index, gained 2.2% in Canadian dollar terms.

Portfolio Specifics

  • The fund holds 23 stocks, of which 12 are headquartered in Canada, 6 in the U.S., and 5 overseas.
  • The fund had a good quarter, gaining 3.4%. Our manager, Fiera Capital, has a focus on quality growth companies, which saw a snapback (investors’ attention had been on more cyclical, or “reopening” stocks earlier in the year). Top performers were Keyence (a manufacturer of machine vision systems and factory automation sensors), Aon (a professional services firm and leader in pension consulting), and Danaher (a science and technology innovator).
  • Two important themes currently run through the portfolio’s holdings: (1) they generally have solid pricing power and are able to pass on rising input costs to customers; and (2) they have manageable levels of debt, or none at all. Indeed, Keyence, Franco-Nevada, Microsoft, and Verisign have no net debt. In a world where labour and supply costs are rising, and governments are awash in debt, these are valuable attributes for a business to possess.
  • Fiera continues to focus on companies with a global footprint (exceptions being Telus, CN Rail, and Metro). Businesses such as Microsoft, Sika, Philips, Thomson Reuters, and Visa have a worldwide customer base and are not as susceptible to a shock or pullback in a particular region.
  • We reported last quarter that the portfolio was well sheltered from many of the supply chain issues that have plagued companies throughout the pandemic. This continues to hold true. In fact, many professional services firms that rely on human capital have seen steady growth in demand and profits, including Experian (credit rating services), Thomson Reuters (financial information & news services), and Aon.
  • Trading activity was once again minimal, with no new purchases or redemptions. Some profits were taken in the top performing stocks and reallocated to those that have been more stagnant, including Toromont, Verisign, and CME Group.
  • The fund currently has a cash position of 4%.

Positioning

  • The fund is comprised of a concentrated group of businesses operating in a diverse array of industries, from information services to renewable energy to packaging to software. The manager’s focus is on best-in-class companies that generate strong cash flows, have good growth prospects, and are well financed.

Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Important information about the Steadyhand funds is contained in our Simplified Prospectus. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently, and past performance may not be repeated.