Equity Fund

June 30, 2021

Market Context

  • The Canadian stock market (S&P/TSX Composite Index) rose 8.5% in the second quarter. Energy, financial, and technology stocks fueled the market’s strong gain
  • Global stocks, as measured by the Morningstar Developed Markets Index, gained 5.7% 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.
  • After a slow start to the year, the fund’s performance picked up in the second quarter, gaining 5.8% (+5.6% year-to-date). That said, the portfolio has lagged this year. This is attributable in part to its relatively small weighting in resource companies, which have seen robust returns and make up a sizable part of the Canadian market.
  • Investments remain focused on best-in-class companies with high operating margins, proven products/services, and little debt — businesses like Microsoft (software and cloud services), Sika (specialty chemicals), Visa (payment services), CCL Industries (specialty packaging), and Verisign (internet infrastructure). These companies also have strong pricing power, meaning they can pass along rising material and labour costs to consumers — an important attribute in inflationary times.
  • The manager, Fiera Capital, is keeping a close eye on the supply chain issues that have impacted many companies through the pandemic. Most of our holdings have not experienced significant setbacks. Further, the service providers we own such as ExpePErian (credit services), Thomson Reuters (information services), S&P Global (financial information & analytics), and Aon (pension administration & consulting) are well insulated from shipping delays and parts shortages because their businesses are focused on human expertise.
  • Trading activity was minimal in the quarter, with no new purchases or redemptions. Additional shares were purchased in a few holdings including Koninklijke Philips, S&P Global, Aon, and CN Rail. CN fell 10%, weighed down by regulatory uncertainties over its proposed takeover of Kansas City Southern (a major north-south railway linking the central U.S. to Mexico). Fiera likes the long-term prospects of CN with or without KCS and viewed the dip as a good buying opportunity.
  • The fund currently has a cash position of 3%.

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.