Small-Cap Equity Fund

December 31, 2019

Market Context

  • The Canadian small-cap market (S&P/TSX SmallCap Index) gained 15.8% in 2019. U.S. small-caps (Russell 2000 Index) rose 19.5% in Canadian dollar terms.
  • Gold stocks were an area of strength, along with technology and industrial companies.

Portfolio Specifics

  • The fund consists of 26 companies, ranging from very small (Waterloo Brewing) to medium-sized businesses (Finning). While the majority of holdings are Canadian, there are four U.S. stocks which make up 14% of the portfolio.
  • The fund had an excellent year, rising 19.2%. Performance was strong across the portfolio, with several industrial and consumer stocks posting high double-digit gains. Standouts in the year were Cargojet (overnight air cargo services), Stericycle (medical waste disposal), Oshkosh (specialty trucks), Points International (consumer loyalty programs), and Dream Global REIT (commercial real estate).
  • A few investments disappointed, namely Uni-Select (sold), NFI Group and Pason Systems. The manager, Galibier Capital, purchased additional shares of NFI and Pason, as they feel these companies are worth significantly more than their share prices indicate. Both stocks are among the fund’s top 10 holdings.
  • An industry in which Galibier is finding compelling value is engineering and construction services. Stantec has been a longstanding holding and SNC-Lavalin and Fluor were recently purchased. SNC has been in the news for all the wrong reasons, but Galibier feels the stock’s steep decline coupled with the company’s revised focus — it’s exiting the construction business and refocusing on engineering services — present a good opportunity for investors. Indeed, the stock is up more than 70% since we purchased it in October. Fluor, a Texas-based global engineering firm, has also suffered from poor execution and write-downs. The firm has valuable expertise in the construction sector, however, and the selloff in the stock looks overdone. We’ve owned the company in the past and earned a solid return on it.
  • Another area of interest is the food & beverage sector. Premium Brands Holdings (specialty food manufacturer) is the fund’s 2nd largest holding and rebounded nicely in 2019. Waterloo Brewing also bounced back from a tough 2018, and Maple Leaf Foods is a new addition. The company is a big player in pork and poultry, and a leader in animals raised without antibiotics. As well, its plant-based Lightlife brand is gaining momentum. The stock has fared poorly because of lackluster profit growth (which should improve with cost cutting measures), presenting a good opportunity to buy.
  • The fund currently has a cash position of 2%.


  • The portfolio has a unique composition, with key areas of investment being capital goods, transportation, food & beverage, and engineering services. This is in contrast to the small-cap market’s heavy focus on resource companies.

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.