Small-Cap Equity Fund

September 30, 2020

Market Context

  • The Canadian small-cap market (S&P/TSX SmallCap Index) gained 6.6% in the quarter. U.S. small-caps (Russell 2000 Index) rose 2.7% in Canadian dollar terms.
  • Consumer and industrial stocks were areas of strength while energy stocks lagged.

Portfolio Specifics

  • The fund consists of 26 companies, ranging from very small (Waterloo Brewing) to medium-sized businesses (Cargojet). While the majority of holdings are Canadian, there are three U.S. stocks which make up 11% of the portfolio.
  • The fund had a strong quarter as many stocks continued to rebound from oversold levels reached in the early days of the pandemic. Companies with exposure to the work from home phenomenon, which has led to an increase in spending related to enhancing life at home, benefited in particular.
  • Three holdings help illustrate this in different ways. Sleep Country Canada’s results have been strong as people are seemingly placing a high value on a good night’s sleep. Spin Master, which makes toys and games, has benefited from an increase in toy spending as more parents try to juggle working from home and keeping their kids entertained. And Intertape Polymer, which makes tapes and adhesives for packages, had a better-than-expected quarter as demand for its products has been robust.
  • Cargojet has also been a key beneficiary of the uptick in online shopping. The company, which specializes in overnight air cargo services, also saw its results boosted by charter services focused on bringing PPE and medical supplies to various government agencies. The stock is up 85% this year.
  • Another holding worth highlighting is Interfor, one of the world’s largest lumber producers. Low supply and inventory coupled with strong demand (driven by home improvements and construction) drove the price of lumber significantly higher in the summer, leading to a healthy gain in the stock.
  • One stock was sold in the quarter, Middleby Corp., which makes commercial ovens for restaurants. The manager, Galibier Capital, believes the future is highly uncertain for this industry and sold the stock (following a decent recovery in price). Several positions were trimmed based on strong performance, including Cargojet, Interfor, Sleep Country, Spin Master and Northland Power.
  • No new companies were added to the fund but additional shares were purchased in Oshkosh, SNC-Lavalin, and Torex Gold Resources, which trailed the market.
  • The fund currently has a cash position of 3%.


  • 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.