What are we looking for?
How North American equity funds stack up against Canadian and U.S. market indexes.
We looked for the top 15 funds in this group for the year ended Feb. 28, 2014. U.S. dollar, segregated and duplicate versions of the funds were excluded. We also omitted funds with minimum investments of more than $25,000 and those closed to new investors.
What did we find?
Performance varied in this border-straddling category. Six funds beat the U.S. S&P 500 Composite Total Return index, while all but one bested the Canadian S&P/TSX Total Return benchmark. The chart topper was the Trimark North American Endeavour Class fund with annualized gains of 48.2 per cent in the year to Feb. 28.
Jason Whiting, the fund’s lead portfolio manager since 2007, says it’s as tough now as it’s ever been to find new investment ideas. He said he’s seeing more “good ideas than great ideas.”
North American equity funds are having a pivotal moment as market strength and stability in the United States has gradually made the country look more expensive to invest in.
That has contributed to Mr. Whiting boosting his fund’s cash holdings from its standard single-digit levels to a close to 20 per cent weighting.
The Trimark fund is unlike its peers in that its pool of holdings is small – often only about 20 stocks – and its asset pool is about $15.5-million deep. This allows the fund to stay nimble and to invest in smaller companies, Mr. Whiting said.
He is invested in several lesser-known companies such as Arkansas-based America’s Car-Mart Inc., a company that sells and finances vehicles to customers who might otherwise have trouble buying or getting financing for a car.
Mr. Whiting calls the customer base “deeply subprime,” but thinks the company has a good lending reputation and that company management has the potential to expand beyond its existing web of locations in 10 states.
The Trimark fund has a heavy weighting toward the information and technology sector, but Mr. Whiting is cautious about the rapid rise of valuations in the sector. “There are definitely pockets in that space that are looking frothy at best, and arguably bubble-ish,” he said.
Mr. Whiting cautions that any company with the word “social” or “cloud” in its description raises warning bells for him.
Top 15 North American equity funds
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- America's Car-Mart Inc$35.45-0.10(-0.28%)
- Updated March 28 2:42 PM EDT. Delayed by at least 15 minutes.