Globe editors have posted this research report with permission of Echelon Wealth Partners Inc. This should not be construed as an endorsement of the report’s recommendations. For more on The Globe’s disclaimers please read here. The following is excerpted from the report:
Echelon Wealth Partners has released its Q1 2020 Top Picks Portfolio, following on its impressive 19.8 per cent performance in Q4 2019, beating the S&P/TSX Small Cap by 13.6 per cent. The portfolio saw full-year 2019 returns of 46.1 per cent, compared to the 15.8 per cent returned by the S&P/TSX Small Cap Index and 22.9 per cent return generated by the S&P/TSX Composite Index. All figures are presented as total returns.
It had an impressive 46.1-per-cent full-year 2019 return following its disappointing performance of -17.5 per cent in 2018, when the S&P/TSX Small Cap returned -18.2 per cent due to negative market conditions. Its long-term relative outperformance record remains intact, and its three-year (2017-2019) and five-year (2015-2019) returns for its Top Picks Portfolio were a healthy 215.3 per cent and 337.4 per cent, respectively, well above the -2.6 per cent/+16.9 per cent for the S&P/TSX Small Cap Index and the 22.1 per cent/35.6 per cent for the S&P/TSX Composite Index.
The outperformance of its small-cap-heavy Top Picks Portfolio has continued despite small-cap underperformance in Canadian markets. It is worth highlighting that the S&P/TSX Small Cap Index outperformed relative to the S&P/TSX Composite Index, with the Q4 2019 gap at 3.0 per cent following an underperformance of 3.4 per cent in Q3 2019 and a full-year underperformance of 7.0 per cent. Our focus on small-cap stocks leaves us sensitive to investors awarding a premium for liquidity, balance-sheet strength, and greater stability and visibility on financial expectations.
Echelon Wealth Partners continues to present its Top Picks Portfolio as an aggressive, catalyst-rich portfolio of high-growth, entrepreneurial companies. Its median performing stock will typically generate returns below its average return, as its aggressive risk profile has historically generated significant outperformers within quarters. It has benefitted from positive catalysts with take-outs, mine development/resource enhancement and regulatory approvals all common events. The research team at Echelon Wealth Partners strives to select stocks that are catalyst-rich, supported by proven execution, positioned for high growth and backed by strong economics.
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