WHAT ARE WE LOOKING FOR?
Today, we will examine the top holdings in Mawer U.S. Equity Fund. It took the top award in the U.S. equity category last month at the Canadian Investment Awards.
Checking out the top companies in funds is useful to research ideas for battered stocks that could be due for a bounce after being beaten up in this bear market. It's also a way to monitor a fund that has been dragged into the red by the stock-market collapse. After all, you want to buy low - not at a high.
MORE ABOUT THE FUND
The $28-million Mawer U.S. Equity Fund, which is run by Darrell Anderson of Calgary-based Mawer Investment Management Ltd., lost 14.3 per cent last year compared with a 22-per-cent decline in the S&P 500 composite total return index in Canadian-dollar terms. Over 10 years, the fund has lost 2.5 per cent versus a drop of 3.6 per cent for the index.
When it comes to investing in U.S. companies, the manager follows a growth-at-a-reasonable price (GARP) investing style. He looks for returns from both dividend income as well as capital gains from a portfolio of 40 to 50 companies that are "going and growing," and have sustainable competitive advantages.
WHAT DID WE TURN UP?
Like its peers, it was a rough year in 2008 for Mawer U.S. Equity - especially during the last quarter. Many stocks with iconic brand names like Nike are still in the red. "As far as industry sectors went, there was no place to hide," said Mr. Anderson in a recent investment commentary.
Some stocks have weathered better than others. Despite the weak U.S. housing market, Sherwin-Williams Co., a paint manufacturer, was still up 3.5 per cent over the past year although it has lost momentum this month.
Recently, the fund bought Ametek Inc., a global manufacturer of electric motors and electronic instruments. The stock is up more than 8 per cent this year.
"We have been patiently observing this high-quality specialty manufacturer for some time, waiting for valuation levels to retreat to reasonable levels," Mr. Anderson said. "We sold our position in Wellpoint to make room for Ametek."
He also sold Johnson Controls Inc., a global market leader in automobile systems like seating interior systems and batteries. "We have been increasingly uneasy about the state of the global automotive industry."
One holding, State Street Corp., which was in the fund at the end of December, took a beating this Tuesday. Shares of the Boston-based firm plunged 60 per cent - its biggest one-day drop since at least 1984 - after it reported falling earnings and big potential bond losses. That stock has tumbled 80 per cent over the past year.
"Our current view is one of caution given the extremely fluid economic environment," said Mr. Anderson. "We are being opportunistic in our investing, given compelling valuation levels in the United States. ... Many high-quality companies are trading at levels not seen in decades."
Mawer U.S. Equity Fund - Top holdings as of Dec. 31, 2008
| Price-to-book | |||||||||
| US$ Price | 52-wk | 52-wk | % | P/E | value/shr | YTD % | 1-yr % | ||
| Company name | Symbol | Jan. 20 | High US$ | Low US$ | Yield | ratio | (Latest/MRQ) | price chg | price chg |
| Chevron Corp. | CVX-N | 68.31 | 104.63 | 55.50 | 3.8 | 5.9 | 1.61 | -7.7 | -18.2 |
| Exxon Mobil | XOM-N | 76.29 | 96.12 | 56.51 | 2.1 | 8.3 | 3.16 | -4.4 | -10.3 |
| Johnson & Johnson | JNJ-N | 56.75 | 72.76 | 52.06 | 3.2 | 12.7 | 3.47 | -5.2 | -14.4 |
| Commerce Bancshares | CBSH-Q | 34.13 | 52.86 | 34.13 | 2.9 | 13.7 | 1.62 | -22.3 | -8.7 |
| Becton Dickinson | BDX-N | 70.96 | 92.12 | 58.14 | 1.9 | 15.9 | 3.50 | 3.8 | -19.0 |
| Pepsico Inc. | PEP-N | 50.43 | 75.25 | 43.78 | 3.4 | 15.2 | 4.89 | -7.9 | -29.4 |
| Nike | NKE-N | 44.14 | 70.60 | 42.68 | 2.3 | 12.1 | 2.63 | -13.5 | -21.9 |
| Marsh & McLennan Cos. | MMC-N | 21.64 | 36.82 | 20.96 | 3.7 | 166.5 | 1.60 | -10.8 | -20.4 |
| Sherwin-Williams Co. | SHW-N | 55.13 | 65.00 | 44.51 | 2.5 | 12.6 | 4.26 | -7.7 | 3.5 |
| Aflac | AFL-N | 33.55 | 68.81 | 29.68 | 3.3 | 8.9 | 2.46 | -26.8 | -43.7 |
| IBM | IBM-N | 81.98 | 130.93 | 69.50 | 2.4 | 9.7 | 4.04 | -2.6 | -20.7 |
| Ecolab Inc. | ECL-N | 34.87 | 52.16 | 29.56 | 1.6 | 19.3 | 3.86 | -0.8 | -26.9 |
| Microsoft | MSFT-Q | 18.48 | 35.00 | 17.50 | 2.8 | 9.7 | 5.02 | -4.9 | -44.0 |
| Lowes Cos. | LOW-N | 19.87 | 28.49 | 15.76 | 1.7 | 12.0 | 1.62 | -7.7 | -10.5 |
| Dentsply Int'l | XRAY-Q | 26.12 | 44.89 | 22.85 | 0.8 | 13.9 | 2.45 | -7.5 | -41.8 |
| Sysco Corp. | SYY-N | 23.10 | 35.00 | 20.74 | 4.2 | 12.6 | 3.97 | 0.7 | -17.4 |
| Emerson Electric | EMR-N | 32.25 | 58.72 | 29.26 | 4.1 | 10.4 | 2.75 | -11.9 | -34.4 |
| Western Union | WU-N | 13.43 | 28.62 | 10.48 | 0.3 | 10.9 | 197.50 | -6.4 | -36.2 |
| Copart Inc. | CPRT-Q | 24.82 | 49.34 | 22.54 | 0.0 | 13.9 | 2.56 | -8.7 | -37.0 |
| Donaldson | DCI-N | 30.37 | 52.33 | 23.40 | 1.5 | 13.9 | 3.55 | -9.8 | -20.6 |
| Graco Inc. | GGG-N | 22.25 | 42.20 | 17.31 | 3.4 | 9.4 | 5.70 | -6.2 | -31.9 |
| Patterson Cos. Inc. | PDCO-Q | 17.77 | 37.78 | 15.75 | 0.0 | 10.2 | 2.03 | -5.2 | -47.7 |
| State Street Corp. | STT-N | 14.89 | 85.76 | 14.43 | 6.5 | 3.4 | 0.49 | -62.1 | -79.9 |
| Cisco Systems | CSCO-Q | 15.01 | 27.72 | 14.20 | 0.0 | 11.4 | 2.52 | -7.9 | -38.2 |
| Costco Wholesale | COST-Q | 47.22 | 75.23 | 43.88 | 1.4 | 16.0 | 2.30 | -10.1 | -26.8 |
| Addition during last quarter | |||||||||
| Ametek | AME-N | 31.60 | 53.12 | 27.32 | 0.8 | 12.8 | 2.47 | 4.6 | -18.9 |
SOURCE: MAWER, GLOBE INVESTOR