Over the first half of 2015 Canada’s S&P/TSX Composite Index returned just 0.9%, weighed down by the poor environment for resources stocks. Canadian & General did better than this however, returning 3.5% on net assets.
The manager says the leading sector, by a wide margin, was Health Care, dominated by Valeant Pharmaceuticals International and Catamaran Corporation. The latter stock is the subject of a takeover bid at a price equivalent to 11x their original purchase cost. In Financials, they recorded losses on bank holdings such as Bank of Montreal (-8.0%), Royal Bank of Canada (-2.9%) and Toronto-Dominion Bank (-2.7%) but Element Financial Corporation, which is a large, top ten holding, was a big winner for CGI, posting a very strong 34.9% return. In the Transportation sector, Canadian Pacific Railway fell but this was offset by positive performance from Air Canada. The largest holding, Dollarama Inc., the retail chain, was once again a top performer in the portfolio, powering ahead with another substantial gain of 27.3%.
Sectors clustered at the low end of performance, ranging from 6-9% in losses were the Industrials, Energy and Utilities groups. Energy had the most negative influence on the benchmark’s total return due to its substantial 20% plus weighting within the S&P/TSX. In spite of some improvement in the WTI oil price during the period, expectations remained uncertain as to a sustainable oil price recovery and downward pressure continued on energy related equities. They realised a loss in RMP Energy Inc. (down 27.9%) but other holdings did better relatively, such as Suncor Energy (-5.3%) and TransCanada Corporation (-9.2%). They say some smaller names in the portfolio were actually strong performers – Raging River Exploration and Whitecap Resources both returned in excess of 18% for the period and helped to mitigate an otherwise negative outcome for the portfolio in this sector.
CGI : Canadian & General beats benchmark in H1