Frugal Funds
Home Bios Articles Contact Stingy Investor
 
The Frugal Fund Way
Norm's Articles

Carl's Articles
 Small-Fee Small Caps
 Bargain Bonds
 Dependable Dividends
 Thrifty Trusts
 Disciplined Value
 Frugal Fixed Income
 Striking the Right Balance
 America For Less Than 2%
 Mawer Canadian Equity
 Mawer U.S. Equity
 Median Mutual MERs

Newsletter Archive
Q1/6 Focus on ETFs
Q4/5 LW Canadian Equity
Q4/5 Saxon High Income
Q3/5 Saxon Small Cap
Q3/5 BG Income
Q2/5 Trimark Canadian
Q2/5 MB Fixed Income
Q1/5 BG Canadian Intrinsic
Q1/5 MB American Equity
Q1/5 Mawer N.C. Closure
Q4/4 Mawer Cdn Equity
Q4/4 Mawer Balanced RSP
Q3/4 Sceptre Equity Growth
Q3/4 Saxon World Growth
Q2/4 BG Small Cap
Q2/4 Mawer U.S. Equity
Q1/4 PH&N Cdn Growth
Q1/4 Leith Wheeler US Eq
Q4/3 iShares S&P500
Q4/3 BG Canadian Equity
Q3/3 North Growth US Eq
Q3/3 HSBC Mortgage
Q2/3 MB Cdn Eq Growth
Q2/3 Batterymarch US Eq
Q1/3 Saxon Stock
Q1/3 BG Balanced
Q4/2 Mawer New Canada
Q4/2 Perigee T-Plus
Q3/2 PH&N Dividend Inc
Q3/2 PH&N Bond
Q2/2 Leith Wheeler Cdn Eq
Q2/2 Perigee Diversifund
Q1/2 PH&N Cdn Equity
Q1/2 Mawer U.S. Equity







PH & N Canadian Equity Fund

Leading the pack of no-fee Canadian equity funds is the Philips, Hager & North Canadian Equity. With $1.10 billion under management this fund has been a top performer over the last six years and only lost 3.5% during the carnage of 2001 which saw the TSE300 drop 12.9%. During the first quarter of this year the fund gained 1.5% which was not quite as good as the 2.5% advance posted by the TSE300. The fund's modest underperformance during the first quarter was caused by it's low weighting in resource stocks. Moving into May the fund's portfolio slid a bit more and is now down 4.2% since the beginning of the year. The fund's significant Nortel and BCE holdings accounted for a large fraction of the loss.

The fund is managed by a team of analysts and follows the growth at a reasonable price style of stock selection. The team picks stocks that they feel will grow at an above average rate provided that they can be purchased for a below average price. In other words, the team tries to blend the best aspects of growth and value investing to achieve above average returns.

The fund's portfolio, at the end of 2001, meshed well with a blended approach. It provides an average dividend yield of 1.6% which matches that of the S&P/TSX Composite index. However, it's earnings yield was a meager 0.32% due to the fund's large Nortel holding. Excluding Nortel, the earnings yield increases to 4.5% (or a P/E of 22.3) while the dividend yield remains unchanged. The fund's management team has recently been loading up on Nortel as a contrarian play.

At a price-to-earnings ratio of 22 the fund's portfolio is less expensive than the 36.5 of the S&P/TSX but it remains expensive nonetheless. The fund's price-to-book ratio is also a touch on the high side for value investors at 2.2 but it is not out of line given current market conditions.

This quarter the fund has been buying BCE, TELUS, Celestica, and Nortel in the belief that "share valuations for these stocks are excessively discounted relative to their attractive long-term growth potential". In other words, these shares have recently been overly beaten up and are now good buys. On the other hand, Magna International, Rogers Wireless, Investors Group, and Nova Chemicals were sold due to relatively high valuations and weakening prospects.

Over 38% of the fund's portfolio is currently invested in the financial sector. Big banks and insurance companies comprise seven of the fund's top ten holdings. The problem is that in a climate of rising interest rates the financial sector usually takes a hit. As a result, the fund may well suffer should rates climb too quickly.

The PH&N Canadian Equity fund has consistently yielded solid returns with a 15 year average annual return of 9.2%. It is worth noting that the fund's MER has been on a modest, but welcome, downward trend, averaging 1.15% over the 1996-2001 period. The $25,000 minimum initial investment likely puts this fund out of the reach of many small investors but its low MER and record of solid performance make it a good fund for the frugal investor.

FF: Q1 2002

Visit
StingyInvestor.com






 

Legal
Disclaimers: Consult with a qualified investment advisor before trading. Past performance is a poor indicator of future performance. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. More...