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Q1/2 Mawer U.S. Equity







Mawer U.S. Equity Fund

The Mawer U.S. Equity fund has been a top quartile performer for the last two years, having recovered smartly from a disastrous performance in 1999. Last year it gained 3.6% and significantly outperformed the S&P500 which lost 13% during that same time period. The fund was not sucked in by the high-tech expansion and subsequent retreat seen in the S&P500 over the last few years. During the first quarter of this year, the fund remained flat with a small gain of 0.09% which was a tiny bit better than the 0.06% lost by the S&P500. Heading into May the fund is now down 6.1% since the beginning of the year which is still better than the 8.6% loss experienced by the S&P 500. Nonetheless, as they say, a loss is still a loss.

Long time portfolio manager Darrell Anderson employs fundamental bottom-up, financial analysis to pick low-risk growth stocks. Sticking to his disciplined approach allowed the fund to avoid the Enron fiasco. Darrell Anderson noted of Enron that "It did not meet our fundamental criteria, so we did not pursue it."

At the end of April the fund was fairly concentrated holding 33 stocks. The fund has an average dividend yield of 1.2% and an average earnings yield of 3.9%. With the earnings yield of the S&P500 index currently around 2.5% (or a P/E of about 40), and its dividend yield at 1.48% the fund represents a reasonable (but by no means outstanding) relative value. The fund's price-to-book ratio is also on the high side at 3.8 but it's price-tosales ratio is much more moderate at 1.7.

Darrell Anderson has been dumping Information Technology and Industrial stocks in favour of Health Care. At the end of March the fund sold drug maker Schering-Plough and troubled conglomerate Tyco International. Additions included Wellpoint Health Networks and a tripling up of the fund's DENTSPLY International holdings.

The Mawer U.S. Equity Fund is a good choice for the frugal investor who wants exposure to the U.S. market. Its 8.1% average annual return over the last five-years places it near the top of all no-load U.S. Equity funds. Indeed, it is one of the few U.S. equity funds that have beaten the S&P 500 over the last five years. The fund's low MER and modest minimum investment of $5,000 makes it an excellent choice for smaller accounts.

FF: Q1 2002

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