Small-Cap Equity Fund Commentary

Market Overview

The Canadian small-cap market had a good start to 2012, led by strong gains in technology, industrial and consumer stocks.
Commodity-related stocks, which comprise over half the index, advanced only modestly.

Portfolio Specifics

Operating results continue to be strong and most of the fund’s holdings saw further share price gains to start the year.
The portfolio’s composition is much different than the small-cap market as a whole. The fund has limited exposure to base metals and is concentrated in companies that generate stable cash flows and earnings.
The manager, Wutherich & Company, purchased two micro-cap companies (market capitalization under $300 million), but their share prices quickly jumped so only small positions were established. The names of the companies are being withheld because they are thinly-traded stocks and Wutherich is still looking to build the positions.
Primero Mining is the fund’s black sheep. The stock was under pressure as the company conducted a full assessment of its reserves late in the quarter. Contrary to the price action, Wutherich felt the results were neutral to positive and is keeping the position.
The fund holds 17 stocks, with a weighted average market capitalization of roughly $1.3 billion. Two-thirds of the holdings, however, have a market cap of less than $1 billion.
A portion of the fund’s cash was put to work in two new holdings, but the manager still has a healthy sum in reserve (11%).

Notable Transactions

Two of the portfolio’s larger holdings, Canadian Helicopters and Coastal Energy, were trimmed. Both stocks have provided stellar returns for the fund.
Additional shares were purchased in Parkland Fuel, Total Energy Services, and Iridium Communications. Iridium is now the fund’s largest holding.

Positioning

The portfolio remains well diversified in a tight collection of profitable businesses. Focus is on industrial, energy, technology and consumer-related companies.
Wutherich is looking in some unloved corners, such as natural gas, but has not yet come across any compelling opportunities.

Learn more about the manager's background, investing style, and the Small-Cap Fund (high-speed internet connection required).