Although two small-cap money managers don\u2019t see an economic turnaround until 2010, they say many Canadian small-cap stocks are valued cheaply and they\u2019ve already begun buying in anticipation that the asset class will shine when the recession ends.
\u201cWhen the economy turns around, small-caps should outperform,\u201d says Martin Ferguson, manager of Mawer New Canada Fund with Calgary-based Mawer Investment Management Ltd. <\/b> \u201cBut it\u2019s not visible yet.\u201d
Ferguson describes the recession as bathtub-shaped \u2014 meaning: it\u2019s long and deep \u2014 and says there\u2019s still some way to go before the situation improves.
Similarly, Sebastien Van Berkom, president of Montreal-based Van Berkom & Associates Inc. <\/b>, says what he expects to be an historical 24-month recession is only halfway finished. Senti-ment can hardly get worse, he adds, and that\u2019s a \u201cbuy\u201d sign.
Although there may be no rush to get into small-caps, Ferguson notes that some stocks in the asset class are tightly held, illiquid and that the index can change quickly with sentiment: \u201cEven though the market is acting poorly, I have established positions for the future.\u201d
Here\u2019s a look at the sectors that Ferguson and Van Berkom are overweighting:
> INDUSTRIALS. <\/b> Infrastructure is a major theme for both Ferguson and Van Berkom. Among their picks are Edmonton-based consulting firm Stantec Inc. <\/b>, Toronto-based construction company Bird Construction Income Fund<\/b>, Mississauga, Ont.-based steel services company Russel Metals Inc. <\/b> and Montreal-based engineering services firm GENIVAR Income Fund<\/b>. Another is Toronto-based Marsulex Inc. <\/b>, which provides sulfide cleaning services for refineries and factories and is an energy sector play more tied to infrastructure.
Ferguson also likes Woodstock, Ont.-based small trucking operator Contrans Income Fund: <\/b> \u201cNobody likes it now, but its yield is 22%.\u201d
> CONSUMER DISCRETIONARY. <\/b> Van Berkom likes Edmonton-based easyhome Ltd. <\/b>, which leases furniture and electronics to consumers; Vancouver-based Glacier Media Inc. <\/b>, the publisher that bought many of Hollinger Inc.\u2019s assets in Western Canada; and, especially, Richmond, B.C.-based Great Canadian Gaming Co. <\/b>, the casino owner and operator.
Ferguson points to Transat A.T. Inc. <\/b>, the Montreal-based tour operator whose valuation has tumbled, and Boucherville, Que.-based Uni-Select Inc., the used car parts distributor.
> FINANCIAL SERVICES. <\/b> Both money managers have a long-time interest in Toronto-based alternative mortgage lenders Home Capital Group Inc. <\/b> and Equitable Group Inc. <\/b>, whose stocks are down even though they are well capitalized and efficient operators. High River, Alta.-based Western Financial Group Inc. <\/b> is also a pick.
Ferguson and Van Berkom also like several small-cap real estate businesses, including Newmarket, Ont.-based Altus Group Income Fund<\/b>, a real estate valuator and consultancy; Calgary-based Parkbridge Lifestyle Communities Inc. <\/b>, which leases land to higher-end mobile homes and condominium operations; and RealEx Properties Corp. <\/b>, also of Calgary, which owns commercial land and industrial space in Alberta and Ontario. Ferguson says RealEx is underleveraged, cheap and has quality tenants and buildings.\t\u2014 GAVIN ADAMSON<\/b><\/p>\n","protected":false},"excerpt":{"rendered":"
Although two small-cap money managers don\u2019t see an economic turnaround until 2010, they say many Canadian small-cap stocks are valued cheaply and they\u2019ve already begun buying in anticipation that the asset class will shine when the recession ends.\u201cWhen the economy turns around, small-caps should outperform,\u201d says Martin Ferguson, manager of Mawer New Canada Fund with […]<\/p>\n","protected":false},"author":4,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[3013,3018],"tags":[3155,3467],"yst_prominent_words":[],"acf":[],"_links":{"self":[{"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/posts\/322140"}],"collection":[{"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/comments?post=322140"}],"version-history":[{"count":0,"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/posts\/322140\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/media?parent=322140"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/categories?post=322140"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/tags?post=322140"},{"taxonomy":"yst_prominent_words","embeddable":true,"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/yst_prominent_words?post=322140"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}