Blue Ribbon outperforms the broad market, though not its high-income benchmark. The fund should do well, though, if value, or bargain, stocks regain appeal as seems likely.
Blue Ribbon Income Fund outperformed the S&P/TSX Composite Index in the first of this year. The fund gained 18.3 per cent in the first half, while the index rose 17.3 per cent in that time.
But the fund didn’t outperform the S&P/TSX High Dividend Total Return Index, which gained 25.6 per cent. That’s because the index is heavily weighted with energy stocks while the fund is not.
Blue Ribbon Income Fund (TSX—RBN.UN) is a TSX-traded closed-end investment fund designed to provide investors with high monthly income and the potential for capital gains by finding undervalued opportunities in Canadian high-income stocks. The fund’s investment manager, Bloom Investment Counsel, has focused on high-income equity investments over the past 35 years.
CAGR since inception is 9.4%
Blue Ribbon itself was started in 1997, and its compound annual growth rate since inception is a respectable 9.4 per cent. Over the same period, the S&P/TSX Composite’s annualized return is 7.2 per cent, while that of the High Dividend Index is 7.8 per cent.
Over the past decade, the fund has tended to lag these two benchmarks. But over the past year, it has handily outperformed both.
The fund’s future results will be helped by a lower management expense ratio, or MER. Its MER for 2020 was 1.44 per cent, down from 1.76 per cent in 2019. That’s because, in 2020, it terminated its service charge fee, which was paid to investment dealers based on the proportionate number of units held by clients of each dealer. The fee was equal to 0.40 per cent per year of the fund’s net asset value.
Industrials, consumer staples dominate
Near-term performance may also be helped by the fund’s heavy weightings in some outperforming sectors—assuming these sectors continue to outperform for the remainder of the year. The fund has 22.8 per cent of its portfolio invested in industrials, which have done very well this year. It has a further 22.0 per cent invested in consumer staples and discretionary, the latter of which has also done well.
Top holdings include Intertape Polymer (packaging & containers), 6.0 per cent; Transcontinental Inc. (business services), 5.9 per cent; AG Growth International (farm & heavy construction industry), 5.5 per cent; Superior Plus (utilities), 5.4 per cent; Canadian Tire (retail), 5.3 per cent; and Park Lawn (funeral services), 5.1 per cent.
Blue Ribbon should do well if value, or bargain, stocks regain appeal as seems likely.
Blue Ribbon currently trades at a discount to its net asset value and yields 5.6 per cent. Blue Ribbon Income Fund is a buy for growth and income if you’re comfortable with equity risk.
This is an edited version of an article that was originally published for subscribers in the August 13, 2021 issue of Money Reporter. You can profit from the award-winning advice subscribers receive regularly in Money Reporter.
Money Reporter, MPL Communications Inc.
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Money Reporter •10/14/21 •