Bissett Canadian Equity Fund succeeds with its GARP style

With the strong performance of the Canadian stock market this year, there is an increased risk that investors will start to overpay for stocks. But that’s not a risk you’ll run with Bissett Canadian Equity Fund.

Franklin Bissett Canadian Equity Fund (Fund codes Series A: TML202(FE), TML202(DSC), TML518(LSC)) seeks long-term capital appreciation by investing primarily in a diversified portfolio of mid- to large-capitalization Canadian equities.

To achieve this objective, the fund adheres to a growth style of investing — but with a twist. It will only buy a growth stock if it trades a reasonable price. Hence, its investment approach is commonly referred to as growth at a reasonable price, or GARP.

In keeping with its GARP philosophy, the Bissett equity team seeks to identify high-quality, well-managed businesses that have a track record of success and exhibit a sustainable business model. The team believes these types of businesses are capable of providing steady earnings and dividend growth and, in turn, stock price appreciation.

The success of this GARP approach is reflected in Bissett Canadian Equity’s track record. Over the past 10 years, for example, the fund’s compound annual growth rate of 5.4 per cent ranks in the top quartile of the Canadian equity funds category. Over the same period, the average fund in the category returned a compound annual 4.3 per cent.

The fund’s performance over the past five- and one-year periods is similarly strong. Only its three-year performance has lagged, during which its 6.9-per-cent annualized return scored in the third quartile.

Overall, though, this fund has outperformed more than it has underperformed. It has performed in the top half of the category in six of the past 10 years. In four of those six years, it was a top-quartile performer. That’s what has earned it a place on the Money Reporter’s recommended list of best Canadian equity funds.

The fund has certainly benefited from an experienced management team. Manager Garey Aitken has co-led the fund since 2003, while his associate, Tim Caulfield, joined him in 2011.

In their search for high-quality businesses, the managers have slightly over-weighted the fund with financial stocks. These stocks make up 38.6 per cent of the portfolio, compared to a 37.2-per-cent weighting for its benchmark index, the S&P/TSX Composite. Major financial holdings include Brookfield Asset Management and the big five Canadian banks.

Other major sectors in which the portfolio is invested include energy, industrials and consumer stocks.

Bissett Canadian Equity is a buy if you want a core Canadian equity fund with medium risk.

 

Money Reporter, MPL Communications Inc.
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