- for accredited investors, or minimum investment of $150,000
Canadian Equity Growth Fund
Objective of the Fund
With investments focused primarily on the Canadian stock market, the objective of the Fund is to provide consistent, above average, long-term performance commensurate with a controlled degree of risk. The Fund is managed using the unique investment style of the firm.
Investment Style and Process
At J Zechner Associates the investment style for Canadian stocks has always been what we refer to as ‘active, top-down, growth.’ It is premised on the reality that the Canadian stock market is dominated by cyclical stocks rather than pure growth stocks, meaning that a large number of the companies in the index will experience alternating periods of expansion and contraction of their core businesses that mirror the economic path of the global economy. An active investment management style therefore lends itself very well to that type of stock market behaviour. The style is characterized by overweighting the industry groups we feel will outperform the market averages at various stages of the market cycle. We rely on our ability to accurately determine when to overweight and underweight a particular sector, based on the historical valuation of that sector, the expected growth rate and the impact of global economic conditions.
Our top-down analysis is complemented by bottom-up stock selection within each industry. The stock selection process focuses not only on some key valuation parameters, but also attempts to identify those companies expected to experience the strongest growth within that sector. We use a variety of criteria when defining a security for inclusion in a portfolio, including cash generation, debt levels, financing requirements, management stability, historical return on equity and qualitative evaluations of the growth potential of both the individual business and the industry
The stock selection process uses a number of qualitative screens as well. First, we perform an analysis of the firm’s products/services to assess potential growth or to identify a market niche for the company’s products/services. Second, through internal interviews, management is closely scrutinized to ensure that their goal is to maximize shareholder value.
Finally, we use several quantitative valuation criteria – which differ across industries – to further evaluate the firms. Key indicators include free cash flow, which can signal a firm’s ability to finance its own growth; operating cash flow, which shows the true operating performance and growth of the company; and EBITDA (earnings before interest, taxes, depreciation and amortization), which adjusts stock valuations for levels of debt and other accounting “anomalies”.