Over the past 50 years, Berkshire Hathaway Inc. (NYSE: BRK.A)(NYSE: BRK.B) has grown book value per share 19.2% annuallyâsignificantly higher than either the S&P 500 or the TSX Composite Index.
Virtually no other companies in either the U.S. or Canada have achieved this kind of long-term value creation for its shareholders.
GARP investor Jason Donville, CEO of Toronto-based Donville Kent Asset Management, is one of Canadaâs most successful fund managers with a performance record that’s second to none. Since inception (October 1, 2008), his Capital Ideas Fund LP hedge fund has achieved cumulative returns of almost 500%.
Donville believes that companies that focus on growing book value per share at a steady pace will do well over the long haul as long as the returns on equity keep pace. In many respects, says Donville, growth in book value per share is a better sign of growth than earnings per share.
In the past five years, Berkshire Hathaway has grown its book value per share at a far more pedestrian rate of 10.4%. It’s impressive when compared with similar-sized peers; Buffett has set the bar pretty high.
However, these three TSX large caps have been more than up to the challenge and would look good in any investorâs portfolio.
Constellation Software Inc. (TSX: CSU)
Book value per share CAGR (2011-2015) = 22.2%
Donvilleâs fund has owned the software companyâs stock since 2008, citing CEO Mark Leonardâs ability to grow its business as a big reason for continuing to hold. âIf I was starting a fund today, for sure Iâd be buying this stock,â Donville said in a March 2015 article in The Globe & Mail. âThe market is getting expensive ⊠but the ones that will make it okay through the other side are those that have high enough growth ⊠and that would certainly be Constellation Software.â
Because Donville runs a hedge fund and doesnât have to disclose his holdings, I canât say definitely if he still owns it a year after those comments, but given that Constellationâs stock continues to performâup 16% in the last three monthsâand its revenues and earnings are still growing at double-digit rates, I donât see a problem with owning CSU stock despite being within 6% of its all-time high of $616.90.
CGI Group Inc. (TSX: GIB.A)(NYSE: GIB)
Book value per share CAGR (2011-2015) = 18.8%
Canadaâs largest IT services provider and the partner of choice for both the public and private sector, CGI Group has delivered book value growth almost on par with Constellation Software, making it one of Quebecâs, and Canadaâs, greatest technology stories.
With good things happening in Asia, CGI has become Caisse de dĂ©pĂŽt et placement du QuĂ©becâs largest equity holding, and, while the company hasnât delivered 20% return on equityâa must for Jason Donvilleâit has managed to keep that very important metric in double digits.
Equally important, CGIâs stock hasnât had a down year since 2008 when it lost 17.1%âconsiderably less than the TSX.
CCL Industries Inc. (TSX: CCL.B)
Book value per share CAGR (2011-2015) = 12.5%
While the specialty packaging company hasnât grown book value per share nearly as prolifically over the past five years as the other two, its shareholders have been generously rewarded for their faith in management to grow its business.
While CCLâs growth in book value per share was almost half that of Constellation Software, its five-year annualized total return was 53.7%, just 168 basis points fewer than Constellation, but almost 30 percentage points higher than CGI Group.
In the past five years, CCL has become a more profitable company, and thatâs reflected in its return on equity, which has almost doubled to 20.8% in 2015. If it keeps up this pace I wouldnât be surprised if itâs able to grow its book value per share by 20% or more over the next five years, which would put it in the same league as the other two and most certainly provide additional market-beating returns for its shareholders.
