3 Stock Ideas From One of Canada’s Top Mutual Funds

Penderfund is still relatively unknown, but has performed very well.

| More on:
The Motley Fool

Very few people have heard of Penderfund Capital Management. It is still relatively small, and headquartered out in Vancouver. But its funds have performed very well, which should gain the company more notoriety over time.

For example, the Pender Canadian Equity Fund only has $4 million in assets under management, but since its inception in November 2010, the fund’s total return has beaten the benchmark by about 10 percentage points.

Below are the top three holdings of this fund.

1. The Bank of Nova Scotia

Of all the Canadian banks, I think The Bank of Nova Scotia (TSX: BNS)(NYSE: BNS) offers the most promise as an investment. This is mainly due to the bank’s exposure to emerging markets, particularly Latin America. Not only are these countries growing quickly, but they are also under-banked, meaning that Scotiabank has a very long runway for growth.

Secondly, Bank of Nova Scotia’s exposure to emerging markets has left investors jittery recently, enough so that its stock has performed worse than all the other bank stocks in Canada over the last year. This may have provided bargain hunters with an opportunity.

2. Canadian Natural Resources

Arguably no energy company in Canada has a better track record than Canadian Natural Resources (TSX: CNQ)(NYSE: CNQ), led by Murray Edwards. Under his leadership, CNRL has consistently spent its money very wisely, building up the largest reserve base in all of Canadian energy.

The past year has been especially kind to CNRL, with plenty of other energy companies trying to sell producing assets. CNRL has taken full advantage, acting as one of the only buyers in a buyer’s market.

3. Finning International

The last year has also been relatively kind to Finning International (TSX: FTT), whose shares are up about 50% since early September. The world’s largest Caterpillar dealer makes excellent returns throughout the cycle – pre-tax return on invested capital averaged 18% from 2006 to 2012. This time period of course included the economic crisis of 2008-2009.

Foolish bottom line

Penderfund prides itself on having a disciplined value investing process, and to the company’s credit, its holdings tend to be excellent businesses. Unfortunately for investors, the Canadian Equity fund comes with a 2.45% expense ratio, not uncommon for Canadian mutual funds. But by looking at its holdings, you can get some great ideas for individual stocks to buy.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Benjamin Sinclair holds no positions in any of the stocks mentioned in this article.

More on Investing

A bull outlined against a field
Investing

After Earnings, I’m Bullish on These 2 TSX Stocks

Given their solid performances and healthy growth prospects, I am bullish on these two TSX stocks.

Read more »

Woman has an idea
Bank Stocks

3 No Brainer Bank Stocks to Buy Now for Less Than $1,000

Canadian bank stocks like Toronto-Dominion Bank (TSX:TD) appear quite cheap today.

Read more »

Dividend Stocks

Where Will Canadian Utilities Stock Be in 5 Years?

Canadian Utilities (TSX:CSU) is a classic example of a stock where the dividend is all you get. Can the company…

Read more »

Man holding magnifying glass over a document
Dividend Stocks

2 Stocks I’m Watching for Big Passive Income

Consider Bank of Nova Scotia (TSX:BNS) and another top passive-income play to power your dividend portfolio!

Read more »

Target. Stand out from the crowd
Dividend Stocks

2 Dividend Stocks to Double Up on Right Now

These top TSX stocks have increased their dividends annually for decades.

Read more »

question marks written reminders tickets
Dividend Stocks

Better Buy: Loblaw Companies or Metro Stock?

Loblaw Companies (TSX:L) stock is riding on recent momentum. Meanwhile, Metro (TSX:MRU) is executing for future earnings growth.

Read more »

bulb idea thinking
Dividend Stocks

2 Supercharged Dividend Stocks to Buy if There’s a Stock Market Sell-Off

These two top stocks offer attractive yields, have reliable operations and are dividend aristocrats, making them two of the best…

Read more »

Dividend Stocks

Got $1,000? Buy These Hot Growth Stocks Before They Take Off

These growth stocks just reported earnings that should have investors eager for more over the next year and beyond. They're…

Read more »