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.
