Sionna Canadian Equity offers a smoother ride

A sector-neutral approach to value investing ensures the fund's holdings are never wildly out of favour.

Shehryar Khan, CFA 28 August, 2018 | 5:00PM

Sionna Canadian Equity's solid, consistent and repeatable investment process and deep, experienced team are its keys to success, making it a strong choice for investors who are looking for a core domestic holding and can look past its price tag. The team's sector-neutral approach to value investing ensures they are never wildly out of favour, resulting in a smoother ride for their investors who are in turn less likely to sell the fund at inopportune times.

While the firm's founder, president and co-chief investment officer Kim Shannon has been the face of the firm, Marianne Hoffman became co-lead on the Canadian equity fund in 2014 and has been sole lead since 2016, a credit to the development of the team under Shannon. Teresa Lee serves as the firm's co-CIO and leads its small cap strategies. On the large cap strategy, Hoffman is supported by a deep team of portfolio managers and analysts, who place a strong emphasis on their culture and steeping newer analysts in their approach to investing. It has paid off with strong retention. The team has had success hiring younger analysts, even ones fresh out of school or with only a few years of experience to be groomed in the Sionna discipline. With the exception of Shannon, all investment team members conduct research. Analysts start off as generalist before settling on specific sector coverage.

The firm targets underpriced companies with the expectation that stock prices will return to their intrinsic fair value over the long term. Stocks that screen well are examined under a fundamental lens to allow the managers to develop a more robust understanding of a company's prospects and risks. The team leverages a singular research questionnaire and seeks to answer the same questions about each company, providing consistency and comparability. The questions range from ones on company management's background and capital allocation history to questions geared to understanding the business' cyclicality. The whole team then debates potential buys in a group setting and strives for consensus before making a decision. Success is not always immediate: A name that the fund holds but that has not performed well in terms of share price is  CI Financial (CIX). Hoffman and the team believe that the firm's asset management business is attractive, and its track record of disciplined acquisitions and owner-operator mentality have paid off in the past. At its current valuation levels, despite the weak share price performance, the team feels CI's stable cash flows, healthy dividend yield and attractive valuation make it a worthwhile long-term investment.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Alimentation Couche-Tard Inc Class B46.78 CAD1.54
CI Financial Corp17.19 CAD-2.27

About Author

Shehryar Khan, CFA

Shehryar Khan, CFA  Shehryar Khan, CFA, is a senior investment analyst for Morningstar’s Investment Management group.

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