EdgePoint's the Exception on Canadian Stocks

This fund's bets on companies here in Canada prove that it can pay to stay home when picking stocks.

Michael Dobson 2 February, 2024 | 4:59AM
Facebook Twitter LinkedIn

 

 

Michael Dobson: For the last ten years, it’s paid to go outside of Canada.

The Morningstar Canada index which tracks Canadian stocks lagged the Morningstar Global Markets index by three percentage points a year and the Morningstar US Markets Index by a more eye-popping six percentage points a year. To put those in another perspective, if you had $10,000 to invest, you would have made $16,000 more putting it in the US than in Canada in the last decade. And so, its only logical to assume that investment managers here would have been better off going outside of Canada for stock ideas, right? Well… not for EdgePoint. 

Contrary to geographic expectations, it was actually their Canadian equity fund that did better than their global equity fund. EdgePoint Canadian Portfolio Series F gained 10.5% annually from 2014 to 2023 while EdgePoint Global Portfolio Series F was just behind at 10.2% over that same time.

The team’s superior knowledge of the Canadian markets paired with their high conviction style has led to some surprising results over the past ten years.

At the heart of EdgePoint’s philosophy is understanding business risk. Leaders Tye Bousada and Geoff MacDonald and team bring a business owner mindset to investing, and in application, they tend to focus on companies that are suffering from an overreactive market. A long investment horizon and high conviction approach requires an equally high level of discipline to weather out the bad times.

New investment analysts learn this mindset by first covering a list of Canadian companies under the watchful eye of both Bousada and MacDonald. As a result, the team collectively possesses a very deep knowledge of the Canadian stock universe which has actually aided the global equity fund.

Now, EdgePoint doesn’t publicly disclose their entire portfolios but there are still a few examples where their Canadian stock selection wasn’t just good relative to Canada, but even against the rest of the world.

Their top position in the Canadian Portfolio was Fairfax Financial FFH with a weight of 8.3% in September 2023. The Global Portfolio holds a more reasonable 3.5% position in the stock. Restaurant Brands QSR is another stock with a weight of more than 5% in both funds. Not only have the two stocks outperformed the Morningstar Canada Index since the funds bought them, but they also beat the far more competitive Morningstar Global Markets Index.

While these are just two examples, they help explain just why the EdgePoint Canadian Equity fund stands out when you look at performance. And Edgepoint continues to be an outlier: for them, its helped and not hurt to stay in Canada.

For Morningstar, I’m Michael Dobson

Facebook Twitter LinkedIn

Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
EdgePoint Canadian Portfolio Series F47.43 CAD-0.65Rating

About Author

Michael Dobson  Michael Dobson is an Associate Manager Research Analyst at Morningstar Canada

© Copyright 2024 Morningstar, Inc. All rights reserved.

Terms of Use        Privacy Policy       Disclosures        Accessibility