Mawer New Canada Fund’s Top 4 Buys

The


Mawer New Canada Fund
(Trades, Portfolio) disclosed its first-half portfolio this week, revealing that its top four buys included a major boost in Converge Technology Solutions (TSX:CTS, Financial), new positions in Softchoice Corp. (TSX:SFTC, Financial) and Pollard Banknote Ltd. (TSX:PBL, Financial) and an increase in Sleep Country Canada Holdings Inc. (TSX:ZZZ, Financial).

Managed by Jeff Mo and Samir Taghiyev, the fund seeks long-term capital appreciation by investing in smaller-cap Canadian securities through a disciplined, research-driven, bottom-up process that emphasizes strong company management and low price valuations.

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The fund updates its portfolios semiannually. During the six months ending June, the fund’s $1.86 billion equity portfolio had a turnover ratio of 18%, ending with 48 stocks including five new holdings. The top four sectors in terms of weight are technology, consumer cyclical, industrials and real estate, representing 33.07%, 17.39%, 14.59% and 11.55% of the equity portfolio.

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Converge Technology Solutions

The fund purchased 8,539,675 shares of Converge Technology Solutions (

TSX:CTS, Financial), giving the shares 4.68% weight in the equity portfolio. Shares averaged 6.49 Canadian dollars ($5.15) during the second quarter.

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GuruFocus ranks the Toronto-based infrastructure software company’s financial strength 5 out of 10 on the back of debt ratios outperforming just over 55% of global competitors despite having a solid Piotroski F-score of 6 and a strong Altman Z-score of 3.57.

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Softchoice

The fund purchased 2,336,289 shares of Softchoice (

TSX:SFTC, Financial), giving the position 2.75% equity portfolio space. Shares averaged CA$20.77 during the second quarter.

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According to GuruFocus, the Toronto-based technology service and solutions company’s cash-to-debt and debt-to-equity ratios underperform more than 90% of global competitors, suggesting low financial strength.

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Pollard Banknote

The fund purchased 543,558 shares of Pollard Banknote (

TSX:PBL, Financial), dedicating 1.65% of its equity portfolio to the stake. Shares averaged CA$49.69 during the second quarter; the stock is significantly overvalued based on Friday’s price-to-GF Value ratio of 1.64.

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GuruFocus ranks the Winnipeg, Manitoba-based lottery-game product company’s profitability 8 out 10 on several positive investing signs, which include a three-star business predictability rank and an operating margin that has increased approximately 4.70% per year on average over the past five years and outperforms more than 77% of global competitors.

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Sleep Country Canada

The fund purchased 963,953 shares of Sleep Country Canada (

TSX:ZZZ, Financial), boosting the position by 63.01% and the equity portfolio by 1.53%. Shares averaged CA$29.87 during the second quarter; the stock is modestly overvalued based on Friday’s price-to-GF Value ratio of 1.18.

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The Brampton, Ontario-based company retails a wide range of mattresses through brands like Serta, Tempur-Pedic and iComfort. GuruFocus ranks the company’s profitability 7 out of 10 on several positive investing signs, which includes a high Piotroski F-score of 7 and an operating margin that has increased approximately 4.10% per year on average over the past five years and is outperforming more than 88% of global competitors.

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