Dina DeGeer has been adding to the foreign content in the $596-million Mackenzie Universal Canadian Growth by buying U.S. stocks. The non-Canadian portion of the portfolio, all of which is in the U.S., has risen to a current 19%, up from a low point of 12% in August.
"You don't have to worry about the currency so much," says DeGeer, "and there's a plethora of companies in the United States. Many U.S. companies are global, so you don't need to add extra risk by going elsewhere."
DeGeer, a portfolio manager at Bluewater Investment Management Inc., has co-managed the Canadian Growth mandate, along with Dennis Starritt, since August 1995. Their responsibilities also include managing the equity portion of Mackenzie Universal Canadian Balanced, which shares the same equity holdings.
Preservation of capital is a top priority for the managers at Toronto-based Bluewater, a sub-advisor to Mackenzie Financial Corp. They favour companies that have long-term records of steady revenue growth, strong competitive positions and barriers to entry.
After identifying these businesses, the managers spend a lot of time getting to know the management. Studying the competition and suppliers of companies is all part of their hands-on research process. Free cash flow -- the "key metric" -- is assessed through a discounted-cash-flow model, looking at projections going five years out.
Once DeGeer and her colleagues complete all of the quantitative and qualitative research, spending about half their time on each process, paying the right price for the stock is an important consideration.
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The research team of four portfolio managers, who also act as analysts, usually choose 20 to 25 Canadian names for the portfolio, along with approximately 10 foreign companies. "We're willing to do 5% positions where we have a depth of conviction," says DeGeer, "and ideally, we'll own a company for three to five years. We diversify among businesses and industries."
CAE, Inc. CAE, a Montreal-based global leader in flight simulators for civil aviation and military defence, fits Bluewater's criteria. "It has tremendous barriers to entry with unique capability," says DeGeer.
As well, CAE is truly global, and demand in emerging markets is considered huge. "China and India are developing airports and flight patterns like you wouldn't believe," DeGeer says. The company is also broadening its service of simulation technology into the medical field. "So just a great company, with a broad base, great management, unique skills, steady growth, all the things we love."
Cenovus Energy, Inc. CVE, an oil producer and refiner based in Calgary, is another Bluewater pick. The production of oil is done through a unique technology that uses a steaming process that leaves a "small, above-ground footprint," DeGeer says. Another engineering feature is the use of modular facilities at the sites, rather than thousands of people, which creates efficiency and reduces capital costs.
"Their resource is huge, they have 40 years worth of oil at the production they envision," says DeGeer, "and they don't depend on exploration success for continuing the business." As well, "they have sufficient cash flow to continue their growth and consider increasing the dividend over time."
Along with her extensive experience in Canadian and U.S. equities, DeGeer holds a 1984 bachelor of commerce degree from McMaster University, and a 1985 MBA from Windsor University.
Upon graduation from Windsor, she began her investment career at Confederation Life Insurance Co. By 1987, the year she received the CFA designation, she was responsible for managing a $300-million U.S. equity fund.
In October 1989, DeGeer joined Trimark Investment Management Inc. as a vice-president and portfolio manager, responsible for investing in U.S. companies. In 1992, she assumed responsibility for co-managing Trimark's Canadian equity mandates with more than $4 billion in total assets. She left Trimark in the summer of 1995 to join the newly created Bluewater.
During the Bluewater managers' tenure, Mackenzie Universal Canadian Growth has an annualized 15-year return of 5.6%, compared with the median 5.3% in the Canadian Focused Equity category.
As for the future, DeGeer expects the fund to continue to be resilient in bearish markets. "We tend to capture 70% or so of up markets," she says, "but when markets are down, we experience only about 20 or 25% of that downdraft."
DeGeer finds that now is an especially challenging time to be a fund manager. "We're in one of the most difficult periods of the 15-plus years we've been doing this. We like to make sure that we're growing for our clients but we're not trying for shoot-the-lights-out kind of growth."
