Canadian General Investments’ (CGI) manager Greg Eckel is optimistic on the outlook for Canadian equities in 2019, particularly if there is resolution to the US-China trade dispute, along with clarity about the revised North American trade agreement. The manager says that while there are macro issues to consider, the Canadian equity market looks reasonably valued and he is encouraged by the outlook for corporate earnings, judging by the US Q119 results so far. Eckel is continuing to ‘stay true to CGI’s heritage’, following a bottom-up, low portfolio turnover approach, and is finding interesting new investment opportunities. The company has a very strong track record; its NAV has outperformed the S&P/TSX Composite index over the last one, three, five and 10 years. CGI’s total dividend is on track for its first growth in seven years, and offers a prospective yield of 3.1%.
Investors may not fully appreciate that there are many investment opportunities available in Canada outside of the financial and commodity sectors. In addition, Canadian equities look attractively valued compared with US stocks, which may provide an opportunity for investors seeking North American exposure.
May be considered as a ‘one-stop-shop’ for investment in Canada. Significant long-term outperformance versus the benchmark. Disciplined, bottom-up stock selection approach. Growing distribution, with a prospective 3.1% dividend yield.
Despite its long-term history of outperformance, CGI’s shares continue to trade at a wide discount. This may be due to liquidity concerns, given more than 50% of shares are owned by related parties. Its current 28.5% discount to NAV is broadly in line with the 26.6% to 30.1% range of discounts over the last one, three, five and 10 years. CGI has C$150m in preference shares and debt; net gearing at endMarch 2019 was 12.5%. The board has increased its first two quarterly dividends in 2019, and the company is currently offering a 3.1% prospective dividend yield.