Are you concerned about Y2K? Are you worried about Market Volatility?
Do you want to have a higher cash position,
but don't want to be completely out of the market?
There may be an answer to your concerns.
"I would like to draw your attention to our ABC Fully Managed Fund. It is a diversified Canadian balanced fund currently holding about 47% in fixed income assets and 53% in common shares. This portfolio mix provides a dual function. Not only does it act as a cushion against market volatility but it also can be an effective vehicle to partake in the equity market during this volatile yet opportunity-laden period. It may be the best of both worlds.
All of my personal investments are in the ABC Funds. Of the total, I have allotted 25% to the ABC Fully-Managed Fund. I invite you to read on as we explain how and why this diversified, top-performing, Canadian balanced fund may work for you."
INTRODUCTION
The ABC Fully-Managed Fund was launched in February 1988 as a diversified Canadian balanced fund. As our first ABC fund, we had worked to structure a conservative value-oriented Canadian balanced fund which could be opportunistic and flexible in its asset mix so as to provide premium investment returns.
The ABC Fully-Managed is 100% RSP eligible. Our long-term asset mix target is 50% fixed income and 50% Canadian/U.S. equities. In practice however, our portfolio mix is quite flexible to take advantage of periodic opportunities and market anomalies.
HISTORICAL PERFORMANCE
| Performance to September 30, 1999 |
| 6 Months |
YTD |
1 Year |
3 Year |
5 Year |
10 Year |
| +9.8% |
+13.00% |
+18.6% |
+11.7% |
+12.4% |
+14.3% |
OVERALL COMMENTARY
An interesting highlight is the fact that the ABC Fully-Managed Fund only totals $70 million. This portfolio is at an optimal size to enable economies of scale and yet is not cumbersome to manage. Its quarterly income dividend policy and year-end capital gains distribution payments attempt to offer steady cash flow. Its long-term orientation is particularly appealing, we believe, to registered (RSP & RRIF) savings plan investors. The Fund has an excellent long-term track record. Overall we believe the ABC Fully-Managed Fund is an attractive value-oriented, Canadian balanced fund investment for the patient long-term investor.
PRESENT POLICY
We have been upgrading our portfolio and raising cash since the beginning of the year. The 23% cash position is primarily in Government of Canada treasury bills and a special short-term interest rate account. The 24% bond position includes a liquid Government of Canada bond of one year maturity and five triple B high-yielding debentures such as Stelco, Canadian Occidental Petroleum, and Hudson Bay. The 53% Canadian equity portion of the portfolio holds a diversified selection of undervalued Canadian stocks. Our lone US holding is Guilford Mills Inc., a fundamentally undervalued NYSE-listed textile/upholstery manufacturer. Trading at a cycle low 14 times price earnings multiple, yielding over 4 1/2 % and at less than 50% of its book value, Guilford is extraordinarily cheap. We may add other US securities to increase foreign content when attractive opportunities arise.
Of particular current interest is our equity holding of Surrey Metro Savings Credit Union which has just announced its intention to merge with two other institutions and to go private. We intend to be proactive and will attempt to obtain the highest possible price for our stock. Surrey Metro is, in fact, a good example of our ABC value investment style. In selecting shares to invest in our portfolios we not only attempt to find companies trading at low/price earnings and discount to net asset value, etc. but also, stocks which could be the object of takeovers, mergers, or reorganizations. Actually by picking fundamentally undervalued securities this increases the likelihood of takeovers and mergers. Three recent ABC takeover stocks have included Scott’s Restaurants, First Marathon and Fishery Products International.
Irwin A. Michael, CFA
|
