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September 29, 2017 at 11:53 AM
The managers of Canada’s best-performing large equity fund know their sandwiches.
That’s because they obsessively researched Premium Brands Holdings Corp., a British Columbia-based company that makes processed meats and packaged sandwiches, before buying it for the Manulife Dividend Income Fund.
The stock has helped drive returns at the fund, which manages the equivalent of $2.7 billion in U.S. dollars, up 8.8% this year versus 4.3% for the S&P/TSX Composite Index. Over five years, the fund’s 93% return is almost double the index.
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“We learned a lot about the sandwich business from that investment,” said Chris Hensen, senior portfolio manager for equities at Manulife Asset Management in Toronto, which is part of the same company that owns Boston-based John Hancock. In order to know their companies inside out, the four-person team focuses on revenue drivers, margins, capital allocation and cash flow. They’ve met with as many as six different management teams on a single day in order to unearth opportunities in unsung corners of the market.
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The fund, which is invested 65% in Canadian equities, 15% in U.S. stocks and 20% in cash, was the top performing of 48 funds with assets of more than the equivalent of $800 million in U.S. dollars this year, according to data compiled by Bloomberg.
The fund’s research on Premium Brands set it up to pounce when another sandwich company with the odd name of AdvancePierre Foods Holdings Inc. filed to go public in mid-2016.
“We had brokers who were like, ‘How in the hell are you guys on this thing?’” Hensen said. “Well, if you did your work on Premium Brands you’d understand the sandwich business too.”
