Traditional value managers Stephen Arpin and Mark Thomson, partners at Toronto-based Beutel Goodman & Co. Ltd., are establishing new holdings or adding to key positions in sectors that have come under pressure in the market weakness -- consumer discretionary, telecommunications and financial services.
When it comes to energy, the Canadian dividend fund they co-manage has used the recent pullback in this sector to buy more of senior Canadian natural gas producer En- Cana Corp.
"We like natural gas as the North American commodity price is low relative to the rest of the world, it is also cheap on a historic base, and it is certainly cheap when compared to the price of oil," Thomson says.
Of the Canadian banks, Arpin and Thomson note that the better-positioned ones -- Toronto Dominion Bank, Bank of Nova Scotia and Royal Bank of Canada (all in the top 10 holdings in their Canadian dividend portfolio) are "extremely" well situated relative to their global peers to take advantage of the current turmoil. These three have the capital bases to continue to add loans and the financial strength to take make opportunistic acquisitions, Thomson says.
The latter is also true of leading Canadian insurers, such as Manulife Financial Corp., says Arpin. "Manulife is already a major force in major markets around the world. It can use its financial clout to buy strategic assets from distressed rivals."
Telecom services stocks have come under considerable pressure around the world, says Arpin. In Canada, they have also suffered from investor concern about the entry of new players into the Canadian wireless market and its impact on profit margins and growth of existing players.
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Friday, October 3, 2008
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