The Fund has been capped and is now closed to all purchases. Its sister fund, the Pender Value Fund, shares many of the same characteristics and is open to new purchases.
The award-winning Pender Small Cap Opportunities Fund is an opportunistic, concentrated portfolio. The Fund is focussed on undervalued small and microcap companies predominantly in Canada. The Manager is focused on businesses with strong underlying economics and often seeks out special situations, and has a track record of identifying catalysts, where market-leading companies have been acquired. After deep fundamental analysis these businesses are purchased at a discount to our estimate of intrinsic value.
Pender Small Cap Opportunities Fund PerformancePlease rotate your device to better view the content
January 31, 2016
1 Mo. 3 Mo. 6 Mo. 1 Yr. 3 Yr. 5 Yr. YTD Since Inception1 2010 2011 2012 2013 2014 2015 Class A -4.5 -1.7 -7.6 -1.6 17.9 17.9 -4.5 18.2 22.9 4.7 31.3 33.0 23.8 6.6 Class F -4.4 -1.4 -7.1 -0.1 19.3 19.3 -4.4 19.3 22.8 6.7 32.2 34.3 24.8 8.2 1Since inception date for Pender Small Cap Opportunities Fund is 1 June 2009
Growth of $10,000 since Inception (June 1, 2009)
Date Class A Inception 10000 Dec'09 10793 Jun'10 11416 Dec'10 13259 Jun'11 14104 Dec'11 13876 Jun'12 16344 Dec'12 18218 Jun'13 19757 Dec'13 24226 Jun'14 26136 Dec'14 29138 Jun'15 34250 Dec'15 31969 Jan'16 30539
Pender Small Cap Opportunities Fund Holdings
Sector Allocation (%) Information Technology 46.5 Healthcare 13.7 Utilities 6.2 Consumer Discretionary 5.7 Energy 4.6 Diversified Financials 4.5 Telecommunications 3.0 Industrials 2.8 Cash 13.0 Sector Allocation (%) Information Technology 46.5 Healthcare 13.7 Utilities 6.2 Consumer Discretionary 5.7 Energy 4.6 Diversified Financials 4.5 Telecommunications 3.0 Industrials 2.8 Cash 13.0 Geographic Allocation (%) Canada 87.1 United States 12.9 Geographic Allocation (%) Canada 87.1 United States 12.9 Top 10 Holdings Fund (%) TIO Networks Corp. 5.7 Medicure Inc. 5.3 Sandvine Corporation 4.7 Absolute Software Corporation 4.2 Ebix Inc. 4.0 QHR Corporation 3.9 Polaris Infrastructure Inc. 3.5 Espial Group, Inc. 3.5 RDM Corporation 3.2 goeasy Ltd. 3.0 Total Percentage of Top 10 Holdings 41.0% Total Net Assets of Fund $112,316,572
Reasons to invest in the Pender Small Cap Opportunities Fund
Experienced Portfolio Manager
David Barr, CFA is the Chief Investment Officer at Pender and the Portfolio Manager for the Pender Small Cap Opportunities Fund. He is a value investing specialist with over ten years of expertise, as well as experience investing in the venture and small cap technology sectors.
He manages the fund with the goal of capital preservation, growth and low volatility relative to comparable funds.
Finding Value – Employing a Margin of Safety
The manager employs a value-based approach, using rigorous bottom-up analysis, to determine the intrinsic value of potential investment opportunities. He then aims to buy at a substantial discount to intrinsic value.
This difference is the margin of safety. Should markets drop, the aim is that the carefully selected stocks in the fund have less far to fall, and capital is better protected.
One way that the Manager looks for potential capital appreciation is by researching investment opportunities in out-of-favour segments of the market. Here, competition has less impact on price and he can uncover market-leading companies, trading at a discount to intrinsic value but with the potential for both strong growth and a price correction when the market recognizes the stock’s merits.
Cash as a Strategic Asset Class
The Manager is a firm believer in utilizing cash as a strategic asset class. With the ongoing market volatility, market dips provide opportunities to buy low. With cash on hand, the Fund can react quickly and add to existing holdings or buy new positions that reach the Manager’s discounted price target. Taking advantage of these market inefficiencies can potentially result in good returns in a short period of time.
Making investments at below a company’s intrinsic value is only half the story. The second part is ensuring the value is not trapped, and growth can be realized as return. With a background in venture capital, the Manager looks for companies that have a potential monetizing catalyst, such as a merger or a takeover. The Fund has a concentrated portfolio of 20-30 holdings of which an average of just under six per year have been acquired.
The Manager takes advantage of market inefficiencies – temporary or otherwise. Many small cap companies lack analyst coverage and are not widely followed or understood by the market. They are overlooked by bigger investment firms, which have prescribed investment cut-off levels.
The Fund invests in a concentrated portfolio of 20-30 well-managed businesses. We believe that it is better to invest in your top ideas than in your 100th best idea.
Why Small Cap Companies?
We believe that:
- Small cap companies, with strong competitive positions are able to build intrinsic value faster, and may even outpace the economy.
- Due to their size, smaller companies have shown an ability to respond quickly to change.
- Once the market recognizes the intrinsic value of a business, there is an upward correction in the market value.
Pender Small Cap Opportunities Fund Investment Strategy
The Pender Small Cap Opportunities Fund aims to maximize returns on a risk-adjusted basis. It uses a strategy of investing in a concentrated portfolio of well-managed businesses, with strong competitive positions, which are overlooked by the market and have the potential for significant capital appreciation.
The Fund takes a value-investing approach to building a concentrated portfolio of well-managed, small-cap businesses, with strong competitive positions, which are overlooked by the market and have the potential for significant capital appreciation.
The Fund seeks to take advantage of the inefficiencies of the small cap sector of the market. After rigorous fundamental analysis, it carefully selects from a pool of promising companies that go unnoticed. This impacts their valuation so that when their growth potential is recognized by the market, their value undergoes a long overdue upward correction.
David BarrChief Investment Officer
- David Barr
Mr. Barr is the Chief Investment Officer for PenderFund Capital Management, setting the direction for Pender’s overall value-based investment strategy. He is also the Portfolio Manager of several of Pender’s funds.
In November 2015, the Pender Small Cap Opportunities Fund, managed by Mr. Barr, won a Lipper Fund Award 2015 for Best Canadian Small/Mid Cap Equity Fund over both three and five year performance periods.
Mr. Barr has over 15 years of investment experience. He initially worked in private equity which gives him a unique background to investing capital. At the end of 2007 he became a partner at PenderFund Capital Management Ltd and was appointed Chief Investment Officer with the objective of launching Pender’s mutual fund business. He is Portfolio Manager of the Pender Small Cap Opportunities Fund, launched in June 2009 (now closed), the Pender Value Fund, launched in July 2013 and the Pender Select Ideas Fund, launched in September 2014.
Mr. Barr holds a Bachelor of Science degree from the University of British Columbia and an MBA from the Schulich School of Business. He earned his Chartered Financial Analyst (CFA) designation in 2003 and is an active member of the Vancouver chapter. He is a past President of CFA Vancouver, having also served on its Board of Directors for four years.
Mr. Barr is a regular guest on BNN’s Business Day program and has been interviewed for his opinions on small cap and value investing by the Financial Post, The Globe & Mail and other media. In December 2012 Mr. Barr was recognised as one of British Columbia’s “Top Forty Under 40” business leaders by Business in Vancouver. The Pender Small Cap Opportunities Fund has received Fundata’s FundGrade® A+ Award in 2012, 2013 ad 2014.
Mr. Barr is an advocate of value investing, a strategy to estimate the intrinsic value of a company before looking to invest in that company with a “margin of safety” or a discount to intrinsic value. Mr. Barr believes that investing in a company well below intrinsic value decreases the risk and sets it up for generating long term performance and this approach forms the basis of Pender’s overall investment strategy, which aims to preserve and grow clients’ capital.
In order to execute on his value investing strategy Mr. Barr is a true contrarian. To meet his stringent value investing criteria, he looks for value in unpopular places with a view to reducing risk and finding prices that include a margin-of-safety. He refuses to follow the crowds and is driven to find quality at a discount.
- David Barr