Q1 2020 Update • Firm Update • Mandate Reviews • Small Cap Canadian Equities • Canadian Equity Income • Economic Outlook Architect Program 1995 2020 25 Years
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Q1 2020 Update• Firm Update
• Mandate Reviews• Small Cap Canadian Equities
• Canadian Equity Income
• Economic Outlook
Architect Program
1995 2020
25
Years
barrantagh {manx gaelic} trustworthy adj., dependable adj.
2019: Firm Update
3
FIRM PROFILE
• 100% employee-owned investment managers since 1995• 17 employees, firm ownership expanded to 6 employee-shareholders• AUM: $1 Bn (private wealth, institutional, sub-advisory)• Fundamental value style, capital preservation • Balanced Mandates – active asset mix mgmt.• Fixed Income – Credit barbell + active duration mgmt.• Equity Strategies – Focus Portfolios (20 – 40 stocks in a strategy):
• Small Cap – quality/yield focus• Mid Cap – S&P TSX Completion Index• All Cap Cdn Equities • Income – yield focus• Global Equities – Global leaders + Special situations
FIRM UPDATE
Barrantagh celebrating 25 years in business!
COVID 19:• Operating remotely with full trading, portfolio accounting,
investment team and client service capability• Rotating limited office schedule & Video conferencing
Diversification Strategies:• Small Cap – new prospectus fund launched in Q2/19
• ‘F’ Class – 1.0% MER, 12-year composite track-record• Mid Cap – reached 2-year track record end of Q2
ESG Integration Update:• Completed UN PRI signatory process (2019) & formalized BIM
Responsible Investing Policy• Introducing Sustainable Investing report in 2020
Sub-Advisory News:• Awarded new SMA mandate at key bank brokerage firm
broadening our offerings to 4 leading IIROC firms
Website Upgrade 2020:• Beta-testing new website• Improved navigation, functionality & content
INVESTING IN QUALITY
Small Cap Canadian Equities
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Aecon Group Example
Difference
ARE
Construction (equal weight TSX and S&P500 'Construction & Engineering' sub-index)
In 2008 Aecon traded at 8.8X EV/EBITDA multiple – current valuation is 4.1X
In 2008 large cap construction companies traded at 13.7X EV/EBITDA multiple – current valuation is 8.3X
Currently Aecon trades at ~6X EV/EBITDA multiple discount to large cap peers – cheapest vs. large caps in 12 years
Small Cap Canadian Equity MandateBroad Small Cap Multi-Year Valuation Opportunities
• Given the COVID-19 impact on markets this quarter we wanted to share a few valuation examples• During the “flight to safety” small cap stocks were oversold vs large cap• Across most sectors small cap stocks are trading at steep discounts to their large cap comps
Small Cap Canadian Equity MandateBroad Small Cap Multi-Year Valuation Opportunities
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fere
nce
(P
KI -
ATD
/B)
P /
CF
(Fo
rwar
d C
on
sen
sus)
Diff PKI ATD/B
ENERGY – Parkland Fuel vs. Couche-Tard
PKI is currently trading at ~5.5x CF (vs.~9.0x avg since 2008)and now a ~2.5x discount to large-cap ATD/B. It has only been cheaper ~10% of the time over the last ~12 years.
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Difference NWC Grocers (L, MRU, EMP/A)
STAPLES - North West Company
NWC is currently trading at ~12x P/E (vs.~15x avg since 2008) and now a ~3.0x discount to large-cap
Grocers (normally trades at premium).
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ard
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s)
Difference
ITP
Packaging (equal weight TSX and S&P500 'Containers & Packaging' sub-index
MATERIALS – Intertape Polymer
ITP is currently trading at ~5.0x EV/EBITDA (vs.~8.0x avg)and now a ~3.0x discount to large-cap weighted Packaging stocks. ITP has only been cheaper on relative basis ~1% of
the time over the period.
Small Cap Canadian Equity MandateBroad Small Cap Multi-Year Valuation Opportunities
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fere
nce
(B
AD
-TS
X-I
)
EV /
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ITD
A (
Forw
ard
Co
nse
nsu
s)
Difference BAD TSX-Industrials
INDUSTRIALS – Badger Daylighting
BAD is currently trading at ~6.5x EV/EBITDA (vs.~7.5x avg since 2008) and now a ~5.0x discount to large-cap
weighted TSX-Industrials index. This is as cheap as BAD has been versus large-caps over the ~12 year period.
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fere
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RE
-C
on
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ctio
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EV /
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ITD
A (
Forw
ard
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nse
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s)
Difference
ARE
Construction (equal weight TSX and S&P500 'Construction & Engineering' sub-index)
INDUSTRIALS – Aecon Group
ARE is currently trading at ~3.0x EV/EBITDA (vs.~6.0x avg since 2008) and now a ~6.0x discount to large-cap
Construction stocks. This is as cheap as ARE has been versus large-caps over the ~12 year period.
Small Cap Canadian Equity MandateBroad Small Cap Multi-Year Valuation Opportunities
Small Cap Median Manager Outperforms on ReboundsBeats the Large Cap TSX Composite on Market Recoveries
9
“Tech Wreck”
Recession Recovery
Credit Crisis European Debt Crisis
10
Small Cap Canadian Equity MandatePerformance at March 31, 2020
For Periods Ending
Mar. 31, 2020
YTD 1 Yr 2 Yrs 3 Yrs 4 Yrs 5 Yrs 6 Yrs 7 Yrs 8 Yrs 9 Yrs 10 Yrs
BIM Canadian Small Cap Equity -25.3% -19.3% -8.6% -5.3% 0.2% -0.8% 0.6% 4.9% 6.5% 7.6% 9.9%S&P/TSX Small Cap Index -38.1% -35.2% -20.3% -16.0% -6.4% -6.3% -6.9% -4.0% -4.4% -5.6% -2.2%
2019 2018 2017 2016 2015 2014 2013 2012 2011 2010 2009 2008
BIM Canadian Small Cap
Equity 19.0% -8.9% 5.9% 19.8% -5.3% 17.3% 30.9% 18.5% 15.6% 35.0% 43.8% -22.9%
S&P/TSX Small Cap Index 15.8% -18.2% 2.7% 38.5% -13.4% -2.4% 7.6% -2.2% -16.4% 35.1% 62.3% -45.5%
Calendar Years => Barrantagh Small Cap outperformed
BarrantaghSmall Cap
Cdn. Equites1
Percentile Rank2
Annualized Return
9.6 1 1st Percentile
Standard Deviation
13.1 1 Lower Volatility than Large Cap Median
Sharpe Ratio 0.65 1 Highest risk-adjusted return
Beta 0.52 1 Very Low risk vs. market
Treynor Ratio 26.3 1 Highest risk-adjusted return
Small Cap Canadian EquitiesRisk Statistics vs. Small Cap Canadian Equity (for Periods Ending March 31, 2020)
110
58
0
20
40
60
80
100
120
Upside Market Capture Downside Market Capture(%
)
Barrantagh Small Cap Canadian Equity
1 Since Inception Jan. 1, 20082 vs. Evestment Small Cap Universe
11
Profile: Small Cap Canadian EquitiesPortfolio at March 31, 2020
12
0% 5% 10% 15% 20% 25% 30% 35%
Industrials
Staples
Real Estate
Utilities
Energy
Health Care
Materials
Financials
Discretionary
Technology
Comm. Services
Barrantagh Small Cap Industry Weight vs. Index
S&P/TSX Small Cap Index Barrantagh Small Cap
CHARACTERISTICS
Number of Holdings 23
Avg. Market Cap $1.5 Bn
# Industry Sectors 9
Dividend Yield 3.3%
P/CF 9.6X
0
2
4
6
8
10
12
14
Historic P/CF
Barrantagh Small Cap
0%
5%
10%
15%
20%
25%
30%
35%
40%
0 - 500Mn 500Mn - 1Bn 1Bn - 2Bn > 2Bn
Market Cap Exposure
Barrantagh Small Cap
Canadian Small Cap Equity PortfolioPortfolio at March 31, 2020 | Q1 Transactions
13
Portfolio Weight
Portfolio Weight
Consumer Discretionary Industrials
Diversified Royal 2.7% Aecon Group 3.6% Sold
2.7% Badger Daylighting 3.0% CES Energy Solutions
Consumer Staples Boyd Group 5.2% TORC Oil & Gas
Primo Water 3.9% Cargojet 7.9%
Jamieson Wellness 4.7% Calian Group (NEW) 2.9%
North West Co. 4.0% Wajax 1.6%
Premium Brands 3.8% Morneau Shepell 5.0%
16.4% 29.2%
Energy Real Estate
Gibson Energy 3.5% Minto Apartment REIT 5.2%
Parkland Fuel 3.0% Storagevault Canada 4.7%
Tidewater Midstream 1.7% 9.9%
8.2% Utilities
Financials Boralex 5.7%
Trisura Group 2.9% Superior Plus 3.8%
2.9% 9.5%
Health Care Materials
Andlauer Healthcare 5.2% Altius Minerals 2.3%
5.2% Intertape Polymer 2.8%
5.1%
Cash & Equivalent 10.9%
Total 100.0%
Canadian Equity Income
14
Canadian Equity MarketDividend Income Matters!
1.7%
2.7% 3.0% 3.1%2.6%
1.9%
4.9% 4.5%
3.1%3.6%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
2000 - 2004 2005 - 2009 2010 - 2014 2015 - 2019 2000 - 2019
S&P TSX Composite: Dividend Income a Substantial Part of Total Return
Dividends Capital Appreciation
15
Canadian Equity Income MandatePerformance at March 31, 2020
• Canadian Equity Income annualized returns for periods longer than six years are an ex-cash carve out of our long-term balancedincome composite.
For Periods Ending
Mar. 31, 2020
YTD 1 Yr 2 Yrs 3 Yrs 4 Yrs 5 Yrs 6 Yrs 7 Yrs 8 Yrs 9 Yrs 10 Yrs
BIM Canadian Equity Income* -24.0% -16.0% -5.1% -4.1% 0.6% -0.9% 0.5% 3.3% 4.9% 5.5% 6.4%S&P/TSX High Dividend Index -27.5% -20.2% -6.7% -5.1% 0.9% -0.9% -0.7% 1.6% 2.4% 2.1% 3.5%
S&P/TSX Composite -20.9% -14.2% -3.7% -1.9% 2.8% 0.9% 1.9% 3.8% 4.1% 2.4% 4.1%
2019 2018 2017 2016 2015 2014 2013 2012 2011 2010 2009
BIM Canadian Equity Income* 24.4% -9.6% 5.0% 16.4% -7.8% 15.1% 20.7% 11.5% 12.7% 16.3% 33.3%S&P/TSX High Dividend Index 25.8% -10.8% 7.6% 28.4% -14.6% 5.2% 16.1% 7.6% 1.5% 13.7% 31.1%
S&P/TSX Composite 22.9% -8.9% 9.1% 21.1% -8.3% 10.6% 13.0% 7.2% -8.7% 17.6% 35.1%
17
BarrantaghCdn. Equites
Income1
Percentile Rank2
Annualized Return
8.2 8 1st Quartile
Standard Deviation
12.5 13 Low Volatility
Sharpe Ratio 0.37 9 High risk-adjusted return
Beta 0.82 18 Lower risk than the market
Treynor Ratio 5.6 9 High risk-adjusted return
Canadian Equities IncomeRisk Statistics vs. Canadian Equity (for Periods Ending March 31, 2020)
1 Since Jan./20082 Versus Evestment Pure Canadian Equity Universe
95.2
73.1
0
10
20
30
40
50
60
70
80
90
100
Upside Market Capture Downside Market Capture
(%)
Barrantagh Canadian Equity IncomeSince Jan/2008
18
-2
-1
0
1
2
3
4
5
6
-2
-1
0
1
2
3
4
5
6
Q1/2008 Q1/2009 Q1/2010 Q1/2011 Q1/2012 Q1/2013 Q1/2014 Q1/2015 Q1/2016 Q1/2017 Q1/2018 Q1/2019 Q1/20
%
Canadian Equity Yield vs. 10 Year Bonds
TSX Yield-10 Yr Bond Yield Barrantagh Cdn. Equity Income Dividend Yield
S&P TSX Composite Dividend Yield 10 Year Canada Bond Yield
Canadian Equity MarketEquities Yields are Attractive vs. Bonds
Canadian stock market out-yielding Canada 10 yr bond by over 3% - multi-year high
Profile: Canadian Equities IncomePortfolio at March 31, 2020
19
0% 5% 10% 15% 20% 25% 30% 35% 40%
Financials
Industrials
Comm. Services
Energy
Utilities
Staples
Real Estate
Technology
Health Care
Materials
Discretionary
Barrantagh Equity Income Industry Weight vs. Index
S&P/TSX Equity Income Index Barrantagh Equity Income
CHARACTERISTICS
Number of Holdings 21
Avg. Market Cap $33.3 Bn
# Industry Sectors 8
Dividend Yield 4.3%
P/CF 5.6X 0
1
2
3
4
5
6
%
Quarterly Dividend Yield History
Barrantagh Cdn. Equity Income Dividend Yield
S&P TSX Composite Dividend Yield
10 Year Canada Bond Yield
Barrantagh Cdn. Equity Income
S&P/TSX Equity IncomeTSX Composite
3
3.5
4
4.5
5
5.5
6
6.5
7
7.5
8
10 10.5 11 11.5 12 12.5 13
An
nu
aliz
ed R
etu
rn
Standard Deviation
10 Year Risk – Return Ending Mar. 31, 2020Vs. Evestment Pure Cdn. Equity Universe
Canadian Equity Income PortfolioPortfolio at March 31, 2020 | Q1 Transactions
20
Portfolio Weight
Portfolio Weight
Consumer Staples Industrials
Premium Brands 3.4% Boyd Group 2.9% SOLD
Primo Water 2.9% Stantec 3.5% Enbridge
6.3% Toromont Industries 3.8% Pembina Pipeline
Energy WSP Global 4.8% Keyera Corp.
Gibson Energy 2.7% 15.0% Suncor
Parkland Fuel 2.7% Financials Brookfield Business Partners
TC Energy 5.4% Bank of Nova Scotia 5.9% Chartwell Retirement Res.
10.8% Industrial Alliance 2.9%
Intact Financial 2.9%
Communication Services Royal Bank of Canada 7.5%
Telus 6.8% Sun Life Financial 3.1%
Rogers Communications 6.8% TD Bank 7.7%
13.6% 30.0%
Information TechnologyOpentext 3.4% Real Estate
3.4% Granite REIT (NEW) 3.8%
3.8%
Utilities
Brookfield Infrastructure 3.2%
Superior Plus 3.3%
6.5%
Cash & Equivalents 10.6%
Total 100.0%
Economic Outlook
Outlook
World:
• Response has been quick
• Rate cuts, fiscal stimulus, monetary support, credit supports, regulatory burden relief
• Fiscal policy response expected to add 1.3% to global GDP
• U.S. Example – fiscal policy between $850bn to $1.2tn• The U.S. response is about 5% of current GDP
• In 2008 the response was $830bn or 6% of GDP
Canada:
• Just announced $82bn response package or 3% of GDP
22
23
Cdn Federal Gov’t Stimulus
Source: WSJ, Scotiabank, GOC
24
China Manufacturing PMI – “V” Shaped Recovery
Source: WSJ
25
Potential GDP Trajectory vs GFC
Source: WSJ, BlackRock, Haver
Working with You
• Why Small Cap Canadian Equities1. Adds low-risk alpha & yield to client portfolios
2. Diversification - reduce overall client portfolio risk (low correlation)
3. Exploit the opportunity in small cap stocks (limited sell-side coverage)
• Barrantagh Small Cap Canadian Equity Fund (F Class)• Fund Code: BMI105, 1.0% MER
• Min. investment $1,000 initial, $200 subsequent
• SMA Min. Investment Small Cap: $50,000, Large Cap Income: $75,000
26
Contact (Vancouver):Robin Ferguson, Vice [email protected](778) 990-3445
Contact (Toronto):Alan Daxner, Senior Vice [email protected](416) 864-7958
100 Yonge Street, Suite 1700Toronto, Ontario M5C 2W1
(416) 868-6295
www.barrantagh.com
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