Back iStock 675645602 VV

Playing the plan: Mawer’s Canadian equity portfolio | Vijay Viswanathan | EP13

August 8, 2018 Print

Director of Research and Canadian equity co-manager, Vijay Viswanathan, discusses potential trade war impacts to the portfolio, the opportunity set in Canada, and dives deeper into holdings in the energy, e-commerce and insurance industries.

Highlights include:

  • NAFTA may not impact Canadian companies in the ways you might think
  • Why the commodity business is tough
  • Life Insurance companies (and banks for that matter) are misnamed—think financial conglomerates


A transcript of this episode is available below, modified for a more enjoyable reading experience. For more posts exploring the ideas we talk about in the episode, check out our Related Reads links.


4:12 – NAFTA: how does it impact the Mawer Canadian Equity portfolio

  • Vijay’s response: Not doing much!
  • When you don’t know how things are going to play out, you don’t make any large shifts in the portfolio
  • Headlines don’t factor in all the nuances and second/third order potential impacts

7:06 – Talking to management teams about trade tariffs

  • Mawer’s taking a wait and see approach
  • Things like this don’t happen in a vacuum, companies have options at their disposal to deal with issues like this

9:01 – Energy: Oil and Gas

  • Fairly substantial energy weight in the portfolio (~12%) but still underweight on a relative basis
  • Vijay emphasizes Mawer’s benchmark agnostic perspective—can’t beat the benchmark if you look like the benchmark
  • Vijay discusses Suncor and Canadian Natural Resources – long time holdings in the CEF portfolio (approximately 10 years)

11:00 – Why the commodity business is tough

  • You’re a price taker—no say on the price you can sell your good at
  • Need to put a lot of capital in up front and you don’t see the cash flows for a long time, sometimes a decade or more
  • You’re making assumptions on what kind of returns you’re going to get on future projects and won’t even see the cash flows for another 10 years…and you don’t even know what the price for your product will be in 10 years!
  • So why invest in Suncor or CNR? Two reasons
    1. For the last decade, these two companies have significantly reduced their cost structure (i.e., instead of getting caught up in the price of oil, rather, how can we increase margins by reducing our costs)
    2. Both companies spent a lot of money (capital expenditure) and that cash outflow is behind them–generates a significant amount of free cash flow that is going to be returned to shareholders in the form of dividends/share buybacks, opportunistic acquisitions etc,.
  • It’s not just the quality of these companies, it’s their return potential—under reasonable assumptions and what’s being priced in, we think valuations are reasonable.

15:45 – Opportunity set in Canada

  • 75% of investible universe in Canada would fall under financials, energy or materials – not a diverse opportunity set
  • Aren’t a ton of companies that we don’t know about – if not in the portfolio, they are on the inventory list
  • Canadian small cap fund – small caps that have success and grow to market cap size that Cdn large cap can take a position in

17:50 – Shopify—great business model

  • Shopify makes money in two ways:
    1. Provides mission critical software for small and medium sized business (creates a recurring revenue stream)
    2. Takes a “cut” of merchandise that’s sold through their platform
  • Valuation
    • conventional metrics may make Shopify look expensive
    • but what’s being priced in is not in the realm of impossible - we think this is one of the better businesses we’ve come across in Canada in a while with a wide range of return potential
    • We can see many scenarios where valuation doesn’t make sense, however, and we balance that in the position size—that’s why it started in the portfolio at a much smaller weight

20:50 – Insurance companies takeaways

  • Lifeco’s are misnamed – they are really financial conglomerates (and banks too for that matter!)
  • The wealth management business is where a lot of the potential growth will come from
  • Growth and profitability is primarily from outside of Canada (Manulife)
  • Valuations look attractive

25:40 – One Mawer thought: The ebbs and flows of Cricket and investing

Related Reads

How to subscribe

The podcast is available to listen and subscribe through any of the following platforms:

Subscribe to Art of Boring to receive email notifications when a new episode is available, as well as other insights through our blog and quarterly updates.

Have feedback?

If you enjoyed this episode, feel free to leave a review on iTunes, which will help more people discover the Be Boring. Make Money.™ philosophy. 

If you have any questions, comments, or suggestions about the podcast, please email

This blog and its contents are for informational purposes only. Information relating to investment approaches or individual investments should not be construed as advice or endorsement. Any views expressed in this blog were prepared based upon the information available at the time and are subject to change. All information is subject to possible correction. In no event shall Mawer Investment Management Ltd. be liable for any damages arising out of, or in any way connected with, the use or inability to use this blog appropriately.