Peter Imhof, Vice President & Portfolio Manager, AGF Investments

Focus: North American Small Caps

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MARKET OUTLOOK:

Presently I am somewhat cautious on the market as we have had nice run of late. I have been building the cash weight in the portfolio recently, focusing my time on stock specific ideas that are able to give me good visibility over the next few quarters despite what is going on with the macro environment. The Canadian market has been the place to be this year after years of underperformance versus the U.S. market. Small Caps specifically have outperformed their larger cap counterparts by a wide margin this year. Small caps had underperformed for the past 5 years but we seem to be breaking out of that trend. When small caps outperform, they usually do so by a wide margin and it usually lasts a few years. I would expect this trend to continue.

Top Picks:

Ceapro (CZO.V)

Ceapro is a healthcare/biotech company focusing on development and commercialization of natural products for personal care. The company’s products can be found in such household items such as Jergens, Neutrogena, Burt’s Bees and Dove. They are partnered with Symrise, a giant food and cosmetic company. Sales have been rocketing up over the past five quarters and profitability has done the same. The stock presently does not have any analyst coverage and is not on the radar of many institutions. Others will take notice once they see the company continue to perform operationally over the next couple of quarters. Recently bought the issue at $1.06 and have been adding at $1.60 (over the past week) as I was not able to get a full position.

Parex Resources (PXT.TO)

Parex is an oil and gas producer in Colombia. The company has grown its production from 5,000 BOE/day to 29,000 BOE/day. The management team has an excellent track record of growing via the drill bit. They recently reported a record 15th quarter of production increases, and are one of the few oil and gas companies that are profitable at today’s oil price. Recently purchased more at $12.55 on July 6.

Guardian Capital (GCGa.TO)

Guardian Capital is an extremely cheap stock as the underlying balance sheet is almost equal to the market capitalization. Presently the market cap is approximately $650 million versus the securities that are held on the balance sheet equalling approximately $580 million. You are getting the asset manager almost for free. They continue to grow their earnings at a decent pace and are monetizing some of their security holdings to redeploy into other areas of the business. The company pays a dividend and continually buys back shares. Most recent purchase was in Feb at $16.95.

Past Picks:  September 28, 2015

RDM Corp. (RC.TO)

• Then: $3.97
• Now: $4.50
• Return: +13.35%
• TR: +14.89%

Espial Group (ESP.TO)

• Then: $3.12
• Now: $2.18
• Return: -30.13%
• TR: -30.13%

CRH Medical (CRH.TO)

• Then: $4.21
• Now: $5.19
• Return: +23.28%
• TR: +23.28%

Total Return Average: +2.68%

Fund Profile

AGF Canadian Growth Equity Class

Performance as of: June 30, 2016

*Index: S&P/TSX Composite

Top Holdings

1. Real Matters - 5.4%
2. Parex Resources - 3.4%
3. Alimentation Couche-Tard - 3%
4. Tamarack Valley - 2.7%
5. Milestone Apartment REIT - 2.7%

Website: www.agf.com