Investment Opportunity: Is Canadian General Worth Purchasing?
Canadian General Investments, a London and Toronto-listed investment trust, has been making waves in the financial world. With a focus on a medium- to long-term timescale, encouraged by the Canadian tax system, the trust has returned impressive figures over the past decade.
Over the last 10 years, Canadian General Investments has returned 192%, and over five years, it has returned 85%. This strong performance places it among the best-performing funds in the investment trust sector over 25 years.
Greg Eckel, the lead fund manager, is cautious in the short term, predicting a pause in the market due to high interest rates and a slowing economy. However, he sees potential for Canada in another bull run for raw materials, particularly in the nuclear renaissance and interconnectivity with the US.
The trust's portfolio is diversified, with Nvidia being its largest holding, worth 7.1% of the portfolio, and held since 2016. Other top holdings include Apple, Amazon, and Canadian stalwarts like Precision Drilling and Canadian Natural Resources. Around 14% of the portfolio is in energy, and 11% is in materials, including gold mining (Franco-Nevada) and uranium mining (Cameco and NexGen).
Interestingly, the market trades on a multiple of under 15 times trailing earnings, less than the US, but this is partly explained by the low ratings of banks and commodities companies. The trust's debt facility of C$175 million enables a ratio of debt to net assets of 12%, at the low end of the historic range, thanks to an interest rate of 5.9%.
Canada, with a population around the size of California, has a land mass larger than North America and is rich in natural resources. This, coupled with a federal debt at 40% of GDP, the lowest marginal effective tax rate in the G7, and foreign investment flowing in, paints a promising picture for the country's economic future.
GDP growth is expected to pick up next year, with a growth rate of just 1.1% in 2023. While this may seem modest, it indicates a recovery from the recent economic slowdown. The trust's performance is well ahead of that of the Toronto Stock Exchange, further highlighting its strength.
The control over the management company of Canadian General Investments lies with the Weston family. Under their stewardship, the trust continues to deliver strong returns, making it a compelling choice for investors seeking long-term growth.
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