Canadian General Investments

(CGI) £21.70

Market cap: £450 million

An unusually wide 41% discount to NAV (net asset value) presents a compelling entry point into Toronto- and London-listed Canadian General Investments (CGI), a trust with a formidable long-run track record. 

The cavernous discount provides investors with broad exposure to the Canadian equity market and a winning total return strategy focused on quality Canadian firms and US-listed star turns including the subject of this week’s cover story, Apple (AAPL:NASDAQ), and the likes of Amazon.com (AMZN:NASDAQ) and Nvidia (NVDA:NASDAQ).

This proxy for Canada aims to beat the S&P/TSX Composite Index by investing in quality Canadian companies with a US equity allocation capped at 25%. Managed by Greg Eckle, the portfolio is a bargain way to access Canadian stocks which remain underappreciated by international investors despite the country’s abundant natural resources, world-class banking sector and vibrant tech industry.

Canadian General has persistently traded at a discount of late, partly due to its concentrated shareholder register and the fact the company is unable to buy back shares, but a wider appreciation of Eckle’s stock-picking prowess could help bring the discount in.

The manager has repeatedly delivered in terms of NAV performance and has an excellent record of identifying winners early, having bought chip designer Nvidia in 2016 and invested in Apple in 2010.

The trust, which typically owns around 60 stocks with portfolio turnover kept low, also owns Canadian logistics firm TFI International (TFII:TSE), tech company Descartes Systems (DSG:TSE) and Canadian forestry company West Fraser Timber (WFG:TSE), the latter well positioned given a major undersupply of new and affordable housing coupled with the likelihood of falling interest rates.

Another standout name is Canadian Natural Resources (CNQ:TSE), a natural fit for the fund as one of the country’s premium energy companies offering exposure to the Canadian oil patch.

At 31 March 2024, the trust’s NAV per share was $62.80, resulting in year-to-date and 12 month NAV returns with dividends reinvested of 13.4% and 22.2% respectively, ahead of the 6.6% and 14% returns of the benchmark S&P/TSX Composite on a total return basis.

It is worth flagging Canadian General is one of 32 investment trusts which would have made investors more than £1 million had they invested the full annual ISA allowance in the company each year from 1999 to 2023, according to research from the AIC) (Association of Investment Companies).

It is also among the AIC’s ‘next generation’ of Dividend Heroes, a select band of 32 trusts which have consistently raised shareholder returns over the last 10 to 20 years. 

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