Cambridge Small-cap Funds: First-half 2019 Review

Greg Dean's picture

open pdf version

Dear fellow Fundholders:

Please see the table below for the year-to-date performance (i.e., as at June 30, 2019) of our funds that invest in small-capitalization companies.


Fund Performance (%), Series F

Fund Year-to-date 1 Year 3 Year 5 Year Since Inception Inception Date
Cambridge Growth Companies Corporate Class (4594) 13.4 3.5 12.5 N/A 11.2 07/29/14
Cambridge Canadian Growth Companies Fund (11008) 15.8 0.7 9.5 6.0 15.2 02/15/11
Cambridge Pure Canadian Equity Fund (11009) 13.3 -4.6 4.6 2.9 13.1 02/15/11

Source: Morningstar Research Inc., as at June 30, 2019.

The Deeper the Roots, the Greater the Fruit 

The roots of a tree provide it the capacity to take in nutrients from the soil and sun, which allows it to grow, and growth provides the opportunity to bear fruit. The roots of a healthy and strong tree serve also as the mechanism to handle and survive the wildest storms and other adversity. Having deep, strong roots provides the opportunity for the tree to grow and bear fruit that will replenish for a long period of time. As investors, we are constantly looking to invest in companies that will bear “delicious fruit” for long periods of time.

On the face of it, some companies may look like mighty trees (i.e., they appear to be very accomplished), yet when you cut below the surface, you may discover roots that are very weak or negligible – almost nonexistent. At Cambridge Global Asset Management (“Cambridge”), our aim is to avoid investing in such companies because time is not their friend. They are lacking the essential ingredients necessary to continue delivering fruit.

We spend an inordinate amount of our time evaluating the roots systems of the companies we look to invest with, trying to identify those with solid “root systems,” and we avoid the ones that although they may look healthy on the surface, their roots are very weak or negligible. This job is not easy, and we actively learn from the occasional mistakes we make. At Cambridge, we are also constantly ensuring our own roots system will provide for a healthy future harvest, a task we believe is incredibly important. One of the ways we do this is to consistently re-evaluate our practices to be certain our team is focused on adding value to our clients over the long term and adding top investment talent to our team.

Since my last letter on January 31, 2019, we have continued to reflect on how to best deliver our investment process to clients to help ensure that our tree will withstand various storms. We are continuously striving to become a more focused organization as we believe it is a key ingredient to delivering high-quality outcomes. Along these lines, one specific enhancement we have implemented has been adding analytical support focused specifically on global small-capitalization company research. We now have dedicated resources assisting me in idea generation, conducting company due diligence and constructing portfolios.

This decision to better focus our talented team of global analysts by market capitalization was made back in March 2019 and stemmed from our learnings since we split Canadian research from our global team just over a year ago. I believe we will look back in five or 10 years and see this as one of the most important changes we made.

I am very pleased to share with you that Jordan McNamee, Equity Analyst will be exploring the very large and diverse pond of global small caps with me. Fundholders have been benefiting from Jordan’s experience and talents since we hired him back in 2014. In fact, his ideas have contributed more than 40% of the cumulative return in our global small-cap fund since inception. In addition, we are currently interviewing to add several others to our team to help us in our quest to deliver returns over the long term, and we hope to be able to make announcements regarding hiring in the coming months. Our efforts to add top investment talent and develop our team will help us ensure our efforts are continuously adding sustainable value to clients now and over the long term.

Below are lists of specific holdings that impacted performance of Cambridge’s small-cap funds in the first half of 2019, as well as a discussion of relevant holdings.

Cambridge Growth Companies Fund (first half of 2019)

LendingTree, Inc. Maisons du Monde S.A.
Smartsheet Inc., Class A Tourmaline Oil Corp.
BK Brasil Operacao e Assessoria a Restaurantes S.A. Alfa Financial Software Holdings PLC
Atlassian Corp. PLC, Class A Aston Martin Lagonda Global Holdings PLC
Middleby Corp. Seria Co., Ltd.

Source: FactSet Research Systems Inc., as at July 31, 2019.

Cambridge Canadian Growth Companies Fund (first half of 2019)

LendingTree, Inc. B&M European Value Retail S.A.
Smartsheet Inc., Class A Storm Resources Ltd.
Boyd Group Income Fund Tourmaline Oil Corp.
Middleby Corp. Teekay Offshore Partners L.P.
Dollarama Inc. Sleep Country Canada Holdings Inc.

Source: FactSet Research Systems Inc., as at July 31, 2019.

Cambridge Pure Canadian Equity Fund (first half of 2019)

Smartsheet Inc., Class A BioSyent Inc.
Boyd Group Income Fund Kelt Exploration Ltd.
Dollarama Inc. Tourmaline Oil Corp.
Middleby Corp. Storm Resources Ltd.
ECN Capital Corp. Sleep Country Canada Holdings Inc.

Source: FactSet Research Systems Inc., as at July 31, 2019.

Great Canadian Gaming Corp. (TSX:GC)

This is one of the largest gaming and entertainment companies in Canada, with over 25 properties across the country. Historically, the business has been well managed, and the recent decision to acquire gaming rights in the greater Toronto area (GTA) provides a significant opportunity for future growth. The company is investing about $1.5 billion over the next three years to develop casinos and expand gaming capacity in Ontario. Over the long term, there is also potential for growth in hospitality as well as another casino. The company’s geographic monopoly provides meaningful barriers to entry with a long-term runway for disciplined capital allocation. Any investment is not without risk, but we believe this is a unique business that now has a monopoly position on casino gaming in the GTA for several decades.

CarGurus, Inc.

CarGurus is a Cambridge, Massachusetts-based automotive research and shopping website that assists users in comparing local listings for used and new cars and contacting sellers. Our team’s work on AutoTrader Group led us to this very interesting competitor that is taking a lot of market share in the U.S. and has global aspirations. The company has a large market opportunity given the US$30 billion in auto marketing spent across the U.S. industry alone , with the added challenge of dealers becoming more digitally savvy as the market shifts to online transactions. The founder of CarGurus is focused on long-term value creation and aligned with shareholders as he owns a 25% economic interest in the firm while maintaining the majority of the voting interest. With a large market opportunity and aligned management, we believe the business has an attractive long-term growth runway and the ability to expand margins considerably over time. N.V.

This Dutch company is a leading food deliverer specializing in online food ordering and home delivery in the Netherlands and Germany. The company acquired a competitor in Germany earlier this year, bringing additional scale to the company’s geographic reach and removing a competitor in the process (source: Bloomberg Finance L.P.). We believe the company is well-positioned and has a long runway to grow revenue and cash flow at over 20% for the foreseeable future. As we like to see, the CEO is also well aligned with shareholders, owning 25% of the firm.

Notable Deletions

BK Brasil Operacao e Assessoria a Restaurantes S.A.

We exited the fund position in BK Brasil, the operator of Burger King and Popeyes restaurants in Brazil, as the risk/reward opportunity was no longer compelling enough to offset the risks of investing in Brazil. (We have a higher hurdle rate for companies in emerging markets.)

Oslo Børs VPS Holding ASA

The fund position in Oslo Børs was absorbed after it was acquired by Euronext N.V., which is another fund holding.

Atlassian Corp. PLC

This Australian enterprise software company develops products for software developers, project managers and content management. We sold the fund position in Atlassian after the risk/reward opportunity was no longer compelling enough to justify such a large company in the fund portfolio.

Our quest at Cambridge to continue to deepen our roots stems from our desire to ensure our clients are enjoying fruit from our fund portfolios for decades to come.

Kind regards,


Sources: Morningstar Research Inc., FactSet Research Systems Inc., Bloomberg Finance L.P. and Cambridge Global Asset Management, as at July 31, 2019.



Greg Dean is a portfolio manager of certain Cambridge funds. He does not have a material interest in the securities discussed herein; however, he is an investor in certain Cambridge funds that may hold these securities.

The author and/or a member of their immediate family may hold specific holdings/securities discussed in this document.  Any opinion or information provided are solely those of the author and does not constitute investment advice or an endorsement or recommendation of any entity or security discussed or provided by CI Investments Inc.

This commentary is published by CI Investments Inc. The contents of this piece are intended for informational purposes only and not to be used or construed as an endorsement or recommendation of any entity or security discussed. The information should not be construed as investment, tax, legal or accounting advice, and should not be relied upon in that regard. Individuals should seek the advice of professionals, as appropriate, regarding any particular investment. Investors should consult their professional advisors prior to implementing any changes to their investment strategies. These investments may not be suitable to the circumstances of an investor. Some conditions apply.

Certain statements contained in this communication are based in whole or in part on information provided by third parties and CI Investments Inc. has taken reasonable steps to ensure their accuracy.

Certain statements in this document are forward-looking. Forward-looking statements (“FLS”) are statements that are predictive in nature, depend upon or refer to future events or conditions, or that include words such as “may,” “will,” “should,” “could,” “expect,” “anticipate,” “intend,” “plan,” “believe,” or “estimate,” or other similar expressions. Statements that look forward in time or include anything other than historical information are subject to risks and uncertainties, and actual results, actions or events could differ materially from those set forth in the FLS. FLS are not guarantees of future performance and are by their nature based on numerous assumptions. Although the FLS contained herein are based upon what CI Investments Inc. and the portfolio manager believe to be reasonable assumptions, neither CI Investments Inc. nor the portfolio manager can assure that actual results will be consistent with these FLS. The reader is cautioned to consider the FLS carefully and not to place undue reliance on FLS. Unless required by applicable law, it is not undertaken, and specifically disclaimed that there is any intention or obligation to update or revise FLS, whether as a result of new information, future events or otherwise.

Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. The indicated rates of return are the historical annual compound total returns net of fees (except for figures of one year or less, which are simple total returns), including changes in security value and reinvestment of all distributions, and do not take into account sales, redemption, distribution or optional charges or income taxes payable by any securityholder that would have reduced returns. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated.

Cambridge Global Asset Management is a division of CI Investments Inc. Certain funds associated with Cambridge Global Asset Management are sub-advised by CI Global Investments Inc., a firm registered with the U.S. Securities and Exchange Commission and an affiliate of CI Investments Inc.

CI Investments® and the CI Investments design are registered trademarks of CI Investments Inc. © CI Investments Inc. 2019. All rights reserved. “Trusted Partner in WealthTMis a trademark of CI Investments Inc.

Published August 23, 2019.

Add new comment

We welcome your comments and questions for the Cambridge team and will respond as soon as possible. Please note that all comments are reviewed for their relevance to the topics discussed in the blog, and that comments may be edited.