Investment Strategies
Canadian Equities
Natcan Investment Management offers a complete range of Canadian equity investment products. Our strategies include different management styles, and cover both large-cap and small-cap equities. Our product line also comprises a socially responsible investment solution.
Each strategy is managed by an independent management team with a proven track record in its field of expertise.
Selexia Canadian Equities
In January 2008, Natcan Investment Management signed a mutual exclusivity agreement with Selexia Investment Management, which thus became Natcan’s partner in the management of institutional Canadian large-cap equity assets.
Selexia’s three key managers carry numerous years of stock market experience, and the team provides great stability. Jacques Chartrand, co-founder of Natcan, has been heading the team since its inception. He ranks among the industry’s most experienced managers.
Characterized by its eclectic style combining Value and Growth, the team’s highly disciplined management approach has remained very constant throughout the years.
Management Approach
Our approach consists in buying out-of-favour stocks to limit downside risk and preserve capital. Though this reflects a more Value-oriented approach, we also integrate a Growth component to our strategy by selecting companies with attractive profit-enhancing catalysts. By not restricting our approach to a single style, we are able to stage a solid performance in all market phases.
Moreover, we offer real active management by not hesitating to maintain sharp deviations from the index. We believe sector rotation is important, regardless of financial conditions. When warranted, we tend to go against market trends by investing in stocks and sectors shunned by investors.
We exercise discipline when buying and selling securities, and we are convinced that to yield positive returns, it is as important to avoid disasters as it is to hold winning securities.
Management Process
Security selection takes precedence over sector selection. Sector deviations are often the result of the security selection process. Alternatively, some strategic investment themes can be identified from macroeconomic and industry analyses.
Stock Selection
In our approach, Value stocks and sectors are undeniably chosen over their momentum counterparts. The team has a pronounced aversion to heavily debt-burdened or expensive securities. Instead, it looks for securities that offer attractive thematic characteristics or identifiable catalysts that may have a positive impact on future earnings.
Valuation is usually the first screen used in assessing a stock. A detailed financial analysis and an assessment of the strategic prospects of the company are then performed, followed by management evaluation.
The managers are particularly attracted to companies that are positioned as low-cost producers in their respective industries, and that exhibit conservative balance sheets and a good operating leverage.
Security selection is performed with an annual return objective of 15 to 20% over a typical investment horizon of 12 to 18 months.
The buy decision process favours companies with the following characteristics:
- Good management
- Low input costs
- Fair valuation level
- Conservative balance sheet and good operating leverage
- Limited downside risk in the stock price
We sell in the event of a violation of fundamental purchase rationale, and when our outlook for key earnings drivers has turned negative. We sell half of the position when drivers deteriorate, and sell the rest if the trend continues. We do not sell on valuation alone, and we try to ignore market noise. Decisions to sell will typically result from an unfavourable shift in one or many strategic factors.
Sector Selection
Sector allocation is a factor of both security and sector selection; it is the result of thorough relative analyses intended to identify strategic investment themes relevant to one or more sectors. As such, the portfolio’s sector allocation can deviate significantly from that of the S&P/TSX Index over a fairly prolonged period.
Management Team
Selexia Investment Management is Natcan’s exclusive partner in the management of institutional Canadian large-cap equity mandates. The firm was founded in 2008 by the co-founder and vice-chairman of Natcan, Jacques Chartrand, who leads the team alongside two senior managers, Claude Boulos and Benoit Brillon, with whom he has worked for several years.
The team benefits from the expertise of one analyst, Marlene Osganian, who closely monitors stocks and news in all sectors. She also reviews the research from independent brokerage firms, brainstorms over investment ideas, and submits her recommendations to the rest of the team.
Products
| Strategy | Description | Availability |
| Natcan Canadian Equity Fund | The objective of the Canadian large-cap equity portfolio, which combines Value and Growth criteria, is to outperform the S&P/TSX Index return. | Pooled Fund Segregated Fund |
| Natcan Contra Cyclical Fund II | The investment objective is to achieve superior growth, mainly through capital appreciation. To do so, the manager uses a value/contrarian approach and a one-year investment horizon. | Pooled Fund |
| Natcan Contra Value Fund | The investment objective is to achieve superior growth mainly through capital appreciation. To do so, the manager uses a value/contrarian approach, and a medium- to long-term horizon of 6 to 18 months. | Pooled Fund |
| Natcan Momentum Global Equity Fund II | The investment objective is to achieve superior growth mainly through capital appreciation. To do so, the manager uses a momentum approach, investing systematically in securities ranked in the first performance decile of the different benchmarks. | Pooled Fund |
For up-to-date information regarding performance and strategies, please visit the Natcan Quarterly Bulletins section.
Canadian Advantage Equities
Management Approach
Focused on long-term investments, our approach consists in buying out-of-favour stocks to limit downside risk and preserve capital. Though our approach is essentially Value-oriented, we also integrate a Growth component through investments in companies with attractive profit-enhancing catalysts.
Given the strength of our convictions, we may go against market trends by investing in stocks and sectors shunned by investors. We exercise discipline when buying and selling securities, and we are convinced that it is as important to avoid disasters as it is to hold winning stocks. With a low turnover ratio, the portfolio includes stocks that provide attractive dividend yield, and have a history of increasing dividends.
Management Process
Our aversion to speculative stocks and to indebted and overpriced companies allows us to avoid the risk of a sudden and substantial drop in the market.
Security selection is the core of our management process. Overall, the portfolio must provide valuation ratios superior to those of the benchmark, thus reflecting our Value-oriented style.
Valuation is usually the first screen used in assessing a stock, followed by regular meetings with company management. We make a point of regularly meeting with the management of companies we invest in by participating in telephone conferences and meetings.
A detailed financial analysis and an assessment of the strategic prospects of the company are then performed. We prefer low-cost producers with good operating leverage (volume and price variables) within their respective industries.
Decisions to sell will typically result from an unfavourable shift in one or many strategic factors rather than from a valuation criterion. Given our propensity for capital preservation, our approach supports regular profit taking.
Management Team
The team is managed by Hélène Bond.
Hélène began her career in the investment industry in1982, and has been managing the National Bank Trust's Canadian equity portfolios since 1996. She works closely with one vice president, Manik Sincennes, who is mainly in charge of the National Bank Financial's global indexed baskets, as well as the “MAC” basket. He is also responsible for the asset allocation of monthly income funds. As for Chantal Ouimet, assistant vice president, she is in charge of covering the Materials, Energy and Industrials sectors.
All three benefit from the experience of an analyst, Etienne Filion, who supports the team in its research tasks.
Products
| Strategy | Description | Availability |
| Canadian Advantage Large-Cap Equities | The objective of the large-cap Value portfolio is to outperform the S&P/TSX Index in the medium term, while preserving capital. | Segregated Fund |
For up-to-date information regarding performance and strategies, please visit the Natcan Quarterly Bulletins section.
Canadian Growth Equities
Management Approach
The team’s investment philosophy is grounded in the belief that the creation of wealth for our clients is best accomplished through long-term ownership of good companies. Our aim is to identify strategic long-term investment themes and short-term tactical opportunities that we believe represent attractive growth opportunities for certain Canadian companies.
Combining this goal with a process that reduces overall portfolio risk and adheres to specific valuation criteria creates a high-quality, predominantly large-capitalization Canadian growth portfolio.
Management Process
Portfolio construction begins with the identification of strategic long-term investment themes or secular trends that are perceived to have the ability to greatly affect business and industry. Themes are developed through a synthesis of macro trends with bottom-up input from sector specialists, thus positioning the portfolio to capture additional value from market anomalies and cyclical trends.
The ultimate objective is to identify exceptional growth opportunities within those sectors that we expect to generate positive cash flow and earnings growth as the identified longer-term themes unfold. Once themes have been identified, an initial sector allocation is made in accordance with the team’s preferences.
Once sectors have been identified, bottom-up analysis is employed to select individual securities for inclusion in the portfolio. The team conducts this analysis by evaluating companies’ fundamental qualitative and quantitative attributes, trying to choose those that best correspond to a Growth At a Reasonable Price (GARP) style.
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Valuation is key to security analysis, specifically to ensuring we are not paying more for a stock than our assessment of its intrinsic value. We are willing to pay a reasonable premium for a stock, provided that underlying fundamentals and future prospects warrant it.
Our principal valuation method entails comparing a company’s quantitative attributes to its expected or target growth rate and that of comparable business entities operating in the same industry. This analysis serves to determine whether company management will be able to translate a competitive advantage or dominant position into revenue and earnings growth. Once this analysis is complete, the decision to include or exclude the stock is made.
Management Team
Natcan’s growth equity strategies are managed by a team of seasoned professionals. Mark Jackson manages the team; he works closely with Natural resources expert Paul Wong, Reza Samahin (Science and Technology) and Michael Colavecchia (Interest sensitive sectors). Together, they form the Canadian Growth equity team.
These four investment experts are CFA charterholders and manage portfolios from Natcan’s Toronto office. This proximity enables frequent discussion between team members and creates an environment conducive to the exchange of views and ideas on a fairly informal basis.
The team is also supported by Natcan’s global analysis team in Montreal.
Products
| Strategy | Description | Availability |
| Natcan Canadian Growth Equity Strategy | The objective of the large-cap Growth portfolio is to outperform the S&P/TSX Index. | Segregated Fund |
Canadian Social Value Equities
Management Approach
The objective of the Natcan Social Value Fund is twofold: financial and social. Securities that make up the portfolio are thus selected according to financial valuations based on fundamental analysis, as well as according to qualitative data provided by a specialized rating agency.
Financial Strategy
Our approach consists in buying out-of-favour stocks to limit downside risk and preserve capital. Though this reflects a more Value-oriented approach, we also integrate a Growth component to our strategy by selecting companies with attractive profit-enhancing catalysts. By not restricting our approach to a single style, we are able to stage a solid performance in all market phases.
Moreover, we offer real active management by not hesitating to maintain sharp deviations from the index. We believe sector rotation is important, regardless of financial conditions. When warranted, we tend to go against market trends by investing in stocks and sectors shunned by investors.
We exercise discipline when buying and selling securities, and we are convinced that to yield positive returns, it is as important to avoid disasters as it is to hold winning securities.
Social Strategy
The Fund’s objective is to achieve a social ranking that exceeds that of the S&P/TSX Index. To do so, we employ three strategies.
The first one consists in excluding companies whose primary mission is related to the production of arms, tobacco, alcohol, nuclear energy, pornography, and gambling.
The second strategy calls upon social value criteria that convey companies’ ethical strengths and weaknesses across several fields, such as community involvement, diversity, employee relations, environment, and commercial products and practices.
The third strategy aims to exercise our ownership power through proxy voting. Guidelines are inspired by policies developed by certain active shareholder groups with respect to ethical and social principle monitoring.
Management Process
Security selection takes precedence over sector selection. Sector deviations are often the result of the security selection process. Alternatively, some strategic investment themes can be identified from macroeconomic and industry analyses.
Stock Selection
In our approach, Value stocks and sectors are undeniably chosen over their momentum counterparts. The team has a pronounced aversion to heavily debt-burdened or expensive securities. Instead, it looks for securities that offer attractive thematic characteristics or identifiable catalysts that may have a positive impact on future earnings.
Valuation is usually the first screen used in assessing a stock. A detailed financial analysis and an assessment of the strategic prospects of the company are then performed, followed by management evaluation.
Managers are particularly attracted to companies positioned as low-cost producers in their respective industries, and that exhibit conservative balance sheets and a good operating leverage. Security selection is performed with an annual return objective of 15 to 20% over a typical investment horizon of 12 to 18 months.
The buy decision process favours companies with the following characteristics:
- Good management
- Low input costs
- Fair valuation level
- Conservative balance sheet and good operating leverage
- Limited downside risk in the stock price
We sell in case of violation of fundamental purchase rationale, and when our outlook for key earnings drivers has turned negative. We sell half of the position when drivers deteriorate, and sell the rest if the trend continues. We do not sell on valuation alone, and try to ignore market noise. Decisions to sell will typically result from an unfavourable shift in one or many strategic factors.
The last step of the management process consists in portfolio construction and research input data related to responsible investment criteria. We exclude companies whose primary mission is related to the production of arms, tobacco, alcohol, nuclear energy, pornography, and gambling.
The management team also avoids, to the extent possible, investing in companies that have no representation of women in upper management, or whose activities violate human rights or exploit children or women. Inclusion is based on a positive factor analysis and “social value” risk management.
Management Team
Selexia Investment Management is Natcan’s exclusive partner in the management of institutional Canadian large-cap equity mandates. The firm was founded in 2008 by the co-founder and vice-chairman of Natcan, Jacques Chartrand, who leads the team alongside two senior managers, Claude Boulos and Benoit Brillon, with whom he has worked for several years.
The team benefits from the expertise of one analyst, Marlene Osganian, who closely monitors stocks and news in all sectors. She also reviews the research from independent brokerage firms, brainstorms over investment ideas, and submits her recommendations to the rest of the team.
Products
| Strategy | Description | Availability |
| Natcan Social Value Canadian Equity Fund | The objective of this portfolio, which combines Value and Growth Canadian large-cap criteria, is to achieve a rate of return that exceeds that of the S&P/TSX Index on the both the financial and social fronts. | Pooled Fund |
Natcan also manages a Canadian Social Value Basket for an internal partner. To learn more about this product, we invite you to contact Grace Di Meo, Vice President, Distribution, and in charge of responsible investment activities.
Furthermore, we invite you to visit the section entirely dedicated to responsible investment.
For up-to-date information regarding performance and strategies, please visit the Natcan Quarterly Bulletins section.
Canadian Small-Cap Equities
To learn more about our Canadian small-cap strategies, please refer to the section exclusively dedicated to small-cap equities.