Tech names add torque to dividend-focused fund

Jonathan Ratner | 03/12/13 5:25 PM ET

Stephen Takacsy, chief investment officer at Lester Asset Management

Christinne Muschi for National PostStephen Takacsy, chief investment officer at Lester Asset Management.

Manager: Stephen Takacsy, Lester Asset Management
Fund: Lester Canadian Equity Fund
Description: All-cap fund focused on under-represented sectors
AUM: $245-million
Performance: 1 year: 18%; 3-year: 13.7%; 5-year: 22.7% (as of Nov. 31, 2013)
Management fee: 1.5%

Although Stephen Takacsy has amassed a strong base of dividend-paying stocks in the Lester Canadian Equity Fund, the portfolio manager is finding torque in technology names.

The fund’s 12% weighting in the technology sector includes big gainers such as Open Text Corp., Redknee Solutions Inc., Tecsys Inc., QHR Corp., NeuLion Inc. and BSM Technologies Inc.

The chief investment officer at Montreal-based Lester Asset Management continues to look for value in smaller companies that are followed by few analysts at small shops. “A lot of people bailed out of BlackBerry and are looking for new technology names. So this group has benefited from fund flows; certainly Open Text has.”

But Takacsy is also finding opportunity in beaten-up high-yield stocks, which he believes were unfairly thrown out with the bathwater.

“Any time there is a big correction in yield stocks, which there have been two of in the past six months, they’ve bounced back quite nicely,” Takacsy said. “Those have been good buying opportunities in areas like pipelines and power companies.”

The fund has a 23% weighting in utilities, which includes power, energy infrastructure and renewable energy companies. “They aren’t just yield stocks, some of them provide good growth as well,” Takacsy said.

For example, Pembina Pipeline Corp. and Emera Inc. have large projects underway, and Algonquin Power & Utilities Corp. and Innergex Renewable Energy Inc. are expected to significantly grow production capacity and dividends in the next few years.

“The risk is in securities that are hyper-sensitive to rising yields, such as most REITs and bonds. But if you own companies like BCE Inc., Telus Corp., Fortis Inc. or TransCanada Corp. that are able to grow their dividends — sometimes twice a year — you don’t have much to worry about,” the manager said. “They may not be cheap by traditional measures, but they are not that expensive given where rates are today.”

BUY

Wi-Lan Inc. (WIN/TSX)

The position: Recently added to long-term holding

Why do you like it? Wi-Lan shares came under pressure after the patent-licensing company lost a trial against Apple Inc. Takacsy expects the company to vigorously appeal the verdict, but the market will be focused on its strategic review.
“At the current share price, we see very limited downside and 50% upside,” the manager said, adding he expects the company will be sold in the next six months. “It’s worth at least $5 per share to a strategic partner and yields 4.7%, so you’re paid to wait.”
He noted Wi-LAN has $1.20 in cash per share and renewable licensing deals signed for the next four years, which means the company’s discounted net present value is at least $3.30 per share, Takacsy estimates.

Biggest risks: A deal fails to materialize; Apple appeal is disallowed.

.....etc

http://business.financialpost.com/2013/12/03/tech-names-add-torque-to-dividend-focused-fund/