Guardian Capital Canadian Focused Equity
Mandate commentary
Q2 2026
Highlights
① The mandate returned 0.87%, underperforming the S&P/TSX Composite Index by 1.67 percentage points since inception, as negative security selection, particularly in financials, outweighed contributions from materials and industrials.
② Earnings strength helped markets absorb uncertainty.
③ Valuations and rates make selectivity more important.
Mandate overview
The mandate’s relative performance was primarily affected by negative security selection, while sector allocation also detracted to a lesser extent. The underweight allocation to materials contributed positively, while stock selection within the sector benefited from CCL Industries and Teck Resources. MDA Space also added value within industrials.
Conversely, the mandate’s underweight allocation to financials detracted from relative performance. Stock selection within financials also weighed on results, particularly positions in Fairfax Financial Holdings and Trisura Group.
Mandate: Guardian Capital Canadian Focused Equity portfolio stock review
Performance contributors
MDA Space was the strongest contributor to relative performance. The company’s shares benefited from new contracts with the Canadian Space Agency and Mitsubishi Electric. Its acquisition of Blue Canyon Technologies also established a U.S. presence, expanding its ability to pursue U.S. defence work and compete for prime contracts.
Teck Resources contributed as copper prices recovered toward record levels and the company delivered strong operating results. The company also continued to advance toward its expected merger with Anglo American.
Performance detractors
Boyd Group detracted after its first-quarter same-store sales growth fell below market expectations. Adverse weather in the southern United States resulted in store closures, although the company delivered solid underlying results as end-market demand continued to recover and repair volumes outpaced the broader industry.
Fairfax Financial Holdings detracted as the broader property and casualty insurance sector declined and investors rotated away from the industry. The company’s investment-focused earnings model also made its quarterly results sensitive to weaker equity markets and broader market conditions.
Total gross returns:
Total return (CAD) | QTD | YTD | 1YR | 3YR | 5YR | SINCE INC. (FEB. 18, 2025) |
GUARDIAN CAPITAL CANADIAN FOCUSED EQUITY | 0.87
|
Mandate repositioning
During the quarter, a position in WSP Global was initiated based on the view that concerns regarding potential AI disruption to its business were overstated. WSP relies on proprietary intellectual property and design standards that are not publicly accessible, while regulatory requirements create barriers to the use of AI. AI may also help the company address labour constraints and improve productivity. These factors, together with its valuation, made WSP an attractive investment opportunity.
Keyera was added to the fund’s growth component based on the opportunities arising from its acquisition of Plains’ midstream business and its ability to grow alongside the Western Canadian Sedimentary Basin. Its exposure to a growing basin and defensiveness relative to exploration and production companies were viewed as providing an asymmetric opportunity.
Teck Resources was sold after strong performance caused the security to exceed the valuation target.
The position in Spin Master was also sold following profitability challenges related to a failed digital game, increased content spending without detailed returns and evidence that the company overpaid for Melissa & Doug. Tariffs also presented a significant headwind, although this was outside the company’s control. The controllable challenges contributed to the CEO’s departure. While the new management team was viewed as an improvement, continuing concerns that some of the company’s issues stemmed from the board of directors supported the decision to exit the position.
Market overview: earnings strength helped markets absorb uncertainty
The second quarter of 2026 reinforced the resilience of financial markets. Investors faced conflict in the Middle East, commodity-price volatility, shifting interest-rate expectations and renewed inflation concerns, yet global equities continued to advance as corporate earnings and economic activity remained stronger than expected. The S&P 500 gained 14.9% in U.S.-dollar terms for the quarter, while the S&P/TSX Composite Index advanced 6.4%, supported by healthier earnings expectations and improving market breadth.
Canadian equities were led by a strong rebound in financials, as better-than-expected bank earnings, resilient credit quality and improved capital markets activity lifted sentiment. U.S. equities were supported by earnings strength rather than a simple risk-on rally, with Information Technology leading as AI infrastructure spending continued to anchor sentiment. International equities also contributed meaningfully, with emerging markets Korea and Taiwan benefitting from demand across the global technology supply chain.
Market outlook: valuations and rates make selectivity more important
Markets enter the second half of 2026 with fundamentals remaining broadly supportive, although elevated equity valuations leave less room for error. Earnings growth is likely to remain the key driver of returns, while inflation trends, central bank policy and interest-rate expectations will continue to shape market sentiment.
Across asset classes, diversification remains important. Canadian, international and emerging market equities offer exposure to distinct sources of growth, while higher yields in fixed income continue to provide a cushion against volatility. Selectivity remains key as investors balance opportunities against valuation and policy risks.
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