US Equity Strategies


On the heels of strong results in 2020 and 2021, Pembroke’s US portfolios declined in the first quarter of 2022 and underperformed their benchmark. The year-over-year decline has been relatively modest and over the past year, Pembroke’s US equity strategy remains ahead of its benchmark.

However, there are shifting sands. Rising interest rates pressured the valuations of many growth companies in the first three months of the current year. Investor interest in the energy sector was markedly influenced by accelerating inflation and the war in Ukraine. The combination of rising commodity prices and higher interest rates is not positive for the firm’s investment approach.

Despite these factors, Pembroke remains focused on identifying companies that are positioned to grow well into the future and armed with balance sheets strong enough to ensure they will survive a potential economic downcycle.

It is difficult, if not impossible, to know when market sentiment will change again. In the meantime, the investment team is polling its management teams on the strategic progress they are making, ensuring our investments remain intact despite the changing macroeconomic backdrop, and questioning whether our holdings can pass on rising input costs to their customers. Of course, the investment team also analyzed the portfolio’s direct exposure to Ukraine, which is minimal.

US Growth Fund

Two stocks that made positive contributions to returns of the Fund over the past 12 months

Shares in Perficient (“PRFT”) have risen over the past year on the back of the company’s revenue growth, expanding profit margins, and execution of its acquisition strategy. Perficient is a US-based consultancy firm that helps its customers digitize their information technology systems. The company is benefiting from strong tailwinds, as its customers try to keep pace with all the changes in how consumers are interacting with brands. As an example, simple phone calls are now complemented or replaced by communications through mobile apps, text messaging, and social media platforms. Perficient is leveraging its growing scale to expand profit margins, while also adding capabilities in locations such as Colombia, which operate at higher margins and allow the company to meet growing customer demand for its technology expertise. The shares have, however, declined in the past several months from all-time highs. Given the company’s growth rate, free cash flow generation, and ongoing acquisitions opportunities, it remains a significant holding in Pembroke’s US equity portfolios.

Franklin Covey (“FC”), an executive training services provider, performed strongly in 2021, as the company successfully adapted to the challenges created by Covid. When the pandemic hit, the company was forced to pivot to a fully online delivery of its training services. Ironically, Covid reinforced the value of Franklin Covey’s offering because companies were faced with a myriad of challenges around employee training, engagement, and retention during the pandemic. Sales accelerated coming out of the lockdown, and the almost complete transition to a subscription-based model became clear. The share price increased amidst strong financial performance. Early 2022 has started well for the company and we believe the outlook remains strong.

Two stocks that made negative contributions to returns of the Fund over the past 12 months

Shares of Ollie’s Bargain Outlet (“OLLI US”) have declined over the past year. The company faced difficult comparisons with the previous year’s stimulus-driven sales, as well as the rising freight and labour rates that led to weak earnings results. As a closeout inventory retailer, Ollie’s can raise prices to protect margins while maintaining its price gap versus the competition. The supply-chain disruptions facing multiple industry players are also leading to buying opportunities of quality closeout merchandise. Despite these positive factors and the stock trading at the cheapest multiple since going public in 2016, Pembroke decided to sell its position. Ollie’s customers typically earn much lower wages than the average American and are more affected by rising food and oil prices, leaving fewer resources for discretionary purchases at the Ollie’s stores. We believe the company’s fundamental progress could be hindered by these macro headwinds.

Shares of Stoneridge, Inc. (“SRI”) have declined almost 35% over the last year, in the face of the well-publicized supply chain constraints impacting the auto and truck markets. However, the near, mid, and long-term fundamental thesis is unchanged. Stoneridge remains a secularly growing, high-quality supplier of components that make commercial trucks and cars safer, more energy efficient, and more connected. The company is outgrowing its end markets and is at the beginning of new product cycles that put much of this growth in its control, outside of the economic cycle. We believe, the upcoming margin and returns expansion could be significant.


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This report is for the purpose of providing some insight into Pembroke and the Pembroke funds. Past performance is not indicative of future returns. Any securities listed herein, are for informational purposes only and are not intended and should not be construed as investment advice nor is it a recommendation to buy or sell any particular security. Factual information has been taken from sources we believe to be reliable, but its accuracy, completeness or interpretation cannot be guaranteed. Pembroke seeks to ensure that the content of this document is correct and up to date but does not guarantee that the content is accurate and complete and does not assume any responsibility for this. Pembroke is not responsible for decisions or actions taken or made on the basis of information contained in this document.