Three Years Went By Fast

On January 31, 2021, the Pembroke Concentrated Fund (“PCF”) celebrated its third anniversary, an important milestone in fund management.  Our results continue to support our original thesis: that a concentrated portfolio of high-quality, differentiated growth stocks can outperform the market over the long-term.  While we are pleased with our first three years, we remain focused on the future.


The historic market rotation that began in November after Pfizer’s vaccine announcement and the Georgia Senate run-off continued in the first quarter of 2021.  The increased likelihood of greater fiscal stimulus and a swift economic recovery led equity markets higher.  The smallest cap, deepest value, lowest quality stocks performed best.  Conversely, the high-quality growth stocks that led in 2020 struggled.

Pembroke’s disciplined approach to generating superior long-term returns is unchanged.  We are not chasing this “junk rally”.  In fact, we view this period as an opportunity, and actively repositioned the portfolio away from the stocks that were handsomely rewarded in 2020 into other high-quality Pembroke businesses poised for growth in this new environment.  This multi-year period of “reflation, re-acceleration and recovery” will produce different winners than last decade’s “lower for longer” darlings.

In this quarter’s letter we will discuss these recent portfolio actions, the resulting updated Portfolio Characteristics data, our Q1 performance, and our market outlook.

Andrew Garschagen, MBA
Partner, Portfolio Manager
March 31, 2021 - Class F Issue

Case Study

byAndrew Garschagen


SiteOne Landscape Supply (“SITE”) distributes landscaping supplies such as lawn care products, hardscapes, irrigation equipment, fertilizer and related equipment to contractors, landscape architects and other maintenance personnel in the US – a $20 billion market.  SITE is the only distributor with a national footprint and is five times the size of its next largest competitor.

SITE is a multi-faceted growth story.  First, the organic growth of the market ranges between 3-5%, depending on the year.  On top of that, the company is aggressively pursuing a consolidation strategy that management successfully executed in the aggregates space at Old Castle, which adds 7-10% incremental revenue growth per year.  SITE has acquired close to 60 businesses since spinning off from John Deere but has multiple decades of consolidation ahead of it in this highly fragmented market.  Importantly, the company is funding M&As entirely from internally-generated cash flow, thus insulating equity investors from future dilution.

From a quality perspective, SITE checks many boxes for us.  It boasts returns on equity and invested capital in the teens to 20s and steadily improving distribution specific metrics.  It has dominant brands and positions in its local markets, which is critical as this is very much a local business.  It benefits from an ideal market structure, with sustainable power over both its customers and suppliers.  While 40% of its demand does come from the cyclical new construction market, 60% is derived from maintenance and repair projects which are less cyclical by nature.

On management, the team is highly effective and well aligned with shareholders.  The majority of the team’s net worth is in SITE stock, and importantly, they possess a clear ownership mentality and manage the business for the long-term.

Pembroke sees a compelling, long runway for growth at SITE.  While we continually assess the sustainability of the company’s competitive position, monitor for changes in M&A dynamics, and scrutinize management’s execution progress, we believe SITE could be a stock in our portfolio for many years to come.


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 compounded total returns including changes in unit value, reinvestment of all distributions and do not take into account sales charges or income taxes payable by any security holder that would have reduced returns. Mutual funds are not guaranteed, their values change frequently, and past performance may not be repeated.

Performance is reported for both PCF A-Class and F-Class units in Canadian Dollars, net of transaction costs and net of all other fees, excluding management fees. Management fees are charged directly to unitholders based on their assets under management, except for Class F units, which are charged to the Fund. Periods greater than one year have been annualized. The performance for the portfolio and benchmark index are measured using the “time weighted” rate of return methodology.

The Pembroke Concentrated Fund was converted from a pooled fund to a mutual fund on April 1st, 2020. For the period this Fund was a pooled fund, the expenses would have been higher if the Fund was a prospectus mutual fund.

The above information is for the purpose of providing some insight into the performance of the Pembroke Concentrated Fund. Commissions, management fees and expenses all may be associated with mutual fund and pooled fund investments. Investment performance assumes reinvestment of dividends and capital gains and is net of transaction costs and net of all other fees, excluding management fees. Performance results will be reduced by the fees incurred in the management of the fund. No assurance can be given that an investor will not lose invested capital. Past performance is not indicative of future returns.