A History
of Delivering

After more than a decade, our flagship fund’s track record speaks to the superior risk-adjusted returns and tailored portfolio management we have been providing discerning Canadian investors

Jemekk Long/Short Fund

A multi-strategy approach for maximizing returns.

Serving investors since 2004, the Jemekk Long/Short fund is an all-cap portfolio with a multi-strategy approach designed to deliver superior risk-adjusted returns in all market conditions.

Learn More

Jemekk Total Return Fund

A refined approach aimed at greater preservation.

The Jemekk Total Return Fund is designed to leverage the strategic rigor and bottom-up approach of our Long/Short Fund, but with a more conservative, mid- to large-cap stance designed for lower overall volatility.

Learn More

Our Philosophy

We treat your money like our own, and we leave no stone unturned when looking for investments worthy of your attention.

At Jemekk Capital we continue our long tradition of focusing on the two pillars of investing; growing capital and protecting capital. We accomplish the first principle through our multi-strategy approach by focusing on bottom-up research to identify opportunities. For the second—protecting capital—we manage risk through judicious use of hedging and options-based insurance protection, in addition to the benefits achieved through strategic diversification.

Each of our funds has its own clear style and strategy; however, each stay focused on the core goals of protecting and growing capital within the context of each fund’s mandate.

Gerard Ferguson on BNN’s Market Call

July 10, 2017

Gerard’s top picks on BNN’s Market Call Tonight

Watch The Video

WHY US?

Jemekk Capital Management is a Canadian-based, employee-owned, private investment management firm with the aim of providing consistent, positive, absolute returns for its clients. We’ve designed our firm—and our investment strategy—to stand out to bring a sensibly different option to a market saturated with “me too” offerings.

Small = nimble

In Canada's relatively small securities markets, equities can rise and fall on relatively low volumes . With a small, engaged team and right-sized portfolios, we can investigate and respond decisively and quickly, taking advantage of our small size where larger funds may face liquidity challenges.

Sensibly different

From Nortel to Blackberry to Valeant, Canadian investors find themselves exposed to outsized risk when the index inevitably becomes imbalanced.  While our funds may invest in familiar companies, we typically demonstrate high 'active share' — a metric that reflects how different our portfolios look from the index.

Service without layers

Ultimately, the real value of working with a smaller firm is that the people you engage with are the people who actually work with your investments, every day. We invest alongside you, we value and depend on your business, and we're committed to clear communication and our mutual success.

Our Team

Jemekk Capital Management is a Canadian-based, employee-owned, private investment management firm with the aim of providing consistent, positive, absolute returns for its clients.

Gerard Ferguson

Gerard Ferguson

Founder, Portfolio Manager

Gerard founded Jemekk Capital Management in 2004 by launching the Jemekk Long/Short Fund, which he still co-manages to this day. Before setting out on his own, Gerard was a portfolio manager and VP with AGF.

More...
Rick Ummat

Rick Ummat

Founder, Portfolio Manager

Rick Ummat joined Gerard Ferguson in 2008 as an Analyst. As a co-founder of Jemekk Capital Management, Rick co-manages the Jemekk funds in tandem with Gerard, bringing his bottom-up stock analysis skills to the team.

More...

Investing with us is easy…

Our funds are available to Canadian accredited investors. We simplify the process as much as possible, we communicate each step with clarity and transparency, and we’re right beside you throughout the process.

Get in touch

Long/Short Commentary Q2 2017

Following a strong Q1, the TSX has been in a downward trend since the second quarter began. The market has given up most of its gains from Q1. Specifically, the TSX was down 1.6% in the second quarter leaving the index up 0.74% for the year. The Jemekk Long/Short Fund however continued its momentum from Q1 posting positive returns for each month in Q2. We are pleased with how the Fund performed for the quarter and year to date handily beating its benchmarks. Outperformance for the Fund was primarily driven by our Technology, Consumer Cyclical, and Basic Material weightings which we will discuss further.
(more…)

Following a strong Q1, the TSX has been in a downward trend since the second quarter began. The market has given up most of its gains from Q1. Specifically, the TSX was down 1.6% in the second quarter leaving the index up 0.74% for the year. The Jemekk Long/Short Fund however continued its momentum from Q1 posting positive returns for each month in Q2. We are pleased with how the Fund performed for the quarter and year to date handily beating its benchmarks. Outperformance for the Fund was primarily driven by our Technology, Consumer Cyclical, and Basic Material weightings which we will discuss further.

Below is an analysis of the Fund and some comparative indices in Q2:

Q2 2017 YTD 2017 Since Inception
Jemekk Long/Short Fund 3.83% 9.56% 195.35%
S&P/TSX Composite -1.64% 0.74% 153.92%
S&P/TSX Small Cap Ind. -5.51% -4.12% 56.86%

*Benchmarks quoted in Total Returns

Performance in the second quarter for Canadian markets reversed as we saw both the TSX and TSX Small Cap indices give up most or all of its Q1 gains. Focusing on the broad based TSX index, the gains in the quarter were mainly from the Industrial and Consumer Discretionary sectors however these gains weren’t enough to offset the moves in the Energy sector. The 8% drawdown in WTI led to the Energy sub-index being down over 9% for the quarter which is material given the Energy weighting for the TSX is 20%. The small cap area of the market also posted a very weak quarter driven by the heavier resource weighting in those Canadian indexes.

 

South of the border geopolitical events such as the heightened terrorist acts in Europe and continued missile testing from North Korea have done nothing to slow down the US markets. In fact, all major US indices are pushing all time highs. So, as it stands now the US markets continue their bull run (now in year 8), valuations are on the upper range, interest rates are increasing, and earnings growth is tepid at best. These factors do not bode well for equities. However, we believe the earnings backdrop remains quite healthy in certain sectors although the outlook for energy remains uncertain. June was a particularly interesting month as we witnessed a violent sector rotation out of technology names into more value oriented stocks. Tech stocks in the US have since rebounded but in Canada it’s a different picture. Canadian tech names are still 10-15% off their highs and we see this as an opportunity as valuations are justified given growth expectations. Consensus for portfolio positioning for the back half of the year is overweight cyclicals and underweight telecom and utilities (interest rate sensitive stocks) which we would agree with, for the most part, but also see technology continuing its leadership.

 

We have taken the exposure of the Fund down over the quarter. Specifically, the Fund was 95% net long coming into Q2 and exited at 80% net long. We acknowledge there is much to be worried about but overall we see underlying trends still being favorable to equity markets. However, there is definitely a divergence occurring between Canadian markets and US markets. Year to date performance for the TSX is being noticeably dragged down by energy and financials (two largest sectors in TSX) and this is readily apparent when compared to US markets that continue its upward trajectory with strong gains in technology and consumer based names. As such we would like to highlight the Fund’s outperformance versus its Canadian benchmarks and note stock picking along with large sector calls are the only way to outperform. For the quarter, the Fund’s performance was led by technology (Shopify), consumer cyclicals (Air Canada), and basic material (a basket of junior gold stocks) weightings while our energy book was a detractor.

We typically enjoy highlighting new stocks we own but would like to take this opportunity to discuss three core names in the Fund. We attended a conference in Montreal in April and had the opportunity to meet the management teams from Boyd Group, Kinaxis, and CCL Industries, which also included a site tour of their health care labeling facility. We understand stock picking is incredibly difficult but equally difficult is knowing when to sell a stock. This is where we believe we differ from other managers. Meaning, we are not quick to sell stocks with gains rather we continue to support management and if anything, buy more. Below we provide a brief summary on each of the three names and reason why we continue to be long.

 

  • Boyd Group Income Fund – Boyd, a leading collision repair company with 85% of its business from the US, continues to impress on executing its growth initiatives. We were first attracted to the story in August of 2011 because of its large growth opportunities in terms of consolidating the highly fragmented collision repair industry. Since we first purchased the stock, the company has, and continues to, exceed expectations. We have met with the CEO, Brock Bulbuck, on a number of occasions and can confidently say Brock is one of the best allocators of capital we have come across. He has publicly announced he plans on doubling the size of the business in five years, and although we are less than half way in this process, he has delivered to date on his stated objectives. We remain long and look forward to seeing Brock continue to allocate capital for maximum ROE.

 

  • Kinaxis – Kinaxis, a developer and marketer of supply chain management software, is an example of a stock where we added to the name as we got more comfortable with the story as the company executed. What made us interested in the stock was how competitive its offering was compared to global giants like SAP. We believe Kinaxis’ product is superior to its competitors and this is confirmed by continuing to add Fortune 500 companies. After meeting with management, we come away as confident as ever and excited to see this Canadian tech gem win business and one day become the de facto product solution for supply chain management.

 

  • CCL IndustriesCCL, a global leader in packaging and labeling, reminded us of a Boyd-like situation when we first started to work on it. Meaning, the company was also acquisition based and looking to consolidate the fragmented industry. However, CCL has proven to be much more than a roll-up story. We have witnessed CCL bring in both large and small companies onto their platform and remove inefficiencies resulting in margin expansion and top line growth. We view the CEO, Geoff Martin, similar to the CEO of Boyd as being an impressive allocator of capital. When on the site tour of its facility producing packaging for drug companies we were surprised by how much technology goes into the labeling process. CCL has made some very interesting acquisitions in the RFID and banknote space and we believe this is what sets the company apart from its competitors. Meaning, CCL positions itself in high growth areas of business. The company was just added the TSX 60 which should fuel more buying as we believe CCL is still an under owned stock.

 

The above stocks share common characteristics we look for when investing in companies. Specifically, they are market leaders that have high barriers to entry and have demonstrated solid growth with a clear path of continuing to capture more share in their respective industries. Also, and perhaps most important, each of these companies is led by a committed and focused CEO surrounded by a tier one management team. When investing we have found promising companies with a great business model but without the execution of a great CEO these companies have missed their mark.

 

The third quarter has started with what most would’ve seen as an unlikely event coming into the year with the Bank of Canada increasing interest rates for the first time in seven years. Much like the US, Canada is now in a rising rate environment which suggests our economy is doing well despite energy headwinds and real estate bubble talk and as such we have to position the portfolio accordingly. As we head into earnings season we remain constructive on select pockets of the equity markets but acknowledge the macroeconomic setup for stocks reads negative. We do however continue to find great ideas albeit at a more muted pace for the time being. One last thing, we would like to note the 13 year anniversary for the Jemekk Long/Short Fund. We are quite proud to have such a long history in Canadian capital markets and determined to continue to source the best ideas on behalf of our partners. Thank you as always for the continued support.

Show More ...

Total Return Commentary Q2 2017

Following a strong Q1, 2017 Q2 proved to be a volatile quarter for equity markets in North America. In Canada, we saw the TSX give up the majority of its Q1 gains and in the US we witnessed a violent sector rotation in early June. That said, we are pleased with how the Total Return Fund performed in the quarter. The Fund was up 3% outpacing the 1.6% loss for the TSX and staying on pace with the S&P 500. On a year to date basis it’s a similar story of outperformance for the Fund when compared to its Canadian benchmark but unable to keep up with the red hot gains of the US markets where major indices are at all time highs. Outperformance for the Fund was primarily driven by Technology and Consumer based stocks which we will discuss in more detail further.
(more…)

Following a strong Q1, 2017 Q2 proved to be a volatile quarter for equity markets in North America. In Canada, we saw the TSX give up the majority of its Q1 gains and in the US we witnessed a violent sector rotation in early June. That said, we are pleased with how the Total Return Fund performed in the quarter. The Fund was up 3% outpacing the 1.6% loss for the TSX and staying on pace with the S&P 500. On a year to date basis it’s a similar story of outperformance for the Fund when compared to its Canadian benchmark but unable to keep up with the red hot gains of the US markets where major indices are at all time highs. Outperformance for the Fund was primarily driven by Technology and Consumer based stocks which we will discuss in more detail further.

Below is an analysis of the Fund and some comparative indices in Q2:

Q2 2017 YTD 2017 Since Inception
Jemekk Total Return Fund 2.99% 7.95% 90.80%
S&P/TSX Composite -1.64% 0.74% 49.70%
S&P 500 (USD return) 3.09% 9.34% 124.01%

*Benchmarks quoted in Total Returns

Canadian and US markets began to diverge in the second quarter. The TSX was positive every month in Q1 but that changed in May as the strength in smaller weighting sectors could not offset the deep losses in energy stocks and the non-performance from financials leaving the TSX up only 74 basis points on the year. There is a lot to be worried about in Canadian markets. We are without a doubt seeing how much Financials and Energy (accounting for over 50% of the TSX) weigh on the index. Without these two sectors performing its tough to paint a rosy picture for the TSX. And we are of the view energy trades at best flat to up small for the balance of the year. Compounding this is the tepid IPO market in Canada. Over the last year we have seen a handful of consumer based names come to the market with limited success (Canada Goose being the outlier) and in Q2 we saw more of the same story. Real Matters, a developer of property valuation software, is trading below issue and Bento, a quick service sushi restaurant, pulled their IPO due to lack of interest. That said, Jamieson Wellness, a maker of vitamins, is trading above issue price. Overall, this does not read well for Canadian equity markets and our view is simply we have saturated the market with consumer based stocks and we would like to see more technology oriented IPOs in an effort to attract capital to Canadian names.

 

South of the border the US markets continue to march higher with all three major indices pushing all time highs despite major geopolitical concerns such as increased terrorist activity in Europe and missile testing from North Korea. The question asked every day is how much farther can US markets increase while volatility is at all time lows, the Fed is increasing interest rates, valuations appear stretched, and earnings growth is lackluster? Although there is good reason to be concerned with valuations generally high, we remain constructive on equity markets and in particular, our holdings. The earnings backdrop for sectors we are overweight appear healthy and should continue to deliver as we head into earnings season.  Another positive is multiples, although high, appear to be holding these levels given the continued interest rate environment.  In other words, some stocks are now growing into their price multiples. The US markets have had impressive performance year to date and we do not expect the same performance for the second half of the year from the same stocks. Consensus is for more value oriented names to do well along with cyclicals while interest rate sensitive names like Utilities and Telecom to underperform. We are of the same view however we are not abandoning Technology stocks as we are against consensus on valuation and believe the stocks we own are worth the multiples they have given their growth expectations. Turning to the political front, we are aware there is a lot of pressure for the Trump administration to deliver on its stated goals which have been a positive catalyst for the markets. We are monitoring these events carefully, namely tax reform, and positioning the portfolio accordingly. To date the market is giving Trump a pass on his promises but we remain concerned about his ability to execute and deliver.

 

The Fund entered the quarter 80% net long and finished 60% net long. We have been actively taking down exposure as we are being much more selective on ideas and sector calls. We are particularly pleased how the Fund has performed given its lack of exposure. However, June’s performance (-1.89%) clearly illustrates the large tech weighting and US exposure in the Fund. On the bright side, our portfolio diversification help softened the weakness during the sector rotation. For Q2, the Fund performance can be attributed to our Technology (Shopify) and Consumer based names (Constellation Brands and Air Canada especially had an impressive quarter). Below we highlight a new name for the Fund:

 

Activision Blizzard Inc.(ATVI) – Widely known for its very popular video game franchises, Activision Blizzard is also making a big bet on the growing popularity of eSports. ATVI has three core business segments: (1) Activision – global player in console gaming; (2) Blizzard – leader in PC gaming; (3) King – revered mobile gaming asset. But what has really attracted us to the story were some of the behind the scene segments which we believe are not accurately being priced by the market. These segments include: gaming distribution, studio and consumer products and most interesting, investments in eSports which is in its early stages of what we think could be an area of massive global adoption. Popular ATVI game franchises include: Call of Duty, World of Warcraft, Candy Crush, and entry into eSports with the game Overwatch.

 

Activision has high barriers to entry. It would be very costly and risky for new competitors to emerge given the runway ATVI has had and scale of monetization. We were impressed to find out how financially sound the company is given the amount of costs that go into game development. The company enjoys a strong margin profile, kicks out approximately $2b in FCF a year with a very healthy balance sheet ($3b in cash + up to $5b in additional debt capacity). Through very smart acquisitions ATVI has built a remarkable company with exposure to every gaming arena and with its Blizzard business able to capture the secular shift from physical cartridges to digital games. By and large the above characteristics are known to the investing public and as such will result in limited upside for the stock. However, why we are long the company is for the push ATVI is making into eSports. What is eSports?

 

eSports – is an organized competition between ‘gamers’ (amateur but more so professional) viewed live (arenas such as Staples Centre), online (Twitch, YouTube, Facebook), or on tv (ESPN). eSports is becoming a global phenomenon that is expected to grow revenues over 30% every year for the next 5 years. eSports is in the very early innings of growth but has already garnered a lot of attention and we believe will one day overtake viewership of the big four pro sport franchises and Activision is set to benefit from this movement. Specifically, (1) the formation of a division dedicated to competing in eSports; (2) ownership of Major League Gaming (MLG), a curator of professional gaming events; (3) creation of Overwatch League which is modeled after professional sports, is designed to build out teams on a city by city basis including recruiting and training sought after talent complete with guaranteed contracts and benefits. Simply, Overwatch League is a way to organize and streamline the process for these athletes to better compete on a global scale. There is a lot to be excited about with a company like Activision but what interests us the most is how well ATVI is positioned in the nascent stages of eSports. For example, ATVI already has 4 of the top 10 titles in eSports and the company is laser focused on being a dominant player in the space and has recently sold franchise rights to seven cities for competition which include serious players like Bob Kraft (owner of the New England Patriots) and Jeff Wilpon (owner of the New York Mets). We believe eSports will be yet another lucrative business segment for ATVI primarily from multi-million dollar media rights contracts, sponsorship opportunities, licensing agreements, and merchandise and ticket sales.

 

We begin Q3 much more cautious than we did when we entered Q1. We remain constructive on equity markets as whole and believe underlying trends still provide reasons to be optimistic. Canada is going to continue to struggle unless there is a rebound in energy and the financials begin participating. Q3 also began with the Bank of Canada hiking interest rates for the first time in seven years which came as a surprise to most market participants and has led to unexpected strength in the Canadian dollar. This should be viewed as a positive signal suggesting Canada is regaining its footing and we have hit an inflection point in our economy. On the US front we are only half way through the year and the S&P 500 is already at or close to market strategist predictions. Which tells us if earnings prove to be more powerful than expected there could be a need to revise targets upward which would create a buying catalyst for the markets.

Show More ...