ABC Funds portfolio manager Irwin Michael says that if the government goes ahead with the planned repeal of foreign content restrictions, he will shift its Canadian funds to 50% Canadian content, 50% U.S.

In a new market commentary, Michael notes, “We believe that the elimination of the 30% foreign content restriction, if passed, will be quite favourable for equity diversification and the ABC Funds. Once put into law, we intend to adjust out country mix of our two Canadian funds to 50-50 Canada – U.S.”

As for the market itself, Michael says he’s optimistic and is selecting new equity holdings to add to the four ABC portfolios. “Presently, including the two U.S. takeovers, our cash position is over $125 million. Our objective, over the next three months, is to significantly reduce this large cash pool as we prepare for the next upward move of equity prices later on in 2005.”

In the meantime, he notes that equity trading in April is ending the month much as it ended March – very weak. “For instance, up to this point the Dow Jones 30 Industrials has fallen over 3.3% during April and has declined over 5.8% for 2005 whereas the TSX 300 has returned -1.75% and +2.5% for the month and 2005 Respectively,” it says. “We continue to believe that equity markets will remain extremely volatile during 2005 however, we expect markets to end the year moderately higher from where they are today.”

He adds that it’s particularly positive on the U.S. market “where we are starting to uncover numerous, undervalued, deep-value situations. At this point, we are selecting the most attractive of these equities and we are starting to accumulate stock positions.” He adds that, due to the Sarbanes-Oxley Act effect, “we will continue to see a growing number of smaller U.S. corporations go private, merge or restructure.”