Update on the Caldwell Canadian Value Momentum Fund

July 2017 1 Year 3 Year 5 Year Since Inception*
Caldwell CDN Value Momentum Fund “CCVMF” -1.4% 12.0% 6.4% 13.4% 11.2%
S&P/TSX Composite Total Return Index -0.1% 6.8% 2.6% 8.6% 6.1%

*Compounded Annual Return since August 15, 2011.

July Recap:

The Fund declined 1.4% in July versus a loss of 0.1% for the S&P/TSX Composite Total Return Index ("Index”). While the Fund's holdings performed in line with their respective sectors, the Fund's overweight positions in the Industrial and Consumer sectors weighed on results as these sectors under-performed the broader market. We also suspect that currency had an impact - CCVMF stocks that outperformed the Index averaged ~70% of their revenue from Canada while those that underperformed generated less than 40% of their revenue from Canada. Given the Canadian dollar’s strength since mid May, the translational impact of currencies on earnings has a greater effect on this latter group.

 

Top CCVMF performers in July were People Corp. (+19.0%) and Cogeco Inc. (+13%). People reported a very strong quarter with organic growth of 16% which significantly outpaced expectations. Organic growth was driven by new client wins in their Third Party Administration vertical. Cogeco earnings also beat expectations, driven by better-than-expected performance in their Canadian division. The shares continue to trade at a discount to their sum-of-parts net asset value calculation.

 

Two stocks were added to the portfolio in July: WSP Global (WSP) and AGF Management (AGF). WSP has evolved from a pure Canadian company to a global engineering power-house focused on the higher growth Buildings, Transpiration and Infrastructure verticals. The company is also focused on countries with good long-term infrastructure spending programs (Canada, U.S., Australia, Nordics and pockets of Latin America). While federal spending is taking longer to play out, municipal and state/provincial projects have already begun as finances have improved from recessionary lows. Margins should continue to move higher and there continues to be good opportunities to build out its global capabilities given the highly fragmented nature of the industry. After years of struggling with negative fund flows, AGF seems to have hit an inflection point as investment flows and fund performance have improved. There have been significant changes in key management roles, including new heads of finance, investing, marketing and human resources. The company has also made good progress diversifying its business away from the fee-pressured Canadian mutual fund space. We believe these positive developments will drive AGF's valuation multiples closer to peers versus the large discounts the stock trades at today.

 

The Fund held a 4% cash weighting at month end. We look forward to tracking the progress of the portfolio’s holdings as we see a meaningful and diverse set of catalysts to drive continued growth.

 

We thank you for your continued support

 

The CCVMF Team

The information contained in this report is designed to provide you with general information related to investment alternatives and strategies and is not intended to be comprehensive investment advice applicable to the circumstances of the individual. We strongly recommend you to consult with a financial advisor prior to making any investment decisions. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing in this product. The indicated rates of return are the historical annual compounded total returns including changes in share and/or unit value and reinvestment of all dividends and/or distributions and do not take into account sales, redemption, distribution or optional 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. Inception Date: August 15, 2011. Principal Distributer: Caldwell Securities Ltd.