Update on the Caldwell Canadian Value Momentum Fund
June 2017 1 Year 3 Year 5 Year Since Inception*
Caldwell CDN Value Momentum Fund “CCVMF” 0.0% 17.1% 6.4% 14.4% 11.7%
S&P/TSX Composite Total Return Index -0.8% 11.0% 3.1% 8.7% 6.2%

*Compounded Annual Return since August 15, 2011.


June Recap:

Accredited Investors Only

 

The Fund was flat in June versus a loss of 0.8% for the S&P/TSX Composite Total Return Index (“Index”). This is the 20th time since inception that the CCVMF outperformed the Index in a down month for a success ratio of 77% (20/26). The Fund’s 5-year down-capture statistic is now a mere 17%, which is amongst the best in the country. We attribute this to the Fund’s ability to identify and own catalyst-rich stocks that have the ability to unlock value, regardless of the market’s underlying performance. For the first half of 2017, the CCVMF is out-pacing the Index by 550 basis points (+6.2% for the CCVMF versus 0.7% for the Index) and places the CCVMF in the top 2% of all Canadian Equity funds on a year-to-date basis. Additionally, the CCVMF is Canada’s #1 performing fund in the Canadian Equity category* on a 5-year basis.


Top CCVMF performers in June were BRP Inc. (+15.6%) and Enerflex (+9.7%). BRP moved higher on a fantastic earnings report where earnings per share more than doubled what analysts were expecting and included the initiation of a dividend and a sizeable stock buyback. The company continues to execute on its long-term growth plan of 10%/15% annualized revenue/ EPS growth through 2020 as they take market share on the back of innovative product launches and an expanded distribution footprint. Enerflex moved higher following its announced acquisition of Mesa, which increases its compression fleet horsepower by nearly 20%, increases exposure in the Permian and Scoop/Stack basins (which are the most active production areas), increases its percentage of recurring revenue and offers meaningful cross-sell opportunities. The deal is expected to be immediately accretive to earnings per share. Earlier this year, we wrote that we would focus any commodity-related exposure to those companies that had the ability to create shareholder value beyond a simple improvement in the underlying commodity price. Enerflex’s strong performance in June (+9.7%) made it an outlier in its energy services peer group, which fell 3.1% on the back of a 4.7% decline in the price of crude oil. Since our initial purchase of Enerflex in January, the stock has gained 7.4% versus a decline of 3.1% for Canada’s energy sector.


One stock was added to the portfolio in June: SunOpta Inc. (SOY). The company is a leading provider of organic and non-GMO consumer food and ingredients in North America. Customers include Kirkland (Costco’s private label), McDonalds, Loblaw, Gerber, Cliff Bars, Frito Lay, Blue Diamond, Hain Celestial and Chobani. The business is a product of 30+ acquisitions since 1999 that were never effectively integrated, and recent operational missteps prompted the Board to conduct a strategic review of the business. We expect the share price to move meaningfully higher on: i) a new, results-driven management team; ii) a value creation plan that involves a 40% profit improvement through cost initiatives alone; iii) growing end markets – 2016 U.S. organic food sales grew 8.4% over 2015, materially higher than the 0.6% growth in the overall food industry. The runway remains robust as organic accounts for only 5% of total food sales.


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 Fund is available on a private placement basis only to residents of Canada who are qualified “Accredited Investors” as defined under National Instrument 45-106 Prospectus Exemptions and who are resident in Canada. This material is for information purposes only and does not constitute an offering memorandum or an offer or solicitation in any jurisdiction in which an offer or solicitation is not authorized.

Please read the Fund’s Offering Memorandum before investing. Prospective investors should rely solely on the Offering Memorandum which outlines the risk factors in making a decision to invest.

The indicated rates of return are historical annual compounded total returns net of fees and expenses paid by the Fund, including changes in unit value and reinvestment of all distributions, but do not take into account sales charges or income taxes payable by any securityholder that would have reduced returns. Investments in the Fund are not guaranteed, their values change frequently and past performance may not be repeated. Investment losses do and may occur, and investors could lose some or all of their investment in the Fund.

The information herein does not consider the specific investment objectives, financial situation or particular needs of any prospective investor. No assurance can be given that the Fund’s investment objective will be achieved or that investors will meet their investment goals. Prospective investors should consult their appropriate advisors prior to investing.

Information presented herein is obtained from sources we believe reliable, but we assume no responsibility for information provided to us from third parties. Caldwell Securities Ltd. and Caldwell Investment Management Ltd. are wholly-owned subsidiaries of Caldwell Financial Ltd. Officers, directors and employees of Caldwell Financial Ltd. and its subsidiaries may have positions in the securities mentioned herein and may make purchases and/or sales from time to time.

This information may not be reproduced for any purpose or provided to others in whole or in part without the prior written permission of Caldwell Investment Management Ltd. All information and opinions indicated herein are subject to change without notice. Inception date: August 15, 2011.