Canadian Value Momentum Fund Reports

January 2018 | Caldwell Canadian Value Momentum Fund Commentary

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January Recap:

 

The Fund fell 0.8% in January versus a more substantial loss of 1.4% for the S&P/TSX Composite Total Return Index ("Index”). Last month's out-performance of traditionally defensive sectors reversed in January with Consumer Staples (-1.9%), Telecom (-4.5%%) and Utilities (-4.5%) under-performing in a down month. Technology was the best performing sector in the market (+5.4%). 

 

Top CCVMF performers in January were BRP Inc. (+9.4%) and Ag Growth International (+6.6%). BRP was out marketing in January and pointed to continued strength in end markets and continued runway in penetrating new product categories. Meanwhile, Ag Growth seems to be picking up after drifting lower in a seasonally weaker period. We are encouraged to see renewed buying interest in the stock as there has been no change to the company's significant growth opportunities tied to the build-out of agricultural infrastructure. 

 

Two stocks were added to the portfolio in January: North American Energy Partners (NOA) and Stuart Olsen (SOX). NOA has done a very good job of improving its business through balance sheet and margin improvements and end market diversification. The company invested through the down-cycle and is now well-positioned to take advantage of an up-tick in activity. Stuart Olsen is expected to benefit from infrastructure spending coming out of Canada's 2015 federal election, which is only now starting to hit the market. The stock trades at a significant discount to peers and we expect this gap to narrow as activity picks up and operating metrics improve. 

 

The bigger story is the market's behavior once February started. We will have more color in next month's note but we are pleased with how the CCVMF has navigated the market's volatility thus far. Specifically, the fund continues to exhibit defensive qualities on the down-side while, at the same time, retaining strong participation in the market's upside. 

 

The Fund held a 33.8% cash weighting at month end. As previously discussed, we expect cash balances to move lower as we progress through the CCVMF's investment process. In the meantime, 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

Peer Comparison

The information contained in this document is designed to provide general information related to investment alternatives and strategies and is not intended to be investment or any other advice applicable to the circumstances of individual investors. We strongly recommend you to consult with a financial advisor prior to making any investment decisions. Unless otherwise specified, information in this document is provided as of the date of first publication and will not be updated. All information herein is qualified in its entirety by the disclosure found in the CCVMF’s most recently filed simplified prospectus. Information contained in this document has been obtained from sources we believe to be reliable, but we do not guarantee its accuracy. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing in this product. Unless otherwise indicated, rates of return are the historical annual compounded total returns including changes in unit value and reinvestment of all 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. The CCVMF is a publicly offered mutual fund that offers its securities pursuant to simplified prospectus dated July 20, 2017. The CCVMF was not a reporting issuer prior to that date and formerly offered its securities privately as follows: Series F and Series I since March 28, 2014 and Series O since August 8, 2011. The expenses of the CCVMF would have been higher during the period prior to becoming a reporting issuer had the fund been subject to the additional regulatory requirements applicable to a reporting issuer. Inception Date: August 8, 2011. Principal Distributor: Caldwell Securities Ltd.

December/Full Year 2017 | Caldwell Canadian Value Momentum Fund Commentary

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December Recap:

 

The Fund gained 0.6% in December versus a gain of 1.2% for the TSX Total Return Index. The Index finished 2017 with a strong commodity and 'risk on' rally with the Materials and Industrials sectors up 3.4% and 2.0%, respectively, in December, while traditionally defensive sectors were all in the negative: Telecom (-2.1%), Utilities (-1.2%), Gold (-0.4%) and Consumer Staples (-0.2%). Top CCVMF performers in December were Cargojet (CJT: +11%) and Imvescor Restaurant Group (IRG: +8.5%). We suspect that CJT moved higher on the back of strong online retail sales through the holiday season. The CCVMF sold its position in IRG following a take-out offer by MYT Group which implied a 2017 EBITDA multiple of 13.8x. The IRG trade was a successful one for the CCVMF with the stock +70% since the initial purchase on February 2, 2016 versus 38% for the TSX Total Return Index. Gains were a function of both multiple expansion and earnings growth - IRG was trading at 8.6x trailing EBITDA at the time of purchase and EBITDA grew over 20% through our holding period.

 

One stock was purchased in December: Rocky Mountain Dealerships (RME). The company owns and operates agricultural equipment dealerships with over 35 locations across Alberta, Saskatchewan, and Manitoba. After several years of weak equipment sales, the market cycle seems to have bottomed and the company is well positioned to benefit from a multi-year up-cycle. Cost and inventory reductions should lead to strong profitability as the company looks to enter a fragmented U.S. market. The CCVMF ended the year with a 38% cash position. As noted last month, we expect the cash balance to move lower as we progress through our due-diligence process on new opportunities. 

 

Full Year 2017 Recap:

 

2017 was another successful year for the CCVMF as it once again significantly out-paced its benchmark. The Fund gained 13.8% in 2017 versus a gain of 9.1% for the TSX Total Return Index for out-performance of 4.7%. *Please see below for standard performance data.  Gains in the Index were broad-based with only the Energy sector (-10%) showing a decline. Looking into the CCVMF's performance, success in 2017 was driven by both sector allocation (i.e. being in the right sectors) and security selection (i.e. being in the right stocks), with the former accounting for 2/3 of the out-performance versus the Index. 

 

Top contributors from a sector standpoint included:

  1. Security selection in Consumer Discretionary stocks, driven by Martinrea, Cogeco and BRP Inc;
  2. The CCVMF being over-weight the Industrials sector, which out-performed the broader market;
  3. The CCVMF being under-weight the poorly performing Energy sector. 

Top detractors included:

  1. Security selection in Technology stocks, driven by Celestica and Wi-Lan;
  2. The CCVMF being under-weight the Financials sector, where the fund missed out on the strong performance of the banks;
  3. Security selection in the Energy sector - although the CCVMF was under-weight energy stocks, the stocks it did own - Enerflex, North American Energy Partners and High Arctic Energy - under-performed. 
Top and Bottom CCVMF Contributors

As Table 1 shows, the top individual stock contributors out-paced the bottom contributors by a factor of 2.3x. The CCVMF also added to its winning streak of out-performing in months when the TSX Total Return Index was negative. Specifically, the Index posted negative returns in May, June and July and lost 2.1% over this three month period. Meanwhile, the CCVMF out-performed the Index in both May and June - including posting a positive return in May - and only declined 0.8% over the three month period. Since inception, the CCVMF has out-performed the Index in a down-month 20/27 times (74% success ratio) and posted a positive return 11/27 times (40% success ratio). 

Growth of $10,000

The strong result in 2017 puts the CCVMF in the top 4% of our Morningstar Canadian Equity peer group. The CCVMF's success is a function of a concentrated portfolio of 15-25 stocks where each position has a strong set of catalysts to increase its value. We continue to look forward to strong results as we progress through 2018 and beyond.

 
We thank you for your continued support.
 
The CCVMF Team

The information contained in this document is designed to provide general information related to investment alternatives and strategies and is not intended to be investment or any other advice applicable to the circumstances of individual investors. We strongly recommend you to consult with a financial advisor prior to making any investment decisions. Unless otherwise specified, information in this document is provided as of the date of first publication and will not be updated. All information herein is qualified in its entirety by the disclosure found in the CCVMF’s most recently filed simplified prospectus. Information contained in this document has been obtained from sources we believe to be reliable, but we do not guarantee its accuracy. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing in this product. Unless otherwise indicated, rates of return are the historical annual compounded total returns including changes in unit value and reinvestment of all 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. The CCVMF is a publicly offered mutual fund that offers its securities pursuant to simplified prospectus dated July 20, 2017. The CCVMF was not a reporting issuer prior to that date and formerly offered its securities privately as follows: Series F and Series I since March 28, 2014 and Series O since August 8, 2011. The expenses of the CCVMF would have been higher during the period prior to becoming a reporting issuer had the fund been subject to the additional regulatory requirements applicable to a reporting issuer. Inception Date: August 8, 2011. Principal Distributor: Caldwell Securities Ltd.

November 2017 | Caldwell Canadian Value Momentum Fund Commentary

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November Recap:

 

The Fund gained 0.2% in November versus a gain of 0.5% for the S&P/TSX Composite Total Return Index ("Index”). Traditionally defensive sectors such as Consumer Staples (+3.7%), Telecom (+2.4%) and REITs (+1.7%) out-performed the more cyclical sectors. Industrials (-1.5%), where the CCVMF has its largest exposure, was the worst performing sector in the market; however, security selection was strong as the fund’s weighted average return across its Industrials stocks was +1.5%.

 

Top CCVMF performers in November were Martinrea (+21.5%) and Empire Group (+11.2%). Martinrea moved higher on the back of a strong earnings report in which the company raised its long-term operating margin guidance. Martinrea is on track to double its margin level over the 2013-2019 period on the back of operational improvements, better pricing discipline and product mix. Empire moved higher on a third consecutive quarter of food inflation after 11 months of deflation. While this is positive for all grocers, Empire is also benefiting from company-specific catalysts as it announced details on a round of spending cuts that are part of a broader restructuring plan.

 

No stocks were added to the portfolio in November.

The CCVMF has significantly outpaced its benchmark over its 6+ year history and we were recently asked how we do that: what is our edge?  Our answer is that it's a combination of two things. First, our proprietary factor model helps us identify companies with strong catalysts. There are very good things happening at these companies to drive their share prices higher. The second important piece is that we own a concentrated portfolio of these high-catalyst names. One can think of the CCVMF in terms of a steak versus a sausage. There is no 'filler' in the CCVMF. The combination of owning a concentrated group of only high-catalyst names results is a portfolio with the ability to significantly out-perform the market.

The Fund held an 33% cash weighting at month end. The relatively higher cash balance is a function of two factors:

  1. There is often a lag between when stocks are sold from the portfolio to when new names are added which creates a cash balance. We executed on a number of sell signals following relatively tepid earnings reports and are now waiting for our proprietary model to produce buy signals and subsequently work through the due-diligence. We expect cash balances to move lower as we progress through this process.
  2. Investors are acknowledging the CCVMF's ability to generate alpha and the fund has started to see significant money flow into it. Our priority is to ensure this money gets wisely deployed into the market.

In the meantime, 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

Peer Comparison

The information contained in this document is designed to provide general information related to investment alternatives and strategies and is not intended to be investment or any other advice applicable to the circumstances of individual investors. We strongly recommend you to consult with a financial advisor prior to making any investment decisions. Unless otherwise specified, information in this document is provided as of the date of first publication and will not be updated. All information herein is qualified in its entirety by the disclosure found in the CCVMF’s most recently filed simplified prospectus. Information contained in this document has been obtained from sources we believe to be reliable, but we do not guarantee its accuracy. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing in this product. Unless otherwise indicated, rates of return are the historical annual compounded total returns including changes in unit value and reinvestment of all 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. The CCVMF is a publicly offered mutual fund that offers its securities pursuant to simplified prospectus dated July 20, 2017. The CCVMF was not a reporting issuer prior to that date and formerly offered its securities privately as follows: Series F and Series I since March 28, 2014 and Series O since August 8, 2011. The expenses of the CCVMF would have been higher during the period prior to becoming a reporting issuer had the fund been subject to the additional regulatory requirements applicable to a reporting issuer. Inception Date: August 8, 2011. Principal Distributor: Caldwell Securities Ltd.

October 2017 | Caldwell Canadian Value Momentum Fund Commentary

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October Recap:

The Fund gained 4.8% in October versus a gain of 2.7% for the S&P/TSX Composite Total Return Index ("Index”). The Financial sector (+4%) drove the market higher on a 4.5% gain in the Banking Index. The Utilities, Consumer Discretionary, Telecom and Industrials sectors were also strong, each up over 3%, offset by declines in Energy (-0.4%) and Health Care (-0.3%). Strength in the CCVMF portfolio was broad-based with nearly 80% of stocks out-pacing their sector returns and only 4 stocks under-performing the broader market.

 

Top CCVMF performers in October were Calian Group (+16.2%), Martinrea (+11.6%) and WSP Global (+11.4%). Calian announced  a contract renewal with the Canadian Armed Forces, which removed a key overhang on the stock and provides incremental revenue opportunity with an initial four year term totaling $275 million plus an eight-year extension option for an additional $600 million. While there was no company-specific news behind Martinrea's move, strength in auto sales in both Canada and the U.S. are positive for auto-suppliers. WSP moved higher following its Analyst Day in late September. While there were no major changes to the outlook, investors walked away with increasing confidence in WSP's growth and diversification strategy and attractive runway of opportunity.

 

Two stocks were added to the portfolio in October: Chorus Aviation (CHR) and Empire (EMP.A). Chorus is in the businesses of contract flying, aircraft leasing and aviation services.  The contract flying business is dominated by a capacity purchase agreement (CPA) with Air Canada (AC) where Chorus operates scheduled service under the Air Canada Express brand. Now that investors have become comfortable with the economics and cash flow generation of the new CPA signed with AC in 2015, focus has shifted to the opportunities in growing the aircraft leasing portfolio, where Chorus has become a major player in the regional jet market. Demand in this part of the market continues to be robust as the world's fleet of regional jets is only 20-25% leased versus commercial jets at 40%+. Empire is a food retailer operating under the Sobeys, Safeway, IGA and Freshco brands. After years of poor execution following the Safeway acquisition, a new management team has been put in place to execute a turnaround plan that involves accelerating sales growth and extracting meaningful cost savings. Early progress looks promising as the company recently posted its first positive tonnage quarter after thirteen consecutive quarters of negative tonnage, while simultaneously improving margins.

 

One of the key features of the CCVMF is that it is a very complementary portfolio to other Canadian Equity strategies. The Fund's proprietary screening process allows us to identify under-the-radar companies that have tremendous opportunity to grow in value. One such company is Calian Group (noted above), whose CEO, Kevin Ford, was recently featured in the Ottawa Business Journal as the 2017 CEO of the Year. Calian was initially purchased in the CCVMF in February 2016, with the stock up nearly 80% since that time.

 

The Fund held an 11.2% 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

Peer Comparison CCVMF

The information contained in this document is designed to provide general information related to investment alternatives and strategies and is not intended to be investment or any other advice applicable to the circumstances of individual investors. We strongly recommend you to consult with a financial advisor prior to making any investment decisions. Unless otherwise specified, information in this document is provided as of the date of first publication and will not be updated. All information herein is qualified in its entirety by the disclosure found in the CCVMF’s most recently filed simplified prospectus. Information contained in this document has been obtained from sources we believe to be reliable, but we do not guarantee its accuracy. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing in this product. Unless otherwise indicated, rates of return are the historical annual compounded total returns including changes in unit value and reinvestment of all 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. The CCVMF is a publicly offered mutual fund that offers its securities pursuant to simplified prospectus dated July 20, 2017. The CCVMF was not a reporting issuer prior to that date and formerly offered its securities privately as follows: Series F and Series I since March 28, 2014 and Series O since August 8, 2011. The expenses of the CCVMF would have been higher during the period prior to becoming a reporting issuer had the fund been subject to the additional regulatory requirements applicable to a reporting issuer. Inception Date: August 8, 2011. Principal Distributor: Caldwell Securities Ltd.

September 2017 | Caldwell Canadian Value Momentum Fund Commentary

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September Recap:

The Fund gained 2.8% in September versus a gain of 3.1% for the S&P/TSX Composite Total Return Index ("Index”). Energy (+7.4%) reversed weak year-to-date performance to drive the market higher on the back of a 9.4% increase in the price of crude oil. Consumer Discretionary (+5.5%) was also a strong performer driven by auto parts producers: Magna (+10.8%), Linamar (+9.3%) and Martinrea (+4.0%). While the Index posted an overall gain, traditionally defensive sectors such as Consumer Staples (-0.3%) Materials/Gold (-4.0%/-8.5%), REITs (-0.5%), Telecom (-1.3%) and Utilities (-2.3%) all posted negative returns. This was in sympathy with bond yields continuing to move higher after the Bank of Canada made its 2nd (surprise) rate increase on September 6, 2017. 

 

Top CCVMF performers in September were Enerflex (+17.5%), IBI Group (+11.0%) and Transcontinental (+7.4%). Enerflex moved higher on the strength in Energy.  The company is benefiting from the build-out of infrastructure around natural gas plays and has the ability to grow in value without needing commodity prices to move higher.  IBI Group has been gaining strength after a solid earnings report in mid-August. The company is well positioned to capitalize on infrastructure spend, particularly in transit, and continues to trade at a discount to peers despite attractive organic growth and margins. Transcontinental moved higher on a strong earnings report that beat expectations on both revenue and expenses. Organic growth showed strong improvement and the company continues to execute its transformation plan, using robust and steady cash flow from its printing division to grow its flexible packaging business. 
No stocks were added to the portfolio in September. 

 

The Fund held an 18% cash weighting at month end (cash at the time of writing is 13%).  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 document is designed to provide general information related to investment alternatives and strategies and is not intended to be investment or any other advice applicable to the circumstances of individual investors. We strongly recommend you to consult with a financial advisor prior to making any investment decisions. Unless otherwise specified, information in this document is provided as of the date of first publication and will not be updated. All information herein is qualified in its entirety by the disclosure found in the CCVMF’s most recently filed simplified prospectus. Information contained in this document has been obtained from sources we believe to be reliable, but we do not guarantee its accuracy. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing in this product. Unless otherwise indicated, rates of return are the historical annual compounded total returns including changes in unit value and reinvestment of all 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. The CCVMF is a publicly offered mutual fund that offers its securities pursuant to simplified prospectus dated July 20, 2017. The CCVMF was not a reporting issuer prior to that date and formerly offered its securities privately as follows: Series F and Series I since March 28, 2014 and Series O since August 8, 2011. The expenses of the CCVMF would have been higher during the period prior to becoming a reporting issuer had the fund been subject to the additional regulatory requirements applicable to a reporting issuer. Inception Date: August 8, 2011. Principal Distributor: Caldwell Securities Ltd.

August 2017 | Caldwell Canadian Value Momentum Fund Commentary

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Update on the Caldwell Canadian Value Momentum Fund

August Recap:

The Fund was +0.15% vs. +0.4% for the S&P/TSX Composite Total Return Index ("Index”). Energy was a big negative for the market, down 3.5% in August on a nearly 6% decline in the price of crude oil. Year to date, the Energy sector is down 16% which makes it the worst performing sector in the country. While the TSX price index is down slightly year-to-date, only Energy (-16.0%) and Health Care (-13.8%) are in negative territory; all other sectors have produced positive returns. This illustrates the advantage that selective market exposure can give investors, something that CCVMF investors have benefited from since the Fund's inception over 6 years ago.

 

Happy 6th Birthday! The CCVMF celebrated its 6th birthday in August. Since inception, the CCVMF is +11.1% versus the TSX +6.2%, and continues to be one of the top performing Canadian Equity funds in the country. We include a table, below, that shows the performance of CCVMF relative to competing funds in both the Canadian Equity category and the Canadian Small/Mid Cap category. While top-quartile returns are attractive, the CCVMF also performs well on risk metrics, including the up/down capture. In addition, correlation analysis shows the CCVMF as an attractive compliment to other investment strategies available to Canadians. This is important because lower correlations between investment strategies reduce overall portfolio volatility and result in more attractive risk-adjusted returns.

 

CCVMF Peer Comparsions

Top CCVMF performers in August were Premium Brand Holdings. (+9.5%) and Martinrea. (+8.2%). Premium Brands had a very strong quarter driven by organic growth and better than expected margins. The outlook continues to be positive given strong demand and the new sandwich facility tracking ahead of schedule. The strong result prompted analysts to increase the Consensus 2018 EPS estimate by 8%. Martinrea also reported a very strong result with continued progress on margins and new contract awards. The company's progress is leading to increased investor confidence in the company's margin targets, which should help move the valuation higher. 

 

No stocks were added to the portfolio in August. 

 

The Fund held a 14% 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 document is designed to provide general information related to investment alternatives and strategies and is not intended to be investment or any other advice applicable to the circumstances of individual investors. We strongly recommend you to consult with a financial advisor prior to making any investment decisions. Unless otherwise specified, information in this document is provided as of the date of first publication and will not be updated. All information herein is qualified in its entirety by the disclosure found in the CCVMF’s most recently filed simplified prospectus. Information contained in this document has been obtained from sources we believe to be reliable, but we do not guarantee its accuracy. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing in this product. Unless otherwise indicated, rates of return are the historical annual compounded total returns including changes in unit value and reinvestment of all 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. The CCVMF is a publicly offered mutual fund that offers its securities pursuant to simplified prospectus dated July 20, 2017. The CCVMF was not a reporting issuer prior to that date and formerly offered its securities privately as follows: Series F and Series I since March 28, 2014 and Series O since August 8, 2011. The expenses of the CCVMF would have been higher during the period prior to becoming a reporting issuer had the fund been subject to the additional regulatory requirements applicable to a reporting issuer. Principal Distributor: Caldwell Securities Ltd.

July 2017 | Caldwell Canadian Value Momentum Fund Commentary

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.

June 2017 | Caldwell Canadian Value Momentum Fund Commentary

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.

May 2017 | Caldwell Canadian Value Momentum Fund Commentary

 

May 2017 1 Year 3 Year 5 Year Since Inception*
Caldwell CDN Value Momentum Fund “CCVMF” 0.6% 16.6% 6.8% 14.4% 11.8%
S&P/TSX Composite Total Return Index -1.3% 12.3% 4.7% 9.1% 6.5%


*Compounded Annual Return since August 15, 2011.

 

May Recap:

Accredited Investors Only

 

The Fund gained 0.6% in May versus a loss of 1.3% for the S&P/TSX Composite Total Return Index (“Index”). This is the 19th time since inception that the CCVMF outperformed the Index in a down month for a success ratio of 76% (19/25). It is also the 11th time that the CCVMF posted a gain when the Index declined, a testament to the strong downside protection of the strategy.

 

Top CCVMF performers in May were Boyd Group (+13.3%) and Sleep Country (+10.5%). Boyd moved higher on the acquisition of Assured Automotive, Canada’s largest non-franchised collision repair company. The deal is expected to be immediately accretive to earnings per share and adds 68 locations, more than doubling Boyd’s Canadian footprint. Sleep Country moved higher on a strong Q1 earnings report that included a very impressive 12% growth in same store sales and over 100 basis points of margin expansion. Recent acceleration of troubles at Sears suggests additional market share opportunities and the potential for meaningful earnings per share growth.

 

Four stocks were added to the portfolio in May: Savaria Corp (SIS), Colliers International (CIGI), Cogeco (CGO) and People Corp (PEO). Savaria is a North American leader in accessibility solutions for the elderly and physically-challenged. Its products include wheelchair lifts, stair lifts, residential and commercial elevators and vehicle accessibility devices. It recently acquired Span-America which adds specialty mattresses, beds and related products to the portfolio and enhances their distribution into the long term care and acute care markets. The company is seeing strong demand drivers as the population ages, people live longer, and as the world increasingly accommodates those with physical disabilities. Colliers is a global leader in commercial real estate services with over 85% of sales outside of Canada. The company is benefitting from institutional investors increasing portfolio allocations to real estate as a means of generating yield in a low interest rate environment, and the preference by these institutions to partner with a large, multi-national provider over multiple local players. Cogeco is a cable and internet provider that is seeing improved execution and strong growth momentum in the U.S. market. We expect the discount to peers to narrow. Lastly, People Corporation provides employee group benefits consulting, third-party benefits administration services, and pension and human resource consulting to Canadian companies. The business has high recurring revenue (90%+) with attractive retention metrics and is benefitting from health care cost inflation. The company is consolidating a sleepy brokerage industry where it is seeing opportunities to accelerate sales (introducing sales targets and hiring new brokers) and reduce costs through back office synergies. This story also fits our ‘under-covered’ category with only 3 sell-side analysts covering the name.

 

The Fund held a 2% 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.

April 2017 | Caldwell Canadian Value Momentum Fund Commentary

 

March 2017 1 Year 3 Year 5 Year Since Inception*
Caldwell CDN Value Momentum Fund “CCVMF” 2.7% 20.3% 7.4% 12.6% 11.9%
S&P/TSX Composite Total Return Index 0.4% 14.9% 5.1% 8.1% 6.8%

 

*Compounded Annual Return since August 15, 2011.

 

April Recap:

 

Accredited Investors Only

The Fund gained 2.7% in April versus a gain of 0.4% for the S&P/TSX Composite Total Return Index (“Index”).

Top CCVMF performers in April were Calian Group (+9.9%) and Ag Growth International (+9.6%). Ag Growth moved higher on a sizable acquisition that is immediately accretive to earnings per share. The acquisition hits many key attributes, including bringing on a complementary product and geographic footprint, and significant potential for sales, manufacturing and other cost synergies. While we saw no specific news on Calian, we see this as an attractive 20% ROIC business with a focused growth plan and a compelling valuation. The company is under-covered with only 3 analysts currently following the name and we expect shares to continue moving higher as the story hits more investors’ radars.

 

Two stocks were added to the portfolio in April: Martinrea (MRE) and BRP Inc (DOO). Martinrea supplies auto parts to OEMs with a focus on metal forming (both steel and aluminum) and fluid management. The company is in an attractive position where it can grow revenue and margins without the need for overall industry volume growth as low margin contracts roll off, aluminum plants ramp up production and they execute their backlog. BRP is a leading global manufacturer of powersport vehicles and propulsion systems, including ATVs, SSVs, snowmobiles and watercraft, and operates under the Ski-Doo, Lynx, Sea-Doo, Rotax, Can-Am and Evinrude brands. The company is executing a plan of double-digit revenue and EPS growth through new product launches and category penetration, the expansion of its dealer channel and margin improvements. The stock trades at a sizable discount to its primary competitor despite much better operational performance.

 

The CCVMF is a great way for investors to participate in the best the Canadian market has to offer. This involves owning a focused portfolio of the right stocks at the right time. While our proprietary process helps us identify the most attractive stocks to own, our quantitative signals also point us to the stocks we should be selling. The nice thing about quantitative signals is that they provide discipline to the investment process. This served CCVMF investors well on our recent sale of AGT Food & Ingredients. While there are many things to like about AGT’s business, the stock hit our sell signal and the longer a stock stays in a ‘sell’ status, the more we grow uncomfortable with it remaining in the portfolio. The stock drifted lower on what we thought were temporary events, but ultimately failed to respond to positive news, prompting us to sell the position. This saved our investors from a negative pre-announcement and sizable earnings miss that took the stock down by 16% in 2 days.

 

The Fund held an 8% 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.