March/April 2017 | Caldwell Balanced Fund Commentary

Portfolio Deletion

Onex (Onex-t)

Reason We Sold: The stock hit our valuation target, trading at over a 30% premium to net asset value (“NAV”). Onex has been busy on the monetization, fund-raising and investment fronts, all of which will have a positive impact on future NAV growth. While analysts expect the shares to move higher as NAV growth accelerates, forward NAV estimates seem, to us, to be pricing in a lot. Since the 30% premium to NAV level is where shares historically topped out, we decided to sell our position. Onex has been a very successful investment for our clients. Since our initial purchase in November 2011, Onex shares are up 187% versus 29% for the TSX, 72% for the Canadian Financials sector and 93% for the S&P500.

Company Updates

Parkland Fuel (PKI-t)

Parkland announced it is acquiring Chevron Canada’s downstream fuel business. The acquisition will increase operating income by ~70%, is highly accretive, and further strengthens Parkland’s supply-focused business model by adding significant scale. We expect the stock to continue to grind higher as Parkland works through significant cost synergies, something it has proved quite adept at with its prior acquisitions.

Bird Construction (BDT-t)

We are cautiously optimistic that shares have seen a bottom and are set to move higher from here. While earnings were well below expectations this past quarter, backlog grew 10% from the prior quarter, and is the first time backlog showed sequential growth since Q3-2015. Management’s tone is increasingly positive as they see a growing amount of bidding activity and improved margins embedded in their backlog. Bird also named Terrance McKibbon, who was formerly the CEO at Aecon Group, as the company’s new Chief Operating Officer. We view this addition in a positive light and expect it will accelerate Bird’s growth and diversification strategy.

Broadridge Financial Solutions (BR)

The stock recently reached an all-time high on the back of a strong earnings report that saw closed sales increase 66% year over year. Broadridge’s offerings are mission critical and deeply embedded within the financial services industry. This leads to very sticky relationships which are further strengthened by the fact that over 50% of Broadridge’s salesforce leverage its customer base and capture a higher share of wallet spend. The stock has significantly outpaced the TSX and S&P 500 since our initial purchase in December 2015 and we expect further upside as this strategy plays out, evidenced by the broad-based strength in closed sales.

We appreciate your continued support.

Best Regards,
Portfolio Management Team

The information contained in this document is designed to provide you with general information and is not intended to be comprehensive investment advice applicable to the circumstances of an institutional or individual investor. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. The indicated rate(s) of return is (are) the historical annual compounded total return(s) including changes in (share or unit) value and reinvestment of all (dividends or distributions) and does (do) not take into account sales, redemption, distribution or optional charges or income taxes payable by any securityholder that would have reduced returns. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. Inception Date: March 1, 1990. Principal Distributor: Caldwell Securities Ltd.

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