Market Commentary
For the fourth quarter of 2024, the Caldwell North American Fund (CNA or Fund) gained 5.9% versus a gain of 6.4% for the Fund’s benchmark, which comprises an equal blend of the S&P 500 Total Return Index and the S&P/TSX Composite Total Return Index. From a sector standpoint Consumer Discretionary, Information Technology, and Financials were relative outperformers, whereas Real Estate, Materials, and Healthcare underperformed.
Portfolio Commentary
Top contributors to the Fund’s performance in the fourth quarter of 2024 were Amazon (AMZN), CAE Inc. (CAE), and JPMorgan Chase and Co. (JPM). AMZN delivered strong performance driven by record operating margins in Amazon Web Services (AWS), reaching 38% – well above the 33% consensus – as well as in the international retail segment, which achieved 3.6% compared to expectations near zero. These gains reflect infrastructure cost efficiencies, improved logistics execution, and strong growth in AWS’s Artificial Intelligence (AI) business, which is expanding at triple-digit rates annually despite Graphics Processing Unit (GPU) supply constraints. Robust consumer demand for essentials drove a 12% year-over-year increase in unit sales, while $14 billion in advertising revenue, up 19% year-over-year, and advancements in automation bolstered profitability and operational strength, reinforcing the company’s long-term growth outlook. CAE performed well as its quarterly results exceeded expectations, demonstrating resilience against challenges in its Civil segment, including a slowdown in airline pilot hiring and aircraft delivery delays. Its Defence segment margins showed notable improvement, progressing toward the management’s annual targets. The company’s strategic retirement of an underperforming Defence contract, with plans to exit two more, further boosted confidence. Additionally, clarity on CEO succession provided investors with reassurance, supporting the stock’s positive performance. JPM rerated higher as the company significantly exceeded its quarterly earnings expectations, reinforcing investor confidence in its position as the premier U.S. banking franchise with comprehensive strengths across consumer, commercial, and institutional banking, as well as asset management.
During the fourth quarter of 2024, the Fund did not initiate any new positions.
Looking Forward
Inflation, interest rates, and the state of the economy continue to be the most prevalent themes in 2025. Macroeconomic forces are still the most dominant factors driving the markets. If inflation remains at a manageable level, central banks may be able to orchestrate a soft landing for the economy, avoiding a typical recession. However, if inflation elevates to undesirable levels again, a harder landing may be necessary where interest rates strain consumer spending, investments, and corporate profits, ultimately resulting in a classic recession with increased unemployment. While economic uncertainty is a predominant risk in the markets today, we remind investors that one of the Fund’s investment principles is to protect capital by seeking reasonable valuations. To that end, we think the Fund’s value tilt positions it well for the uncertain environment. History has taught us that crisis creates new opportunities and for those investors with multi-year investment horizons, we will continue to manage portfolios based on our investment principles of protecting and growing our investors’ capital through discounted valuations, strong balance sheets, good management teams and attractive business environments.
Series F, total return CAD terms
Standard performance as at December 31, 2024:
Caldwell North American Fund Series F: 1 Year: 21.9%, 3 year: 8.9%, 5 year: 11.5%, 10 year: 7.8%, Since Inception (August 8, 2014): 7.9%.
50% S&P/TSX Composite Total Return Index and 50% S&P500 Total Return Index: 1 Year: 28.9%, 3 year: 11.3%, 5 year: 14.1%, 10 year: 12.2%, Since Inception (August 8, 2014): 12.2%.
All data is as of December 31, 2024 sourced from Capital IQ, unless otherwise specified.
First purchased: AMZN 2/2/2023, CAE 11/21/2023, JPM 1/10/2022.
The information contained herein provides general information about the Fund at a point in time. Investors are strongly encouraged to consult with a financial advisor and review the Simplified Prospectus and Fund Facts documents carefully prior to making investment decisions about the Fund. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Rates of returns, unless otherwise indicated, are the historical annual compounded 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 unitholder that would have reduced returns. Mutual funds are not guaranteed; their values change frequently and past performance may not be repeated.
Publication date: January 27, 2025.