Fourth Quarter 2025 Commentary | Caldwell North American Fund Annual Commentary

Market Commentary

For the fourth quarter of 2025, the Caldwell North American Fund (CNA or Fund) declined -2.3% versus a gain of 3.7% 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 Index¹. From a sector standpoint, Materials, Healthcare, and Financials were relative outperformers, whereas Real Estate, Industrials, and Utilities unperformed.

Portfolio Commentary

Top contributors to the Fund’s performance in the fourth quarter of 2025 were Royal Bank of Canada (RY), Thermo Fisher Scientific (TMO), and Granite Real Estate Investment Trust (GRT.UN)². RY performed well as strong results across capital markets and wealth management drove higher earnings and operating leverage. Improved cost discipline and resilient fee-based revenue supported a higher return profile, while credit performance remained manageable despite a cautious macro backdrop. Capital strength increased further, enabling dividend growth and supporting ongoing share repurchases. With improved operating leverage, diversified earnings drivers, and enhanced capital flexibility, confidence in the bank’s medium-term return and growth outlook strengthened over the quarter. TMO rerated higher as quarterly results reinforced confidence in an improving growth outlook, led by strength in biopharma-related end markets. Demand across bioproduction and clinical research remained solid, helping offset ongoing softness in more cyclical customer segments. Operating margins expanded as productivity improved and cost discipline drove operating leverage, while updated guidance reflected greater stability and incremental upside. With biopharma demand strengthening, easing year-over-year headwinds, and improving visibility into organic growth, investor confidence in the company’s medium-term earnings trajectory increased. GRT.UN did well as operating results showed continued strength across its industrial real estate portfolio. Leasing activity remained robust, driving higher occupancy and solid rent growth, while disciplined cost control supported steady cash flow growth. The balance sheet remained conservatively positioned, providing flexibility to accelerate capital recycling through asset sales and reinvestment into higher-quality properties. With resilient demand for logistics space, improving leasing visibility, and retained cash flow supporting distribution growth, confidence in the sustainability of earnings improved.

During the fourth quarter of 2025, the Fund initiated positions in TFI International (TFII), Canadian National Railway (CNR), and Resmed (RMD). TFII is a diversified transportation and logistics provider with operations spanning truckload, less-than-truckload, logistics, and parcel services across North America. It is now in the fourth year of a soft freight market, leaving the stock at a discounted valuation on trough earnings. The company offers significant leverage to a cyclical freight recovery, which should be supported by easing monetary conditions over the next several years. A strong balance sheet, ongoing restructuring efforts, and a continued shift toward a more asset-light model position the company to expand margins and pursue disciplined M&A as the cycle turns. CNR is a Class I railway transporting roughly $250 billion of goods annually across a uniquely positioned network connecting Canada and the U.S. and linking the Atlantic, Pacific, and Gulf coasts. Similar to TFII, it is operating through the fourth year of a soft freight market, leaving the stock at a discounted valuation on trough earnings. Ongoing operational improvements and prior network expansion are supporting network fluidity as volumes recover, which should translate into margin improvement. Looking ahead, lower capital spending plans are expected to free up cash flow for increased share buybacks, reinforcing CNR’s ability to deliver attractive long-term shareholder returns. RMD is the global leader in positive airway pressure devices, masks, and cloud-connected digital health solutions used to treat obstructive sleep apnea and other chronic respiratory conditions. It operates across sleep and respiratory care as well as software solutions for out-of-hospital providers, creating a differentiated, data-driven care ecosystem. Powerful secular tailwinds, including low diagnosis and treatment penetration for sleep apnea, rising physician awareness of its health risks, and expanding reimbursement, continue to support demand. Additional momentum from the growing use of GLP-1 drugs, a class of prescription medications used for weight loss, and increasing adoption of health and fitness trackers is driving greater diagnosis and treatment of sleep apnea and reinforcing the company’s long-term growth outlook.

Looking Forward

The state of the economy, inflation, interest rates, tariffs, and geopolitical tensions remain central themes in 2026, with macroeconomic forces continuing to play a significant role in shaping market performance. At the same time, Artificial Intelligence (AI) has emerged as a transformative technology, driving a global investment arms race as companies and countries seek to position themselves at the forefront of this shift. Rapid earnings growth and market capitalization expansion among AI-exposed companies have contributed to historically high levels of market concentration, particularly in U.S. equity markets. While there is no immediate evidence of a reversion, questions around the sustainability of current investment levels and the pace of monetization are likely to become increasingly important drivers of investor sentiment. From a macroeconomic perspective, a key risk remains the potential re-acceleration of inflation. Recent and prospective tariff actions increase the risk of higher input costs, supply-chain inefficiencies, and reduced pricing flexibility for businesses, which could ultimately be passed on to consumers. If inflation remains contained, central banks may still be able to achieve a soft landing, allowing economic growth to moderate without triggering a traditional recession. However, should inflation re-emerge, more restrictive monetary policy may be required, placing pressure on consumer spending, corporate investment, and profit margins, and potentially resulting in a more pronounced economic slowdown and rising unemployment.

While economic uncertainty remains elevated, we remind investors that one of the Fund’s core investment principles is capital protection through disciplined valuation. In this context, we believe the Fund’s value tilt and diversified positioning across sectors and business models leave it well-situated for a range of potential outcomes. History has shown that periods of heightened uncertainty often create opportunities for investors with multi-year investment horizons. Accordingly, we will continue to manage the portfolio in line with our investment principles, focusing on companies with attractive valuations, strong balance sheets, capable management teams, and durable business models that can compound value over time.