January 2024 | Caldwell Canadian Value Momentum Fund Commentary

January Recap:

For the month of January, the Caldwell Canadian Value Momentum Fund (“CVM” or “Fund”) outperformed its benchmark, the S&P/TSX Composite Total Return Index (“Index”), by 3%, with a return of 3.6% versus a return on the Index of 0.6%. At the sector level, Information Technology, Communication Services, and Industrials were relative outperformers, whereas, Materials, Healthcare, and Utilities underperformed.

Top performers in the month of January were Tricon Residential (“TCN”), Constellation Software (“CSU”), and Cameco (“CCO”). TCN’s stock surged as the company announced that it would be acquired by Blackstone for C$15.17 per share in an all-cash transaction. The offer represents a premium of approximately 30% to what price the stock was trading at before the announcement, providing a much more accurate reflection of the company’s fair value, based on its net asset value. CSU’s strong performance was a continuation of its performance following its most recent quarterly earnings, which exceeded investors’ expectations as the company continues to make progress in restructuring and improving the profitability of its Altera business. The company also continues to execute its successful acquisition strategy and has recently targeted larger deals, which should bolster its ability to generate industry-leading topline growth over the medium term. CCO rerated higher after the world’s largest uranium producer, Kazatomprom, highlighted production risks due to the constrained availability of sulphuric acid, which is used in the extraction process of uranium. This led to Uranium prices soaring to their highest level in over 16 years, providing CCO with a favourable backdrop.

During the month of January, the Fund initiated positions in Stella-Jones (“SJ”), Celestica (“CLS”), Loblaw Companies (“L”), Descartes Systems (“DSG”), Athabasca Oil (“ATH”), and Onex (“ONEX”).

SJ is a leading supplier of pressure-treated wood products to utility, telecommunications, railway, and residential construction end markets. The company should continue seeing strong demand driven by stimulus spending around the grid hardening as well as broadband expansion.

CLS is one of the largest providers of Electronics Manufacturing Services to Original Equipment Manufacturers in several end markets such as enterprise, industrial, and communications. The company should continue experiencing accelerated growth through its exposure to Artificial Intelligence (“AI”). The higher rate of growth paired with an improving mix should also provide the company with greater operating leverage.

L is the largest food retailer in Canada operating stores in all provinces with banners including Loblaws, Fortinos, Zehrs Markets, Provigo, Maxi, The Atlantic Superstore, No Frills, The Real Canadian Superstore, T&T, and Shoppers Drug Mart. The company is seeing incremental growth opportunities in the pharmacy business as the growing shortage of family doctors in Canada is leading to regulatory changes favouring pharmacies for minor primary care. This should allow the company to expand its fee-generating prescription services.

DSG is a leading software solutions provider for logistics and shipping companies. It is a high-margin business that is strategically well-positioned to exploit the heightened demand for global trade intelligence and logistical optimization solutions, as the global supply-chain environment remains challenging with increased complexity.

ATH is an oil and gas producer involved in the development of heavy and light oil resources in Alberta. The company is highly levered to the improving heavy oil differentials from the expanding egress capacity.

ONEX is one of the oldest alternative asset managers in North America. It has private equity and private credit fund offerings with fee-generating assets under management of $34 billion. The company is trading at a considerable discount to its net asset value and its cost-cutting initiatives should support its valuation to improve as it demonstrates progress.

The Fund held a 3.6% cash weighting at month-end.

While we remain mindful of the macro environment, the Fund employs a bottom-up investment approach designed to seek out attractive investment opportunities in any market. CVM has generated substantial value for investors over its long-term history driven by the combination of strong company-specific catalysts and a concentrated portfolio. We continue to look forward to strong results as we progress through 2024 and beyond.

Standard performance as at January 31, 2024:
Caldwell Canadian Value Momentum Fund (Series F): 1 Year: 5.2%, 3 year: 8.0%, 5 year: 9.2%, Since Inception (August 29, 2014): 7.7%.
S&P/TSX Composite Total Return Index: 1 Year: 4.6%, 3 year: 9.9%, 5 year: 9.6%, Since Inception (August 29, 2014): 6.4%.
Actual Investments, first purchased: TCN 9/14/2021, CSU 8/12/2020, CCO 05/31/2023.

The CVM was not a reporting issuer offering its securities privately from August 8, 2011 until July 20, 2017, at which time it became a reporting issuer and subject to additional regulatory requirements and expenses associated therewith.

Unless otherwise specified, market and issuer data sourced from Capital IQ & Morningstar Direct.

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.

FundGrade A+® is used with permission from Fundata Canada Inc., all rights reserved. The annual FundGrade A+® Awards are presented by Fundata Canada Inc. to recognize the “best of the best” among Canadian investment funds. The FundGrade A+® calculation is supplemental to the monthly FundGrade ratings and is calculated at the end of each calendar year. The FundGrade rating system evaluates funds based on their risk-adjusted performance, measured by Sharpe Ratio, Sortino Ratio, and Information Ratio. The score for each ratio is calculated individually, covering all time periods from 2 to 10 years. The scores are then weighted equally in calculating a monthly FundGrade. The top 10% of funds earn an A Grade; the next 20% of funds earn a B Grade; the next 40% of funds earn a C Grade; the next 20% of funds receive a D Grade; and the lowest 10% of funds receive an E Grade. To be eligible, a fund must have received a FundGrade rating every month in the previous year. The FundGrade A+® uses a GPA-style calculation, where each monthly FundGrade from “A” to “E” receives a score from 4 to 0, respectively. A fund’s average score for the year determines its GPA. Any fund with a GPA of 3.5 or greater is awarded a FundGrade A+® Award. For more information, see www.FundGradeAwards.com. Although Fundata makes every effort to ensure the accuracy and reliability of the data contained herein, the accuracy is not guaranteed by Fundata.

Publication date: February 14, 2024.

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