July 2022 | Caldwell Canadian Value Momentum Fund Commentary

July Recap:

The Caldwell Canadian Value Momentum Fund (“CVM”) gained 3.7% in the month of July versus a gain of 4.7% for the S&P/TSX Composite Total Return Index (“Index”). At the sector level, Industrials, Information Technology (“IT”) and Consumer Discretionary were relative outperformers, bolstered by better than expected earnings reports and full year outlooks. Health Care, Materials and Communication Services were relative laggards. The continued sell-off of cannabis companies impacted the Health Care sector’s performance. Lower commodity prices largely weighed on Materials names. Despite decent earnings results, Canadian cable and telecommunications companies sold off as a group, we believe partially reflecting a rotation out of defensive stocks back into more cyclical areas of the market.

Top performers in CVM’s portfolio for the month of May were Couche-Tard (“ATD”, +14.2%), Tourmaline Oil (“TOU”, +19.9%) and Colliers International (“CIGI”, +13.4%). ATD reported earnings results where U.S. retail fuel volumes were lighter than expected but fuel margins were robust and came in well above the industry benchmark. Merchandise margins were also strong, supported by favourable mix and pricing actions. Lastly, the company noted labour supply issues are easing due to its recruitment and retention initiatives and an influx of candidates returning back to the market. TOU reported strong second quarter (“Q2”) results and a better than expected cash flow outlook for 2022/2023. Following a special dividend in its first quarter results, TOU declared another special dividend in Q2 and noted it intends to maintain a high free cash flow payout ratio through the end of 2023. Lastly, the company also announced the acquisition of Rising Star Resources which adds complementary assets to TOU’s existing Peace River complex. CIGI announced the acquisition of Versus Capital to further scale its investment management business, for which it has added three other investment managers within the last 12 months. In addition to recent acquisitions, the deal grows CIGI’s recurring revenue stream while being immediately accretive to earnings per share. Lastly, and most importantly, the deal also provides access to the private wealth distribution channel which we believe CIGI will leverage to cross-sell its other products over time.

During the Month of July, the Fund initiated positions in Loblaws (“L”), Intact Financial (“IFC”), Laurentian Bank (“LB”), Mullen Group (“MTL”), Ritchie Bros (“RBA”) and Kinaxis (“KXS”). Loblaws is a leading Canadian grocery and pharmacy retailer. The company’s strong private label line up positions it well to benefit from a potential shift to at home dining and trade down activity in a weaker economic environment. Recent results have demonstrated continued gross margin strength, despite tough comparisons, and ongoing initiatives can potentially help expand margins further over time. IFC is the leader in the Canadian Property & Casualty (P&C) insurance market. The company’s management team has a strong execution track record and has successfully scaled through acquisition while driving operating synergies. We believe they can leverage the same capabilities to enter and gain share in underpenetrated international markets. A new management team at LB is looking to improve operational performance by changing the strategic direction of the bank. Recent results demonstrate early success in growing the retail deposit base and the loan book on the commercial side. By focusing on improving its digital capabilities, LB hopes to acquire new clients while driving more cross-sell opportunities with existing clients. MTL is a Canadian trucking company over-indexed to Western Canada. The company is benefiting from a rebound in industrial activity in the area driven by higher energy prices. The company’s growth by acquisition strategy should be helped by the divestiture of non-core assets and an improving free cash flow profile over the next 12 months. RBA is the world’s largest marketplace for commercial and industrial assets. Originally specializing in unreserved auctions, strategic acquisitions over the past few years have positioned RBA to become a global marketplace platform, which has significantly increased its total addressable market and provided access to adjacent revenue streams. KXS is the leader in the supply chain management software market. A renewed focus on supply chain optimization and resiliency around the globe has supercharged demand for the company’s products which should drive accelerated growth exiting the pandemic.

The Fund held a 22.6% cash weighting at month-end. CVM has generated substantial value to 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 2022 and beyond.

1Standard performance as at July 31, 2022:
Caldwell Canadian Value Momentum Fund (Series F): 1 Year: -1.9%, 3 year: 9.8%, 5 year: 8.9%, Since Inception (August 29, 2014): 8.4%.
S&P500/TSX Composite Total Return Index: 1 Year: -0.2%, 3 year: 9.5%, 5 year: 8.6%, Since Inception (August 29, 2014): 6.1%.

2Actual Investments, first purchased: ATD 12/19/2018, TOU 6/11/2021, CIGI 11/3/2021.

3Return since August 15, 2011 (Perf. Start Date): CVM (Series F) 10.0%, Index 7.3%. | Returns are annualized for periods greater than one year.

4Categories defined by Canadian Investment Funds Standards Committee (“CIFSC”).
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.
As the constituents in the CIFSC Canadian Equity category largely focus on securities of a larger capitalization and CVM considers, and is invested, in all categories, including smaller and micro-cap securities, we have also shown how CVM ranks against constituents focused in the smaller cap category. The above list represents 6 of a total of 400 constituents in the CIFSC Canadian Equity category.
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: August 16, 2022.

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