The Caldwell Canadian Value Momentum Fund (“CVM”) gained 2.6% in June versus a gain of 2.5% for the S&P/TSX Composite Total Return Index (“Index”)1. Through the first half of 2021, the CVM outperformed the Index by 200bps, gaining 19.3% versus a gain of 17.3%1. Energy was the strongest performer. While the Fund held only a slight overweight to the sector, the underlying holdings added significant value, namely Paramount Resources and NuVista Energy.
After lagging in the first part of the year, Technology (+18.2%) made a strong comeback and was by far the Index's strongest performer. Meanwhile, Materials (-6.2%) was the only sector in negative territory, led by the Gold sub-segment (-8.7%).
Top CVM performers in June were Converge Technology Solutions (“CTS” +31.0%), NuVista Energy (“NVA” +30.1%) and Paramount Resources (“POU” +18.3%)2.
CTS moved higher as it continued its acquisition strategy and outlined its long-term strategic road map, including European expansion plans, at its AGM. The listing of Softchoice in late May also acted as a catalyst, with CTS trading at a valuation discount (at the time) despite a more favorable growth and margin profile.
Higher commodity pricing is lifting the Energy sector, which benefited both POU and NVA. Capital allocation decisions also continue to act as catalysts, with POU initiating a dividend earlier than analysts excepted. Earnings estimates across the Energy sector continue to move higher, highlighting significant free cash flow yields on strip pricing.
Two stocks were added to the portfolio in June: Victoria Gold (“VGCX”) and Tourmaline (“TOU”).
VGCX is a gold producer with a long reserve-life, open pit mine located in Canada's Yukon. We see upside in shares as the company moves towards current design capacity of 200,000 oz/year and outlines low-risk growth plans to 250,000 oz/year. There is also upside from additional analyst coverage as it becomes a mid-size producing company in a low risk jurisdiction.
TOU is a natural gas producer consolidating assets in the North Montney. It's latest acquisition of Black Swan Energy ($1.1 billion) is immediately accretive on a free cash flow per share basis and comes alongside a guidance and dividend increase.
The Fund held a 19.0% cash weighting at month-end. The 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 2021 and beyond.
1See Performance Comparison table (or page 2 of the PDF) for standard performance data.
2Actual Investments, first purchased: CTS 2/1/2021, NVA 3/10/2021, POU 1/7/2021.
3Return since August 15, 2011 (Perf. Start Date): CVM 11.5%, Index 8.0%. | Returns are annualized for periods greater than one year. | Source: Morningstar
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.
As the constituents in the 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 386 constituents in the 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.
The Refinitiv Lipper Fund Awards are based on the Lipper Leader for Consistent Return rating, which is a risk-adjusted performance measure calculated over 36, 60 and 120 months. Lipper Leaders fund ratings do not constitute and are not intended to constitute investment advice or an offer to sell or the solicitation of an offer to buy any security of any entity in any jurisdiction. For more information, see lipperfundawards.com. The CVM in the Canadian Equity Category for the 5-year period (out of a total of 74 funds) ending 7/31/2020 with corresponding Lipper Leader ratings of 4 (3 years) and 5 (5 years).
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: July 14, 2021.