June 2023 | Caldwell Canadian Value Momentum Fund Commentary

June Recap:

The Caldwell Canadian Value Momentum Fund (“CVM” or “Fund”) gained +4.1% in the month of June versus a gain of +3.4% for the S&P/TSX Composite Total Return Index (“Index”). From a sector standpoint Consumer Discretionary, Industrials, and Information Technology were relative outperformers, whereas Utilities, Health Care, and Real Estate were laggards. This year began with economists forecasting a slowing economy and a high likelihood of a recession. Additionally, earnings estimates were being revised downward across the board as investors anticipated a considerable drop in consumer and industrial spending as the effects of the significant rate hikes infiltrate the economy. However, as we continued to see good employment numbers as well as robust GDP (Gross Domestic Product) trends, the Consumer Discretionary and Industrials sectors reflected this current economic resilience by posting the strongest returns in June out of all sectors in the Index.

For the month of June, top performers in the Fund were Stella Jones (“SJ”, +14.0%), Stantec (“STN”, +10.3%), and SNC-Lavalin Group (“SNC”, +9.6%). SJ continued to rerate higher after having delivered robust earnings in the prior month, which were driven by strong Utility Pole sales. In addition, it expects improved margins going forward resulting from its pricing actions. STN announced the acquisition of Environmental Systems Design, an engineering firm focused on mission-critical facilities and data centers. The bolt-on acquisition expands STN’s mechanical, electrical, plumbing, and structural engineering practice by 40% in the U.S. The announcement was well received by the market as the stock continued to rerate higher. SNC delivered earnings that were meaningfully ahead of expectations in the prior month. The market remained constructive on the outlook that the company provided, which was supported by its robust backlog for the year.

During the month of June, the Fund initiated positions in North American Construction Group (“NOA”), Kinaxis (“KXS”), TransAlta (“TA”), and GFL Environmental (“GFL”). NOA provides mining and heavy construction services and has a leading presence in the Oil Sands mining industry. The company has been adding to its headcount to meet the strong client demand, which provides greater confidence in its management’s outlook of an increasing backlog by the end of the year. KXS provides solutions for supply chain planning, giving customers a control tower view of their supply chains to help ensure efficiency and identify possible issues before they emerge. The company should benefit from strong secular demand for supply chain management solutions, triggered by the global supply chain disruptions. TA is an independent power production company generating electricity in Canada, U.S., and Australia. It has several organic growth projects in its pipeline and the current supply and demand dynamics are constructive for stronger pricing in the near term. GFL is the fourth largest diversified environmental services company in North America, providing waste management services to a wide array of customers across Canada and the U.S. A healthier pricing environment is aiding strong organic growth that is likely to sustain in the near term.

For the second quarter of 2023, CVM gained 2.2% versus a gain of 1.1% for the Index. Stella Jones (“SJ”, +32.2%), Restaurant Brands International (“QSR”, +14.0%), and Stantec (“STN”, +9.7%) were top performance contributors. QSR’s share price continued to appreciate as its quarterly earnings benefitted from positive momentum across all its restaurant brands, both domestically as well as internationally. SJ and STN were discussed in the monthly section above.

The Fund held a 10.4% 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 2023 and beyond.

Standard performance as at June 30, 2023:
Caldwell Canadian Value Momentum Fund (Series F): 1 Year: 6.6%, 3 year: 10.1%, 5 year: 7.2%, Since Inception (August 29, 2014): 7.8%.
S&P/TSX Composite Total Return Index: 1 Year: 10.4%, 3 year: 12.4%, 5 year: 7.6%, Since Inception (August 29, 2014): 6.1%.

Actual Investments, first purchased: SJ 12/18/2020, STN 3/2/2020, SNC 3/31/2023.

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: July 17, 2023.

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