March 2024 | Caldwell Canadian Value Momentum Fund Commentary

March Recap:

During the month of March, the Caldwell Canadian Value Momentum Fund (“CVM” or “Fund”) gained 2.7% versus a gain of 4.1% for the S&P/TSX Composite Total Return Index (“Index”). From a sector standpoint, Materials, Healthcare, and Energy were relative outperformers, whereas, Communication Services, Consumer Staples, and Information Technology underperformed.

Top performers in the month of March were Hammond Power Solutions (“HPS”), SNC-Lavalin Group (“ATRL”), and Celestica (“CLS”). HPS continued to rerate higher aided by the company delivering strong quarterly earnings, which were led by exceptionally robust sales in Canada and India. We believe sustainable demand trends in key end markets and recent capacity additions should allow the company to outperform over the medium to long term. ATRL performed well as its strong quarterly results demonstrated robust organic growth accompanied by upbeat guidance for 2024 by its management. Strong performance by its Engineering Services segment provided greater operating leverage, driving earnings beyond what investors had expected. CLS kept on rerating higher gradually as investors continued to appreciate the company’s strategic repositioning to increase focus on higher-value growth markets that offer longer lifecycles and superior margins. It continues to strengthen its position as a core hardware supplier for Artificial Intelligence (“AI”) infrastructure buildouts.

In this period, the Fund initiated positions in Ag Growth International (“AFN”), MEG Energy (“MEG”), Bank of Montreal (“BMO”), National Bank of Canada (“NA”), Manulife Financial (“MFC”), and Fairfax Financial (“FFH”).

AFN provides solutions for global food infrastructure; facilitating the storage, movement, processing, and protection of crops and agricultural inputs. Continued operational streamlining, rising profitability in its legacy Digital business, and a budding turnaround in its Commercial Food unit should keep the company’s margins at a structurally higher level compared to prior years.

MEG is a pure-play oil sands company with significant acreage as well as proven and probable reserves in the Athabasca region in Alberta. The company is well-positioned to benefit from the improving egress capacity.

BMO is the third-largest Canadian bank by market capitalization, offering a broad range of retail banking, wealth management, insurance, and investment banking products and solutions, predominantly in Canada and the U.S. The bank is set to achieve synergies from its U.S. acquisitions and it also provides attractive exposure to commercial loans across the U.S. and Canada.

NA is the sixth-largest Canadian bank offering financial services to consumers, small and medium businesses, as well as large corporations in its main market of Quebec. Its recent quarterly earnings show broad-based strength across all of its business lines. Furthermore, it maintains a lower exposure to commercial real estate.

MFC is Canada’s largest life insurer and a leading global provider of financial protection and wealth management products and services. It operates in more than 20 countries and territories. A high dividend yield that should be sustainable without financial strain, given the bank’s low Debt to Equity ratio coupled with strong free cash flows, is likely to become more attractive to investors in a declining interest rate environment.

FFH engages in property, casualty, and life insurance, reinsurance, and insurance claims management. The company demonstrated solid operating results despite a tough backdrop and also offers an attractive potential upside to its valuation.

For the first quarter of 2024, CVM outperformed its benchmark by 3.7%, with a return of 10.3% versus a return on the Index of 6.6%. Top contributors to performance were Hammond Power Solutions (“HPS”), Celestica (“CLS”), and SNC-Lavalin Group (“ATRL”). All three of these companies were also the top performers in the month of March and were already discussed in the monthly section above.
The Fund held a 1.0% 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 March 31, 2024:
Caldwell Canadian Value Momentum Fund (Series F): 1 Year: 13.0%, 3 year: 8.5%, 5 year: 10.0%, Since Inception (August 29, 2014): 8.3%.
S&P/TSX Composite Total Return Index: 1 Year: 14.0%, 3 year: 9.1%, 5 year: 10.0%, Since Inception (August 29, 2014): 6.9%.
Actual Investments, first purchased: HPS 10/16/2023, ATRL 3/31/2023, CLS 1/19/2024.

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.

Publication date: April 16, 2024.

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