May 2023 | Caldwell Canadian Value Momentum Fund Commentary

May Recap:

For the month of May, the Caldwell Canadian Value Momentum Fund (“CVM” or “Fund”) declined -3.2% versus a decline of -4.9% for the S&P/TSX Composite Total Return Index (“Index”). At the sector level, Information Technology (“IT”), Utilities, and Health Care were relative outperformers, whereas, Materials, Communication Services, and Energy underperformed. IT was the only sector in the index that posted positive returns for the month and it was also the strongest-performing sector in the U.S. market. Investors’ heightened interest in the IT sector has been fueled by the Artificial Intelligence (“AI”) boom that is currently underway, which was triggered by the launch of ChatGPT and the unprecedented momentum that it generated, as more and more companies have been investing in and increasing their commitments towards incorporating AI in their businesses and products.

Top performers in May were Element Fleet Management (“EFN”, +16.2%), Stella-Jones (“SJ”, +13.3%), and Restaurant Brands International (“QSR”, +3.8%). EFN exceeded their quarterly earnings expectations and raised its 2023 guidance by 4%, as a result of robust client demand. Its healthy backlog of $3 billion should persist well into 2024, which also encourages further originations. SJ delivered robust earnings driven by strong Utility Pole sales. In addition, it expects improved margins going forward resulting from its pricing actions. QSR’s shares appreciated as its quarterly earnings benefitted from positive momentum across all its restaurant brands, both domestically as well as internationally.

During the month of May, the fund initiated positions in Open Text (“OTEX”), Shawcor (“MATR”), Finning International (“FTT”), and Cameco (“CCO”). OTEX develops and sells enterprise information management software. The company is poised to experience earnings upside driven by the Micro Focus acquisition, which already appears to be off to a good start as the company recently raised its 2023 guidance. MATR, one of the largest pipe-coating providers in the world, specializes in providing services to the pipeline sector in the oil and gas markets. The company has maintained a strong balance sheet that can be deployed toward mergers and acquisitions. Additionally, its business mix is becoming less cyclical, which should aid the company in attaining a higher valuation. FTT is an industrial equipment dealer specializing in Caterpillar products. It sells, rents, and provides parts and services for equipment to industries such as mining, construction, petroleum, and forestry. The company is poised to benefit from the strong secular electrification tailwinds as they drive greater exploration of copper and other minerals. CCO is the world’s largest publicly traded uranium producer, accounting for over 18% of the world’s production. The company has 26 million pounds of uranium under long-term contracts, on average, over the next five years. This is the highest level that the company has achieved in the last seven years. The inventory levels at utilities globally are well below the minimum two-year requirements, which should continue supporting the robust demand environment for the company.

The Fund held a 7.5% 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 May 31, 2023:
Caldwell Canadian Value Momentum Fund (Series F): 1 Year: -8.3%, 3 year: 9.9%, 5 year: 6.4%, Since Inception (August 29, 2014): 7.4%.
S&P/TSX Composite Total Return Index: 1 Year: -2.5%, 3 year: 12.1%, 5 year: 7.3%, Since Inception (August 29, 2014): 5.8%.

Actual Investments, first purchased: EFN 10/26/2018, SJ 12/18/2020, QSR 11/4/2022.

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: June 13, 2023.