November 2020 | Caldwell Canadian Value Momentum Fund Commentary

November 2020 Recap:

The Caldwell Canadian Value Momentum Fund (“CVM”) gained 2.5% in November versus a gain of 10.6% for the S&P/TSX Composite Total Return Index (“Index”)1. The market experienced an aggressive rotation in leadership following U.S. election results and news of a credible COVID-19 vaccine. Specifically, stocks whose businesses were most negatively impacted by the virus experienced sharp positive reversals in their share prices and, on the flip side, stocks that were seen as pandemic-related winners saw their share prices decline. The Fund's relative performance was most impacted by strength in Financials (+16.3%) and Energy (+18.6%) given their large weightings within the Index - approximately 29% and 11%, respectively - versus minimal exposure within the Fund.

Top CVM performers in November were Linamar (“LNR” +37.4%), Champion Iron Ore (“CIA” +33.6%) and Xebec Adsorption (“XBC“ +16.3%)2. In addition to benefiting from the market rotation noted above, company specific drivers included stronger than expected earnings results from LNR, an investment into XBC by a large Chinese gas utility which is expected to accelerate the company's hydrogen strategy in that country, and official approval for CIA's Bloom Lake expansion.

As a reminder, the CVM seeks to own stocks undergoing a positive re-rating by the market and is designed to adjust quickly to changing market dynamics. Part of the market's rotation, in our view, is being driven by a shift in investor appetite towards risk. Specifically, the willingness to take on valuation risk (in terms of high multiples paid for stable/growth companies) has shifted to a willingness to now take on earnings risk (through more cyclical companies). Whereas investors were shy to own cyclical companies in late 2019 and through the worst of the pandemic, now that a bottom appears to be in place and investors have seen what 'worst-case' earnings look like, risk appetite has shifted to these cyclical names. Just as the CVM quickly adjusted the portfolio in response to the COVID-19 pandemic earlier this year, we have once again been busy adjusting the portfolio to take advantage of this latest change in market sentiment. We often remind investors that what they own in the CVM is not a static portfolio, but an investment process that finds and quickly adjusts to new re-rating opportunities. As we sift through the current pool of potential re-rating opportunities, we are mindful to focus on those that have continued runway versus those that seem more one-time in nature.

To that end, seven stocks were added to the portfolio in November: West Fraser Timber (“WFT”), Norbord (“OSB”), Interfor (“IFP”), TFI International (“TFII”), Mullen Group (“MTL”), IA Financial (“IAG”), and Nutrien (“NTR”).

In terms of catalysts, WFT, OSB and IFP are all benefiting from strong new housing and renovation/remodel demand. TFII is seeing strong demand for trucking given e-commerce strength and continues to execute a successful M&A strategy. MTL is also benefiting from e-commerce strength but has an added re-rating opportunity as investors still value the stock like an oilfield service company, despite the company meaningfully pivoting away from this end market over the last five years. IAG has a history of growing faster than the market given its smaller market position. It has executed very well and is seeing strong sales results in insurance and wealth products, driven by new products and investments into distribution capabilities, which should continue to drive strong results going forward. Lastly, while agriculture market fundamentals are looking positive going into 2021, NTR has highlighted significant opportunity for EBITDA improvement solely from self-help opportunities.

The Fund held a 13.9% cash weighting at month-end. The 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 2020 and beyond.

We thank you for your continued support.

The CVM Team

CVM - Caldwell Canadian Value Momentum vs Canadian Small/Mid Cap Equity vs Canadian Equity

1See table for standard performance data.

2Actual Investments, first purchased: LNR 7/2/2020, CIA 6/28/2019, XBC 6/10/2020.

Return since August 15, 2011 (Performance Start Date): CVM 9.5%, Index 6.5%. | Returns are annualized for periods greater than one year. | Source: Morningstar

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 375 constituents in the Canadian Equity category and 5 of a total of 96 constituents in the Canadian Small/Mid 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.

*Categories defined by Canadian Investment Funds Standards Committee (“CIFSC”).

Publication date: December 15, 2020.

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