October Recap:
The Caldwell Canadian Value Momentum Fund (“Fund” or “CCVMF”) gained 0.8% in October versus a loss of 0.9% for the S&P/TSX Composite Total Return Index (“Index”). The Index continued to see dispersion of performance with gains in Gold (+4.5%) and Industrials (+0.8%), offset by weakness in Consumer Staples (-4.6%), Health Care (-4.6%), Consumer Discretionary (-4.3%), and Energy (-4.3%). The Fund's strong performance was broad-based with 70% of holdings beating the Index return and over 80% beating their respective Sector returns.
Top CCVMF performers in October were Air Canada ("AC": +8.5%) and Element Fleet ("EFN": +5.7%).
Air Canada posted a solid earnings result despite continued disruption from the grounding of the Boeing 737 Max, which demonstrates the improved resiliency of AC’s business model. The company has further room to improve margins over the next few years - as laid out in its analyst day earlier this year - while a healthy demand environment and other self-help factors drive further growth runway.
Element Fleet continues to execute on its turnaround strategy with shares continuing to move higher after another strong earnings report in early November. The company is ahead of plan on its initial cost targets and is entering the growth phase of the plan. Price targets have moved higher across the board.
Two stocks were added to the portfolio in October: Wesdome Gold (“WDO”) and Major Drilling (“MDI”). As a reminder, for commodity-driven names, we are looking for company-specific catalysts that allow share prices to move higher outside of a higher commodity price. WDO has seen strong operational and drilling results, and we like the fact that its properties are 100% in Canada. While MDI is more sensitive to the underlying gold price, we expect senior gold producers' budgets to start showing growth after years of restrained spending, which is supported by healthy free cash flow generation this year.
In addition, the process is well underway to source a new addition to the Fund’s portfolio management group to complement the efforts of William Chin, Portfolio Manager and Chief Technical Analyst, and myself. The new addition will replace Mario Mainelli who, having been a valued member of the Caldwell team for the past five years, has moved on to pursue other opportunities. We wish Mario great success in his future endeavours.
The Fund held a 16.0% cash weighting at month-end. The CCVMF 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 2019 and beyond.
We thank you for your continued support.
The CCVMF Team
The Fund 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 CCVMF considers, and is invested, in all categories, including smaller and micro-cap securities, we have also shown how CCVMF ranks against constituents focused in the smaller cap category. The above list represents 6 of a total of 374 constituents in the Canadian Equity category and 5 of a total of 108 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. Publication date: November 13, 2019.
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")