October 2023 | Caldwell Canadian Value Momentum Fund Commentary

October Recap:

For the month of October, the Caldwell Canadian Value Momentum Fund (“CVM” or “Fund”) outperformed its benchmark, the S&P/TSX Composite Total Return Index (“Index”), by 1.5%, with a return of -1.7% versus a return on the Index of -3.2%. At the sector level, Consumer Staples, Energy, and Communication Services were relative outperformers, whereas, Healthcare, Real Estate, and Information Technology underperformed.

Top performers in the month of October were Hammond Power Solutions (“HPS.A”), Alimentation Couche-Tard (“ATD”), and Parkland (“PKI”). HPS.A rerated higher as the company surpassed its earnings expectations in addition to accelerating its backlog with an increase of 11% quarter over quarter. This was primarily driven by strong demand in renewable energy and data center applications. ATD rerated higher as the company’s reveal of its five-year plan, at its investor day, implied its EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) to increase at a compound annual growth rate of 12% over the next five years, which was well received by investors. PKI’s stock performed well as the company has been experiencing record results in both its Retail and Refining operations. Additionally, its leverage ratio has lowered to sub-3x, which is within the company’s target range of 2 to 3 times Net Debt/EBITDA.

During the month of October, the Fund initiated positions in Stella-Jones (“SJ”), Constellation Software (“CSU”), Alamos Gold (“AGI”), Hammond Power Solutions (“HPS.A”), Crescent Point Energy (“CPG”), and Docebo (“DCBO”).

SJ is a leading supplier of pressure-treated wood products to utility, telecommunications, railway, and residential construction end markets. Its margins have been benefitting from pricing increases in its infrastructure-related businesses as well as a greater proportion of Utility Poles revenues, which is a higher-margin category for the company.

CSU is a leading provider of software solutions and services aimed at customers in specific vertical markets. The company’s core strategy is to grow through opportunistic acquisitions of companies that provide vertical market software solutions in its existing as well as new verticals. Elevated interest rates should result in more acquisition opportunities for the company as competition from Private Equity diminishes.

AGI is a Canadian mid-tier gold producer with production from three operating mines in North America. The company has a healthy pipeline of organic growth opportunities and it highlighted further high-grade mineralization zones that are in close proximity to its existing infrastructure. This should allow for relatively low-cost development and production, resulting in an overall declining cost profile for the company.

HPS.A is the largest manufacturer of dry-type transformers in North America, serving industries such as oil and gas, mining, steel, waste and water treatment, commercial construction, data centers, and wind power. The company is seeing a strong backlog and quoting activity as a result of strong end-market demand due to favourable macroeconomic trends, such as the onshoring of manufacturing, renewable energy, infrastructure buildout, EV (Electic Vehicle) charging, Semiconductor production, and natural resource development.

CPG is predominantly a producer of crude oil with its core properties in Saskatchewan, Kaybob Duvernay, and Alberta Montney. The company is expected to achieve substantial operational improvements at its Kaybob Duvernay as well as at its recently acquired Montney assets.

DCBO provides a cloud-based SaaS (Software as a Service) learning platform to train and develop internal and external workforces, partners, and customers. The company’s expanding recurring revenue base positions it well to achieve operating leverage as it continues to scale. Additionally, its expansion in the Government vertical should provide further near-term upside.

The Fund held a 24.1% 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 October 31, 2023:
Caldwell Canadian Value Momentum Fund (Series F): 1 Year: 2.6%, 3 year: 9.1%, 5 year: 7.6%, Since Inception (August 29, 2014): 7.4%.
S&P/TSX Composite Total Return Index: 1 Year: 0.4%, 3 year: 9.8%, 5 year: 8.0%, Since Inception (August 29, 2014): 5.2%.
Actual Investments, first purchased: HPS.A 8/2/2023, ATD 2/5/2016, PKI 9/5/2018.

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: November 15, 2023.

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