Month End Recap:
For the month of October, the Caldwell U.S. Dividend Advantage Fund (UDA or Fund) gained 2.1%, versus a gain of 2.3% for the S&P 500 Total Return Index (Index). From a sector standpoint, Financials, Communication Services, and Energy were relative outperformers, whereas Healthcare, Materials, and Real Estate underperformed.
Top performers in the month of October were Booz Allen Hamilton (BAH), Houlihan Lokey (HLI), and Tetra Tech (TTEK). BAH rerated higher as the company delivered robust quarterly results due to strong underlying momentum in its business, supporting the company as a growth leader in its sector. Furthermore, PAH raised its guidance for next year given the strength of its last twelve-month book-to-bill of 1.54 times, which is also a six-year high for the company. HLI significantly beat its earnings expectations driven by improving capital market conditions and lower interest rates, which are translating into higher activity levels. Additionally, heightened restructuring activity is also an expected tailwind that should persist well into the next year. TTEK continued its strong momentum since having delivered robust quarterly results, driven by increased demand for high-end consulting services, particularly in environmental and water treatment projects. The company’s strategic focus on front-end advisory and consulting work led to margin expansion, improving overall profitability. Additionally, the strong backlog in key business segments supported robust revenue performance.
During the month of October, the Fund initiated positions in Meta Platforms (META) and Argan (AGX). META is the world’s largest social networking company with over 3.8 billion monthly active users worldwide across its family of apps, including Facebook, Instagram, Messenger, WhatsApp, Reels, and Threads. The company generates the majority of its revenue from selling ad placements to marketers. The company is poised to benefit from a cyclical recovery in ad pricing. Additionally, it is actively leveraging its AI innovation to drive improved returns on ad spend on its platforms. AGX is a construction company serving the power, telecommunications, and industrial sectors through its wholly owned subsidiaries. It provides engineering, procurement, construction, and maintenance services, operating across the United States, Ireland, the United Kingdom, and other regions. Its power services segment is well positioned to benefit from strong demand resulting from secular growth in power consumption driven by data centers, electric vehicle adoption, and solar & battery factories. Its industrial services segment is also set to experience robust demand driven by the reshoring of manufacturing, which should provide sustainable multi-year tailwinds.
The Fund held a 3.3% 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. Over the long run, given its unique momentum-driven investment approach and focus on well-managed dividend growth companies, we believe UDA is well-positioned to provide strong performance by way of both attractive regular monthly distributions and long-term capital appreciation potential. We expect that our approach to dividend growth investing should continue to provide a means of generating compelling risk-adjusted returns for our investors over the long term.
1All returns (for the fund, individual stocks and sectors) are in total return, Canadian dollar terms. All stock returns represent performance for the full period noted. All fund returns are in respect of Series F.
Standard performance as at October 31, 2024:
Caldwell U.S. Dividend Advantage Fund (Series F): 1 Year: 32.4%, 3 year: 9.2%, 5 year: 11.3, Since Inception (June 19, 2015): 9.5%.
S&P500 Total Return Index: 1 Year: 38.6%, 3 year: 13.4%, 5 year: 16.6%, Since Inception (June 19, 2015): 14.8%.
2Actual investments, first purchased: BAH 6/14/2022, HLI 4/9/2024, TTEK 5/12/2022.
All data is as of October 31, 2024 sourced from Morningstar Direct or S&P Capital IQ, unless otherwise indicated. Fund returns are from FundData. UDA, Index total return numbers, sector returns and individual stocks returns are in CAD terms. The Fund was first offered to the public as a closed-end investment since May 28, 2015. Effective November 15, 2018 the Fund was converted into an open-end mutual fund such that all units held were redesignated as Series F units. Performance prior to the conversion date would have differed had the Fund been subject to the same investment restrictions and practices of the current open-end mutual fund.
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 payment of distributions should not be confused with a fund’s performance, rate of return or yield. If distributions paid are greater than the performance of the fund, your original investment will shrink. Distributions paid as a result of capital gains realized by a fund, and income and dividends earned by a fund, are taxable in your hands in the year they are paid. Your adjusted cost base (“ACB”) will be reduced by the amount of any returns of capital and should your ACB fall below zero, you will have to pay capital gains tax on the amount below zero.
Publication date: November 20, 2024.