Cambridge Canadian Equity Corporate Class started the year with a barbell approach – lots of cash (nearly 25%), but cyclical beta as well. As we have always promised, first and foremost, we continue to be positioned to protect the downside considering our concerns about earnings, trading volumes and the slowing of China. However, we respect the fact that clients still want to see positive numbers which we have delivered without taking undue risk chasing returns.
Post Brexit, the market has rallied to new highs. Our strongest performing sectors have been our cyclical holdings. Strong stock picking by our analysts in the industrials, commodities and gold sectors, drove positive performance.
At this point, our team has strong conviction in our current list of holdings. Our higher cash position gives us the ability to: A) be defensively positioned at all-time market highs; B) have the dry powder to selectively explore opportunities that we are finding (and at great prices, particularly in the commodity/cyclical area). Remember – not all companies are created equal. At Cambridge, we are looking for aligned management teams, who operate quality businesses that will emerge from down-market cycles in a stronger position relative to their competitors.
We continue to see boring staples as being overpriced by the market (we are particularly concerned about bond surrogates…please see Steve’s blog Low volatility…the new momentum). We have found value in infrastructure companies (such as Brookfield Infrastructure) which have added significant value in the portfolio. In the financial space we still own U.S. over Canadian banks, seeing that they have better valuations and lower downside risk. We are also exploring some key technology companies whose valuations are being discounted as the herd of investors are further moving in the direction of anything and everything labelled “low-vol” or “yield”.
All that said, and with time or some pullback in price (or a combination), we’ll see cash levels fall again.
Cambridge Canadian Equity Corporate Class continues to deliver the upside your clients want, with the downside protection they need.
Thank you for your support.
Based on rolling monthly return data.
Source: Morningstar, CI Investments
Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Unless otherwise indicated and except for returns for periods less than one year, the indicated rates of return are the historical annual compounded total returns including changes in security value. All performance data assume reinvestment of all distributions or dividends and do not take into account sales, redemption, distribution or optional charges or income taxes payable by any securityholder that would have reduced returns. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated.