Strathbridge Asset Management
Blog FAQ Advisor Login Print
Home Funds Insights About Us Education & Tools Contact Us   Search
Fund Overview
Fund Features
NAVs
Distributions
Portfolio Manager Updates
Portfolio
Press Releases
Administration Governance
Financial Regulatory
Prospectus

Core Canadian Dividend Trust

 

CDD.UN

Portfolio Manager Updates

 

Portfolio Manager Updates for 2017-03-31

Net Asset Value (“NAV”) at quarter end March 31, 2017 was $6.84 versus $6.89 on December 31, 2016. Unitholders received distributions totaling $0.11293 during the quarter.

The fourth quarter rally continued into this quarter until mid-February before retracing somewhat. The S&P/TSX Composite Index was up 2.4% on a total return basis in Q1.

The Financials sector which was by far the best performing sector in the fourth quarter of 2016 on expectations of higher net interest margins and less regulation gave way to the Information Technology and Consumer Discretionary sectors in the first quarter of 2017. Meanwhile, the Energy sector which was one of the best performing sectors in 2016 has been one of the worst performing sectors so far in 2017.

Gold started the year strong and finished the quarter up over 8% despite a big pullback in early March. The strong commodity also helped Teck Resources Ltd. deliver a total return over 8% this quarter, which was our best performing holding.

Our weakest position was Thomson Reuters coming in at minus 1.3% after a reasonably good previous quarter.

Volatility as measured by the S&P/TSX VIX Index was trendless during this quarter around the 12% level but with greater day to day swings than we observed over the past year. The Fund averaged 5.3% overwritten in the quarter, slightly lower than last quarter.

This quarter the Fund delivered a total return of 0.8% compared to 2.4% for the S&P/TSX 60 Index. The trading price on March 31, 2017 was $6.67 up $0.12 from the December 30, 2016 trading price of $6.55. The March 31st trading price of $6.67 represents a discount to NAV of $0.17 per unit or 2.5% of the $6.84 NAV.

 

Portfolio Manager Updates for 2016-12-31

Net Asset Value at quarter end December 30, 2016 was $6.89 versus $6.52 on September 30, 2016. Unitholders received distributions totaling $0.10899 during the quarter.

The fourth quarter got off to a slow start but did continue its year-long uptrend to finish the quarter and the year at its highs. However, this uptrend did not span all sectors. The small Health Care component of the market was decimated by Valeant Pharmaceuticals International (VRX) which, fortunately, is not part of our core portfolio. The other dramatic downturn among the Canadian sectors was Materials, drawn lower by a significant pullback in the price of gold. The up move stalled during the summer and the correction that followed later in the year coincided with the U.S. election. Bullion was up almost 30 per cent at its peak in the summer but settled up only 8.5 per cent by year-end following the post-U.S. election selloff.

Financials led the TSX higher in this quarter and that was reflected in our top two performers, Manulife Financial Corp. (MFC) and AGF Management Ltd (AGF.b) which saw total returns of 30.2 per cent and 26.2 per cent respectively. Despite a relatively benign interest rate environment throughout the year, and this quarter in particular, rate sensitive stocks were the most impacted, Financials to the upside and Utilities to the downside. BCE Inc. (BCE) was our worst performer delivering a total return of negative 3.1 per cent in Q4.

Implied volatility had moved lower earlier in the year and remained essentially flat for most of this quarter until mid-December when uncertainty, as measured by the S&P/TSX 60 VIX, all but disappeared. Intra-day levels went below 5 per cent for the first time since the inception of the index. The average level of overwriting for this quarter was 6.9 per cent compared to 3.1 per cent in Q3 of 2016.

The Fund delivered a total return of 7.4 per cent compared to 11.9 per cent for the equally weighted universe.

The trading price on December 30, 2016 was $6.55 up $0.41 from the September 30, 2016 trading price of $6.14. The December 30 trading price of $6.55 represents a discount to NAV of $0.34 per unit or 4.93 per cent of the $6.89 NAV.

 

Portfolio Manager Updates for 2016-09-30

Net Asset Value (“NAV”) at quarter end September 30, 2016 was $6.52 versus $6.28 on June 30, 2016. Unitholders received distributions totaling $0.10449 during the quarter.

Stock markets reached their year-to-date highs in mid-summer during this quarter. For the S&P 500, this meant new all-time highs, while the TSX is still below its highs set in 2014. Mid-summer highs also applied to gold which has been a key driver for Materials stocks in the TSX index. However, gold has been drifting lower since July. Oil, on the other hand, had an early summer sell-off touching $40 per barrel by early August; it has been drifting higher since that time.

Teck Resources (TCK.b) continues to be the star performer in the portfolio and, indeed, the TSX index. The stock saw a total return of 39% this quarter and was one of only two double-digit performers in the portfolio. Bank of Nova Scotia (BNS) was the other name with a total return of 10.9% per cent. After being a solid contributor for the first half of the year, Russel Metals (RUS) rolled over this quarter delivering a total return of negative 6.7% per cent.

Implied volatility continued to move lower in Q3 with the S&P/TSX 60 VIX trading below 9% per cent in July. The lower volatility levels made attractive overwriting opportunities more difficult to find. The average level of overwriting for this quarter was 3.1 per cent compared to 6.9 per cent in Q2 of 2016.

The trading price on September 30, 2016 was $6.14 up $0.35 from the June 30, 2016 trading price of $5.79. The September 30 trading price of $6.14 represents a discount to NAV of $0.38 per unit or 5.8% of the $6.52 NAV.

 

Portfolio Manager Updates for 2016-06-30

Net Asset Value at quarter end June 30, 2016 was $6.28 versus $5.96 on March 31, 2016. Unitholders received distributions totaling $0.10026 during the quarter.

Global equity markets were mixed in the second quarter of 2016 with markets in North America showing positive results while International markets were modestly lower. The S&P/TSX Index rose 5.1% and the S&P 500 Index in the U.S. was up 2.4% while the international index (EAFE) was down 1.2% with most of the decline occurring after the “Brexit” vote was decided on June 23 with 52 percent of Great Britain voting in favor to leave the European Union. The news roiled global markets immediately following the vote but rebounded by quarter-end. The longer term impacts on the region and the world are not yet known.

Gold stocks continue to rally on the strength in bullion. Our holding of Teck Resources (TCK.b) enjoyed a total return of 73.2% in Q2 and was our best performing position for the second quarter in a row.

Russel Metals (RUS) and TransCanada Corp (TRP) delivered solid returns of 17.6% and 15.6% respectively. Our other core holdings delivered a mix of positive and negative returns in the single digits.

Implied volatility levels drifted lower for most of this quarter coming close to the 2015 lows. The level of overwriting was reduced somewhat with stock prices well bid and volatility reduced. The average for this quarter was 6.9% compared to 14.3% in Q1 of 2016.

The Fund delivered a total return of 7.0% compared to 9.3% for the equally weighted universe.

The trading price on June 30, 2016 was $5.79 up $0.23 from the March 31, 2016 trading price of $5.56. The June 30 trading price of $5.79 represents a discount to NAV of $0.49 per unit or 7.8% of the $6.28 NAV.

 

Portfolio Manager Updates for 2016-03-31

Net Asset Value at quarter end March 31, 2016 was $5.96 versus $5.71 on December 31, 2015. Unitholders received distributions totaling $0.09166 during the quarter.

Global equity market performance was “A Tale of Two Cities” in the first quarter of 2016. From the start of the year up to the lows on February 11, 2016, most global indices were down over 10% due to concerns surrounding global growth. The WTI Crude Oil spot price declined over 30% during the same period. Since then, many markets have advanced over 10% erasing most if not all of the losses incurred earlier in the year as global macroeconomic indicators started to show some signs of improvement. By the end of the quarter, the S&P/TSX Composite advanced 4.5%, the S&P 500 Index advanced 1.3%, while the WTI Crude Oil spot price ended the period down only 0.5% to end at US$36.94 per barrel.

Another interesting story in this quarter has been the turnaround in gold prices. After languishing for three years it appears that bullion may have bottomed at the end of 2015. Prices have surged almost 14% percent this quarter in one of the biggest quarterly moves in several years.

The impact on many gold stocks has been even more dramatic. Our holding of Teck Resources (TCK.b) enjoyed a total return of 84.4% percent in Q1 and was our best performing position.

Financials in general had mediocre performance this quarter delivering low single-digit returns, however, Manulife (MFC) suffered energy-related investment losses that took investors by surprise. As a result, shares sold off during this quarter and had a total return of negative 10.4% percent. This was our worst performing position this quarter.

Implied volatility levels had begun to settle in the fourth quarter of 2015, however, the price reversal that began at the end of January brought elevated volatility levels. By mid-February, the VIXC (S&P TSX 60 VIX) was testing the intra-day highs of 2015.

The level of overwriting was increased again this quarter to take advantage of this elevated volatility. The average for this quarter was 14.3 per cent compared to 6.7 per cent in Q4 of 2015.

The Fund delivered a total return of 7.2 percent compared to 9.2 per cent for the equally weighted universe.

The trading price on March 31, 2016 was $5.56 up $0.28 from the December 31, 2015 trading price of $5.28. The March 31 trading price of $5.56 represents a discount to NAV of $0.40 per unit or 6.7 percent of the $5.96 NAV.

 

Portfolio Manager Updates for 2015-12-31

Net Asset Value at quarter end December 31, 2015 was $5.71 versus $6.06 on September 30, 2015. Unitholders received distributions totaling $0.09838 during the quarter.

After three weak quarters, the fourth quarter of 2015 started out well but quickly resumed the downtrend. Most of the weakness can be attributed to further downside in crude which traded below U$35 per barrel for the first time in thirteen years.

Teck Resources (TCK.b) continued lower this quarter down 15.4 per cent in total return. However, the weakest performer in our core portfolio was Russel Metals (RUS) which was down 23.9 per cent. The portfolio weights were kept as low as possible in these names.

The best performers this quarter were Bank of Montreal (BMO) and Transcanada Corp (TRP) which delivered positive returns of 8.4 per cent and 8.3 per cent respectively.

Volatility spiked in the prior quarter and started to settle down going into this quarter. The levels continued lower through the quarter despite the weaker price levels which suggested a surprising level of investor complacency. The S&P TSX 60 VIX (VIXC) traded below 20 per cent for most of the fourth quarter.

Overwriting activity was slightly lower in this quarter compared to the prior quarter with the average level at 6.7 per cent.

The Fund delivered a total return of negative 4.2 per cent compared to negative 2.7 per cent for the equally weighted universe.

The trading price on December 31, 2015 was $5.28, down $0.43 from the September 30, 2015 trading price of $5.71. The September 30 trading price of $5.28 represents a discount to NAV of $0.43 per unit or 7.5 per cent of the $5.71 NAV.

 

Portfolio Manager Updates for 2015-09-30

Net asset value (“NAV”) at September 30, 2015 was $6.06 versus $6.51 on June 30, 2015. Unitholders received distributions totaling $0.10383 during the quarter.

Markets had turned down in the second quarter and continued lower right through the third quarter of 2015 driven predominantly by a dramatic correction in oil prices. Crude fell below US$40 a barrel for the first time since 2009. The Energy sector component of the TSX was down 18% this quarter. Materials sector was even harder hit down nearly 25%.

One of the hardest hit names in the Materials sector was Teck Resources (TCK.b), one of our core holdings, down over 48% in Q3. The Manager had kept the weight at the low end of the allowable range to minimize the impact on the Fund.

Consumer names fared better this quarter and Thomson Reuters Corp (TRI) was our best performer delivering a total return of 13.7% over this quarter.

After years of below average volatility levels, the S&P TSX 60 VIX (VIXC) soared to 5-year highs briefly in late August on an especially tumultuous day of market action. However, this elevated volatility was short-lived and settled the quarter in the low 20s compared to the long-term average of 17%.

With volatility somewhat elevated, the Fund increased its overwriting to capitalize on the higher option premiums and closed this quarter with 17.3% of the portfolio overwritten.

The Fund delivered a total return of negative 5.3% compared to negative 6.63% for the equally weighted universe.

The trading price on September 30, 2015 was $5.71, down $0.75 from the June 30, 2015 trading price of $6.46. The September 30th trading price of $5.71 represents a discount to NAV of $0.35 per unit or 5.8% of the $6.06 NAV.

 

Portfolio Manager Updates for 2015-06-30

Net Asset Value (“NAV”) at June 30, 2015 was $6.51 versus $6.99 on March 31, 2015. Unitholders received distributions totaling $0.11283 during the quarter.

After a sharp correction in early March, the TSX broad index appeared to be continuing higher. However, the 2015 high for the year-to-date was set in mid-April and has trended lower since then. Canadian markets closed the quarter at the low for Q2.

Industrials and Utility names were the hardest hit during this period. Most sectors were down except for Consumer stocks with small positive returns and Healthcare showing stronger returns led by Valeant Pharmaceuticals.

After stemming losses in the first quarter, AGF Management (AGF.b) and Teck Resources (TCK.b) both resumed their downtrend and were our weakest performers this quarter at negative 28.8% and negative 27.9% respectively. Manulife Financial Corp (MFC) had a great quarter and returned 8.7% to its shareholders during the quarter.

Volatility continued to drift lower in the second quarter and traded in a range in the mid-teens. The S&P/TSX 60 VIX (VIXC) got as low as 12% but ended the quarter at 13.5%.

With volatility falling, our overwriting activity remained relatively quiet. However, we were able to selectively write some of the names showing weaker price action. The average for the period was 9.4% and 9.5% of the portfolio was overwritten at the end of the quarter.

The Fund delivered a total return of negative 5.3% compared to negative 5.0% for the equally weighted universe.

The trading price on June 30, 2015 was $6.46, down $0.54 from the March 31, 2015 trading price of $7.00. The June 30th trading price of $6.46 represents a discount to NAV of $0.05 per unit or 0.8% of the $6.51 NAV.

 

Portfolio Manager Updates for 2015-03-31

As of March 31, 2015, the Net Asset Value per unit of CDD.UN was $6.99 vs. $7.17 on December 31, 2014. Unitholders received regular distributions totaling $0.11576 per unit during the quarter.

The unit’s closing market price March 31, 2015 was $7.00 which represents a 1 cent premium to its underlying NAV.

The healthcare and technology sectors enjoyed the strongest performance on the TSX this quarter while other sectors delivered low single-digit positive or negative returns.

Thompson Reuters (TRI) was the best performing stock in the portfolio for the second consecutive quarter up 10.4%, while Teck Resources (TCK.b) recouped nearly half its fourth quarter losses up 9.4%. Utility names were modestly higher but fund performance was dragged down by CIBC, which was down 6.97%.

With volatility declining over the quarter from 25% in January and markets generally up, the level of call writing was minimal with an average written position of 5.3% though trended up to 12.3% at quarter end.

 

Portfolio Manager Updates for 2014-12-31

Net Asset Value (“NAV”) at quarter end December 31, 2014 was $7.17 versus $7.32 on September 30, 2014. Unitholders received distributions totaling $0.11863 during the quarter.

The fourth quarter started with markets in correction mode. The pullback continued into mid-October with some dramatic down-days along the way which offset most of the 2014 gains to that point. Uncertainty returned to the markets over the next couple of months and into the end of the year, as losses were retraced and subsequent gains were corrected.

On a sector basis, returns continue to be mixed. Consumer and Technology stocks delivered strong double-digit gains; however, Energy and Materials were significantly lower. Financials, the other heavily weighted sector in our Fund, were relatively flat.

Thompson Reuters Corp (TRI) was easily our best performing stock up almost 16% on a total return basis. Teck Resources Ltd. (TCK.b) reacted to the big pullback in gold and sold off 22.7%. The overall market as represented by the S&P TSX 60 Index was basically flat with a total return of negative 0.3 per cent.

Volatility was starting to pick up at the end of the third quarter and continued into the fourth. Implied volatility as measured by the S&P TSX 60 VIX index peaked at just under 24% percent in October and tested this level again in December before returning to the mid-teens as the year drew to a close. Our overwriting activity remained about the same as the third quarter, which was relatively low. Our model did not signal a return to more overwriting during this period.

The Fund delivered a total return of negative 0.50 percent which compares favorably to negative 2.04 per cent for the equally weighted universe.

The trading price on December 31, 2014 was $6.53, down $0.595 from the September 30, 2014 trading price of $7.125. The December 31 trading price of $6.53 represents a discount to NAV of $0.64 per unit or 8.9 percent of the $7.17 NAV.

 

Portfolio Manager Updates for 2014-09-30

Net Asset Value at quarter end September 30, 2014 was $7.32 versus $7.29 on June 30, 2014. Unitholders received distributions totaling $0.12102 during the quarter.

The broad-based rally that started in 2013 continued unabated well into the third quarter of 2014. There was a little pause in August but new highs were made in early September. These summer gains were erased, however, as the quarter drew to a close with the market in correction mode. Market weakness stemmed from a wide variety of factors including softer economic data here in Canada, and geopolitical concerns such as the rise of the ISIS which could impact global natural resources.

In terms of sectors, it was more of a mixed bag this quarter with about half delivering flat to negative returns with the rest seeing mainly single-digit positive returns. Our best performer was Transcanada Corp (TRP) but this performance was very stock specific. The politics over the Keystone pipeline has been heated for some time but took on a new twist recently when investors began to consider TRP a potential candidate for activist investors. The total return for TRP this quarter was 14.2 per cent.

Gold began to slide in September along with equities taking Teck Resources lower. It was our worst performer this quarter at negative 12.9 percent. The overall market was relatively flat with the S&P/TSX Composite index posting a return of negative 0.5 percent in Q3.

The quarter started quietly with volatility near the lows for the year, however, this calm came to an end in early August when North American markets reacted to concerns in Europe and Argentina, as well as, the Ebola crisis and the rise of ISIS. Implied volatility as measured by the S&P/TSX 60 VIX spiked to over 16% in early August and closed out the quarter not far from these levels. Overwriting activity remained fairly quiet in the third quarter as it was in the previous quarter until volatility spiked in September and overwriting activity was increased. The fund ended the quarter with 10.2 per cent of the portfolio overwritten.

The fund delivered a total return of 2.07 percent compared to the TSX 60 which had a total return of 0.4 percent. The relatively high weighting of Financials in this fund contributed to our relative outperformance during this period.

The trading price on September 30, 2014 was $7.125, down $0.125 from the June 30, 2013 trading price of $7.25. The September 30 trading price represents a discount to NAV of $0.195 per unit or 2.7 percent of the $7.32 NAV.

 

Portfolio Manager Updates for 2014-06-30

Net Asset Value at quarter-end June 30, 2014 was $7.29 versus $7.19 on March 31, 2014. Unitholders received distributions totaling $0.11733 during the quarter.

Most sectors enjoyed gains in the second quarter but all were single-digit aggregate returns, led by Energy and Industrial names. Our star performer was Russell Metals (RUS) with a total return of 15.1 percent which rebounded from a weak first quarter. Scotiabank (BNS) with a total return of 12.1 percent was the next best which also recovered from a weaker previous quarter. Canadian Utilities (CU) was the laggard this quarter. Its share price peaked this quarter and rolled over delivering a negative 2.1 percent total return in Q2.

Volatility, or rather the lack of volatility, continues to be an interesting story in 2014. Levels continued to drift lower this quarter with the S&P/TSX 60 VIX spending several days at record lows. We reduced our overwriting activity further this quarter averaging less than 5 percent during the period and closing June 30 with only 2.4 percent of the fund written.

The Fund delivered a total return of 3.0 percent compared to the S&P/TSX 60 which had a total return of 6.3 percent. This relative underperformance is due to the higher concentration of Financials in this fund which did not fare as well.

The trading price on June 30, 2014 was $7.25, up $0.53 from the March 31, 2013 trading price of $6.72. The June 30 trading price of $7.25 represents a discount to NAV of $0.04 per unit or 0.5 percent of the $7.29 NAV.

 

Portfolio Manager Updates for 2014-03-31

Net Asset Value at quarter end March 31, 2014 was $7.19 versus $7.30 on December 31, 2013. Unitholders received distributions totaling $0.1157 during the quarter.

The broad market in Canada ended 2013 at the highs for the year. That rally has continued mostly unabated into the first quarter of 2014. Materials had lagged other sectors on weak gold prices last year but rebounded in Q1 with gold approaching US$1,400 once again. All sectors delivered positive single-digit returns except for Healthcare which posted a 12.6 percent total return on the strength of Valeant Pharmaceuticals International Inc. (VRX).

Our core names saw a wider range of returns. Canadian Utilities Inc. was the best performer with over 16 percent total return. Also contributing to the positive quarter was Enbridge Ltd. up almost 9 percent. The laggards this period were Thomson Reuters Corporation and Teck Resources Ltd. down 5.0 percent and 13.7 percent respectively.

Volatility has remained well below its long-term average for all of 2014 so far. While economic uncertainty persists, it is not being reflected in stock prices. The low volatility and rising market made for difficult overwriting conditions. We kept the level of overwriting low, averaging 8.3 percent for the quarter to maximize upside participation.

The Fund delivered a total return of 0.1 percent which underperformed the TSX 60 Index with a total return of 5.5 percent.

The trading price on March 31, 2014 was $6.72, down $0.04 from the December 31, 2013 trading price of $6.76. The March 31st trading price of $6.72 represents a discount to NAV of $0.47 per unit or 6.5 percent of the $7.19 NAV.

 

Portfolio Manager Updates for 2013-12-31

Net Asset Value (“NAV”) at December 31, 2013 was $7.30 versus $6.91 on September 30, 2013. Unitholders received distributions totaling $0.11641 during the quarter.

The market low for 2013 occurred in June. Since then the Canadian market has trended higher with both the third and fourth quarters delivering good returns. The total return on the S&P/TSX Composite on the quarter was 7.26%. Once again, the rally was broad with all but one sector posting positive returns. Gold stocks dragged the Materials sector lower as the commodity moved down to levels not seen since 2010; gold bullion closed the year at just over US$1,200 per ounce.

Financials and Consumer stocks continued to lead the market higher. Two of the top three stocks in this quarter were from these sectors. Manulife Financial, Russell Metals, and Scotiabank delivered total returns of 23.77%, 16.26%, and 12.59% respectively. Our weakest performer was miner Teck Resources Ltd with a total return of 1.50%.

There was a lot of perceived uncertainty in the economy, however, with markets continuing to forge higher this quarter, volatility continued to move lower. The S&P/TSX 60 VIX posted an all time closing low of 10.3% this quarter. We began to reduce our overwriting in the third quarter and continued to do so this quarter in order to participate in more market upside. Our average overwritten position this quarter was 5.0% of the fund and we closed the quarter with no call option positions.

The Fund delivered a total return of 7.33% which is on par with the total return on the TSX 60 of 7.67%.

The trading price on December 31 was $6.76, up $0.04 from the September 30 trading price of $6.72. The December 31 trading price of $6.76 represents a discount to NAV of $0.54 per unit or 7.4% of the $7.30 NAV.

 

Portfolio Manager Updates for 2013-09-30

Net Asset Value (NAV) for the quarter ended September 30, 2013 was $6.91 versus $6.58 on June 30, 2013. Unitholders received distributions totaling $0.1099 during the quarter.

After falling to year-to-date low near the end of June, the Canadian market started a rally which persisted for most of the third quarter. The total return on the S&P/TSX Composite Index during the quarter was 6.24%. All but the Utilities sector, which was down 3.08%, posted low to mid single-digit positive total returns this quarter. The Financials, which are well represented in our core portfolio, delivered decent returns after posting comparatively weak returns for the previous two quarters.

Teck Resources Ltd. had delivered mixed results over the past year; however, it was our best performer this quarter with a total return of 23.19%. Other names, in the Fund that performed well, include: Russell Metals Inc., AGF Management Ltd. and National Bank of Canada. With Utilities sector underperforming in general, Canadian Utilities Ltd. was our worst performer at negative 3.35%.

With the market rallying into the third quarter, implied volatility began to weaken and even tested the year-to-date lows in August. The S&P/TSX 60 VIX mostly traded in a range between 12% and 16% during this quarter. Our overwriting activity had increased during the second quarter with the increased volatility and weaker markets. But, with the third quarter rally underway, our overwriting activity diminished and the Fund had just over 10% of its portfolio with written call positions as at September 30th.

The Fund delivered a total return of 6.73% which compares favourably to the total return on the S&P/TSX 60 Index of 6.19%.

The trading price on September 30th was $6.72, up $0.27 from the June 28th trading price of $6.45. The September 30th trading price of $6.72 represents a discount to NAV of $0.19 per unit or 2.7% of the $6.91 NAV.

 

Portfolio Manager Updates for 2013-06-30

Net Asset Value (NAV) for the quarter ended June 30, 2013 was $6.58 versus $6.96 on March 31, 2013. Unitholders received cash distributions totaling $0.11293 during the quarter.

After trading virtually sideways for two months, the Canadian market started an up and down quarter in early April that culminated with the S&P/TSX Composite posting a total return of negative 4.07%. The S&P/TSX 60 Index was slightly worse at negative 4.10%. Materials and Telecom stocks were the main culprits this quarter. Three quarters of the Material names delivered negative returns, mainly in the Gold sector as bullion prices continued to erode throughout the quarter. Gold traded below US$1,200 per ounce for the first time since September 2010.

In the face of broad negative returns, there were two star performers in the Fund this quarter, namely: Manulife Financial Corp and Thomson Reuters Corp. Their respective total returns for this quarter were 13.44% and 5.09%. The worst performer, for the second quarter in a row, was Teck Resources Ltd.-Class B at negative 19.96%.

Implied volatility began to move somewhat higher in the second quarter after making multi-year lows in January and further intra-lows in March. Interestingly, the volatility of the implied volatility measure S&P/TSX 60 VIX has also been moving higher. The 30-day average of this series reached levels not seen since September 2011. The Fund took advantage of the higher volatility and increased its overwriting in this quarter to just under 12% on average from approximately 2% in the first quarter. About 30% of the Fund was overwritten as at June 30, 2013.

The Fund delivered a total return of negative 3.95% which compares favourably to the total return on the S&P/TSX 60 of negative 4.10%.

The trading price on June 28th was $6.45, down $0.21 from the March 28th trading price of $6.66. The June 28th trading price of $6.45 represents a discount to NAV of $0.13 per unit or 1.9% of the $6.58 NAV.

 

Portfolio Manager Updates for 2013-03-31

Net Asset Value (“NAV”) for the quarter ended March 31, 2013 was $6.96 versus $6.80 on December 31, 2012. Unitholders received distributions totaling $0.1132 during the quarter.

The rally that started in Q4 of 2012 continued to the end of January 2013, but then traded sideways for the rest of Q1 of 2013. The S&P/TSX 60 Index posted a total return of 3.2% in this quarter. The two sectors driving this return were Healthcare and Technology with big returns in two specific names, Blackberry Inc. and Valeant Pharmaceuticals. The three primary sectors represented in our core universe, Financials, Materials, and Energy, saw returns of 4.2%, negative 10.4% and 4.2% respectively. The Materials sector saw the most weakness as investors reacted to the steady erosion in gold bullion prices.

Thomson Reuters was our best performer with a total return of 15.7%, followed by Canadian Utilities Ltd. at 12.6%. With the gold price falling, our holding in Teck Resources Ltd. was the worst performer at negative 20.9%.

Implied volatility had been in decline for most of 2012 and ended the year near the lows. This trend continued in Q1 of 2013. The S&P/TSX VIX (VIXC) made new multi-year lows in January and again in March trading below 10% on March 20th. The relatively low levels of implied volatility make overwriting more challenging due to the lower option premiums available.

The TSX 60 Index started the year in strong fashion, continuing the uptrend that started in mid-November of 2012. In order to participate in this uptrend, we reduced our overwriting activity from just under 20% during Q4 of 2012 to 1.5% on average for Q1 of 2013. The Fund delivered a total return of 4.0% which compares favorably with the S&P/TSX 60 Index at 3.2%.

The trading price on March 28th was $6.66, up $0.32 from the December 28th trading price of $6.34. The March 28th trading price of $6.66 represents a discount to NAV of $0.30 per unit or 4.3% of the $6.96 NAV.

 

Portfolio Manager Updates for 2012-12-31

Closing Net Asset Value (“NAV”) for the quarter ended December 31, 2012 was $6.80 versus $6.62 on September 30, 2012. Unitholders received distributions totaling $0.10726 during the quarter.

The broad-based market continued the positive growth seen in the previous quarter, albeit slower. The S&P/TSX 60 Index posted a total return of 2.3% with Consumer stocks up 8.7%. The Energy and Materials sectors, two of the strongest performers in Q3, sustained negative returns in this quarter, while Financials stocks, the key sector represented in our Fund, was up 5.2%.

Despite the weakness in the Materials sector this quarter, our best performer was Teck Resources Ltd. – Class B which had a total return of 26.2%, followed by Manulife Financial Corp. up 15.1%.

AGF Management Ltd. (AGF) has been in a pronounced downtrend since 2011 after several quarters of net redemptions. AGF was our worst performer this quarter which had a negative return of 9.3%. The Fund was able to mitigate this negative return somewhat by keeping the weight at the lowest allowable level.

BCE Inc. was down for much of the quarter following its announcement to acquire Astra Media Inc. in an all cash deal for $3.7 billion at a 37% premium to the current share price. There were no changes to the dividend this quarter; however, the BCE share price recovered somewhat to finish the quarter roughly flat on a total return basis (after factoring in the over 5% dividend yield).

After testing the YTD lows last quarter, implied volatility traded sideways for most of the fourth quarter with a brief spike in November but closed the year not far off the 12-month lows.

The average level of overwriting for Q4 was down to 18.7% compared to 29.1% in Q3. Lower levels of implied volatility made call writing more challenging this quarter. The Fund delivered a total compound return of 4.3% for the quarter which compares favorably to the total return on the S&P/TSX 60 Index of 1.5%.

The closing price on December 29th was $6.35, down $0.23 from the September 30th trading price of $6.58.

The December 29th closing price of $6.35 represents a discount to NAV of $0.45 per unit or 6.62% of the $6.80 NAV.

 

Portfolio Manager Updates for 2012-09-30

Closing Net Asset Value (“NAV”) for the quarter ended September 30t, 2012 was $6.62 versus $6.68 on June 30, 2012. Unitholders received distributions totaling $0.10839 during the quarter.

The quarter ending September 30, 2012 recovered most of the broad market losses sustained in the previous quarter. All sectors delivered positive returns; however, only the Materials sector produced double-digit gains. The S&P/TSX 60 Index posted a total return of 6.7% in the third quarter, with Materials up over 13%. Financials, as the key sector represented in its portfolio, was up 4.8%.

Our best performer, namely Russel Metals Inc., was also from the Materials sector, posting a total return of 11.0% in the quarter. All other names had single-digit positive returns except Enbridge Inc. and Teck Resources, which were down 4.9% and 8.0% respectively. Enbridge suffered a pipeline accident in the U.S., albeit relatively minor, casting a shadow of uncertainty for investors this quarter. Teck Resources shares experienced sell-off in mid-quarter on weaker-than-expected earnings but did start to recover towards the end of the quarter.

AGF Management Ltd. was mostly flat during the quarter after a terrible first half. The stock appeared to be turning around in September but sold off sharply on weak earnings just before the quarter-end.

Volatility, which had peaked in the fall of 2011 and corrected 50% by the end of the first quarter in 2012, started to normalize in the second quarter. Both actual volatility and implied volatility as measured by the S&P/TSX VIX (VIXC) trended lower throughout the third quarter and tested the lows in the first quarter of 2012.

Overwriting activity was reduced dramatically in the third quarter in order to capture as much upside as possible in the up-trending market. The Fund closed the quarter with only one equity security overwritten, representing 2.5% of its portfolio versus 53.2% at the end of the second quarter, while the average level over the quarter was 29.1%.

The trading price on September 28th was $6.58, up $0.26 from the June 30th trading price of $6.32.

The September 28th trading price of $6.58 represents a discount to NAV of $0.04 per unit or 0.60% of the $6.62 NAV.

 

Portfolio Manager Updates for 2012-06-30

Net Asset Value (“NAV”) as of June 30, 2012 was $6.68 versus $7.21 on March 31, 2012. Unitholders received distributions totaling $0.11451 during the quarter.

The market rollover anticipated for the second quarter did come to pass. Most sectors suffered negative returns, some in the double digits. At the same time, implied volatility which had suggested great complacency for several months began to return up to more normal levels.

The S&P/TSX 60 posted a total return of negative 5.4% during the second quarter of 2012. Apart from the Technology sector, Materials and Energy stocks were the laggards on the TSX during the quarter, down 10.8% and 7.2% respectively. Telecommunications and Consumer stocks delivered the best returns in the quarter, however, only in the low single digit.

In line with overall sector performance, BCE Inc. was the best performer in the Fund during the second quarter posting a positive return of 6.5%, followed closely by Enbridge Inc. up 5.7 %. Most of the core holdings suffered negative returns in this quarter. AGF Management Ltd. continued its slide down 26.0% and was our worst performer. Manulife Financial Corp. had staged a nice recovery in the first quarter of 2012, yet it gave back some of these gains in the second quarter at negative 17.0%.

Volatility peaked in the fall of 2011 and began a dramatic slide which continued to the first quarter of 2012. Implied volatility as measured by the S&P/TSX VIX (VIXC) fell from over 30% to less than 15% during this period. After several months of optimism, and perhaps complacency, market participants began to take some profits and volatility climbed to more normal levels in the second quarter. Overwriting activity was increased in the second quarter finishing at just over 50%. The average overwritten percentage for the second quarter was 20.8%. The Fund delivered a total return of negative 5.7% for the period.

The last trading price for the second quarter of 2012 was $6.30, down $0.55 from the March 31st trading price of $6.87.

The last trading price of $6.30 represents a discount to NAV of $0.38 per unit or 5.69% of the $6.68 NAV.

 

Portfolio Manager Updates for 2012-03-31

Net Asset Value (“NAV”) as of March 31, 2012 was $7.21 versus $6.94 on December 31, 2011. Unitholders received distributions totaling $0.11391 during the quarter.

The economic recovery in Canada continued into the first quarter, but the slow pace has not improved since last year-end. Markets forged ahead in anticipation of sustained recovery but showed signs of rolling over by mid-March. The U.S. market by comparison is expanding at a much faster pace with many sectors as well as the overall market sustaining almost twice the year-to-date gains of the TSX.

The S&P/TSX 60 posted a total return of 4.6% in the first quarter. Healthcare led the gains for the third consecutive quarter, followed by the Consumer Discretionary and Financial Services sectors. Financials saw double-digit positive gains for the first time since 2010.

For the names in our core portfolio, Manulife Financial Corp (MFC) was the best performer this quarter with a total return of 25.8%. This stock has been one of our most volatile holdings and in a prolonged downtrend since the financial crisis of 2008, so it’s encouraging to have it positively contributing to portfolio performance again.

The laggard this quarter was TransCanada Corp. (TRP), which was down 2.8% in the quarter. This usually stable name came under pressure in March when it announced a temporary shutdown of its Keystone pipeline to retrieve disabled cleaning equipment.

Implied volatility on TSX stocks as measured by the VIXC has been in a downtrend since peaking last October. While usually strongly inversely correlated with market prices, the VIXC continued to weaken into late March even though prices had started to roll over earlier in the month. The lower implied volatility of TSX stocks reduced the value of option premiums, however, the Fund selectively wrote specific names within the portfolio. The average overwritten level over the past quarter was 15.8% ending the quarter at 14.3%. The Fund delivered a total compound return of 5.5% compared to 7.5% for the equal weighted benchmark.

The trading price at the close of March 30, 2012 was $6.87, up $0.56 from the December 29th trading price of $6.31.

The March 30th trading price of $6.87 represents a discount to NAV of $0.34 per unit or 4.72% of the $7.21 NAV.

 

Portfolio Manager Updates for 2011-12-31

Net Asset Value (“NAV”) at December 31, 2011 was $6.94 versus $6.84 on September 30, 2011. The Fund paid distributions totaling $0.11007 during the quarter.

After several months trending lower, the market bottomed and started to recover in early October. The economic recovery has been anemic so far, so time will tell whether the equity investors were correct in discounting better earnings in 2012. Lighter than usual volume suggests the year-end rally may have little conviction.

The S&P TSX 60 Index ended Q4 up 2.8% but well off the highs set earlier in the quarter. The financials lagged the broad index this quarter diverging from its outperformance during much of 2011.

Following a massive pullback, Teck Resources (“TCK.b”) finally started to recover in Q4 and was the Funds top performer delivering 17.4% since September 30th. Enbridge Inc (“ENB”) also had double-digit returns; while other core names had single-digit returns. Our worst performer was Manulife Financial Corp (“MFC”) at negative 8.1%. Life Insurance companies are still struggling to regain their footing since the financial crisis.

Volatility for the year peaked this quarter with the S&P/TSX 60 VIX (“VIXC”) reaching just below 40% in early October. It worked its way lower for the remainder of the year to close just over 20%. Investor uncertainly, as measured by volatility, spiked due to the European debt crisis. While some progress has been made in this regard, very little was resolved in 2011 yet volatility continued to soften. We expect volatility to increase again in 2012 driven by headlines in much the same way it was in Q3 of 2011.

The fund attempted to monetize as much volatility as possible during the quarter, with average overwriting levels at over 30% over the three months. The fund ended the quarter with 12.5% of the fund overwritten. With volatility falling throughout most of the quarter and prices generally rising, options premiums were not enough to offset the upside sold away with overwriting. The fund delivered a total compound return for the quarter of 3.06% compared to 4.52% for the equal weighted benchmark.

The trading price on December 29th was $6.31, down $0.41 from the September 30th trading price of $6.72.

The December 29th trading price of $6.31 represents a discount to NAV of $0.63 per unit or 9.1% of the $6.94 NAV.

 

Portfolio Manager Updates for 2011-09-30

Net Asset Value at quarter end September 30, 2011 was $6.84 versus $7.44 on June 30, 2011. Unitholders received distributions totaling $0.11484 during the quarter.

The correction, which began in early March, continued with a vengeance throughout the third quarter.

The S&P TSX 60 Index was down more than 12% during the period and ended the quarter near the lows. Once again, as in the previous quarter, the Financials, down 9.6%, fared a bit better than the broad based index.

Similar to the second quarter, the Utility stocks made the greatest contribution to the Fund and were, in fact, the only stocks to deliver positive total returns.

The Fund's top three performers were Canadian Utilities (“CU”) up 11.7%, Enbridge Inc. (“ENB”) up 7.5% and, BCE Inc. (“BCE”) up 5.3%.

Teck Resources Ltd has been a great contributor at various stages over the past year, however, it was the worst performer during the quarter down 36.9%.

There was marginal improvement in credit conditions in the third quarter which helped the banks outperform the broad market, and dramatically outperformed their U.S. counterparts.

Volatility, which had been relatively mild for the first half of 2011 virtually doubled in mid-summer. Uncertainly over the European debt crisis and policy gridlock in the U.S. left investors perplexed and divided as to how to properly position.

The uncertainly will likely continue well for the balance of 2011 and perhaps into 2012.

The Fund had taken advantage of lower volatility in the second quarter to purchase some put protection, and dramatically stepped-up our call overwriting in the third quarter, ending the period with 25.9 % of the portfolio subject to covered calls. These actions helped the Fund outperform its benchmark by over 300 basis points in the quarter.

The trading price on September 30th was $6.72, down $0.47 from the June 30th trading price of $7.19.

The September 30th trading price of $6.72 represents a discount to NAV of $0.12 per unit or -1.8% of the $6.84 NAV.

 

Portfolio Manager Updates for 2011-06-30

Net Asset Value at quarter end June 30, 2011 was $7.44 versus $7.69 on March 31, 2011. Unitholders received distributions totaling $0.12431 during the quarter.

After a brief recovery, the correction, which began in early March, continued throughout the second quarter.

The S&P TSX 60 Index Total Return Index was down nearly 5% in Q2. Financials, which represent approximately half of the core portfolio, fared slightly better than the broad index, but were also down this quarter.

The strength in the portfolio this quarter came from utility-related stocks such as, TransCanada Corp. (“TRP”) and BCE Inc. (“BCE”) both up 8.8%, Canadian Utilities Ltd. (“CU”) up 6.5%, and Enbridge Inc. (“ENB”) up 6.4%.

Despite improved year over year results, Russel Metals Inc. (“RUS”) was the worst performer in the core fund down 8.9%. Waning economic growth expectations worldwide weighed on all steel producers.

Credit conditions are likely to improve somewhat in 2011, which will benefit the bank stocks, however, economic growth may be slower than previously expected for the next two quarters. This slowdown may negatively impact the performance of our resource-based holdings.

Volatility remained relatively low throughout the quarter, which limited our overwriting opportunities. The fund was, nevertheless, overwritten for most of the period and ended the quarter with approximately 12 percent of the portfolio subject to covered calls.

Given the concentrated exposure to the Financial sector, the Fund took advantage of the low volatility levels to purchase protective puts on this sector. The profits from these positions helped mitigate the negative performance of our bank holdings during the quarter.

The trading price on June 30th was $7.19, down $0.11 from the March 31st trading price of $7.30.

The June 30th trading price of $7.19 represents a discount to NAV of $0.25 per unit or -3.36% of the $7.44 NAV.

 

 

© 2017 Strathbridge Asset Management Inc.         Privacy     |    Legal     |    Trade Matching Statement