Alt Thinking January 31, 2025
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Canadian Large Cap Leaders Split Corp.

Canadian Large Cap Leaders Split Corp – January 2025
Investment Team
  • John Wilson, MBA
    Co-CEO, Managing Partner, Senior Portfolio Manager
    John Wilson, MBA
    Co-CEO, Managing Partner, Senior Portfolio Manager
    John Wilson is a founding principal, Co-CEO and Managing Partner of Ninepoint Partners. John oversees all aspects of the firm’s investment and research initiatives. Prior to Ninepoint’s formation, he was CEO, CO-CIO and Senior Portfolio Manager at Sprott Asset Management (SAM). Previous to SAM, he was Chief Investment Officer at Cumberland Private Wealth Management, founder and CEO of DDX Capital Partners, an alternative investment management firm; was Managing Director at RBC Capital Markets...
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  • Jeff Sayer, MBA, CFA
    Vice President, Portfolio Manager
    Jeff Sayer, MBA, CFA
    Vice President, Portfolio Manager
    Jeff Sayer is Vice President, Portfolio Manager at Ninepoint Partners. Jeff oversees Global Equity, Infrastructure, Tactical Balanced and Split Corp investment strategies for the firm. Prior to Ninepoint’s formation, Jeff was with Sprott Asset Management (SAM), rounding out more than 20 years of investment management experience. Jeff received his MBA from the Schulich School of Business at York University and was awarded his CFA designation in 2004.
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  • Colin Watson
    Vice President, Portfolio Manager
    Colin Watson
    Vice President, Portfolio Manager
    Colin Watson's background spans across equities, asset allocation & derivative-based strategies. Prior to Ninepoint Partners, Colin worked as a Portfolio Manager at IMCO on a team responsible for overseeing IMCO’s $26B public equity allocation and deploying derivatives-based strategies for IMCO’s public asset allocation strategy. Prior to IMCO, Colin worked at Ninepoint Partners on equity selection & options-based overlays. Colin holds a Bachelor of Commerce Degree from McMaster Unive...
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Key Takeaways
  • Despite a weak December and increased geopolitical concerns in January, 2024 was a strong year for stocks with steady gains. The portfolio of Canadian high-quality dividend payers performed well, benefiting from lower interest rates in Canada.
  • Class A shareholders will receive $0.12500 per share on February 14, 2025.

Monthly Update

Despite a weak December (specifically post Fed meeting), 2024 was an excellent year for stocks and it felt much less volatile than most years because of the steady gains.  However, with President Trump’s inauguration and his new administration now in Washington, it made sense to prepare for greater volatility as a slew of Presidential Executive Orders looked set to hit the tape. The final week of January somehow managed to surpass our expectations for greater volatility, with the introduction of DeepSeek to the world, a Fed meeting where they paused monetary policy easing and a US-instigated trade war with everyone from its closest neighbors and allies to its largest adversaries.

Despite the noise, our portfolio of Canadian high quality dividend payers has performed well to start the year and the (now split-adjusted) net asset value of the Class A shares of the Canadian Large Cap Leaders Split Corp is significantly above the IPO price. The outlook for the portfolio remains solid and, as interest rates continue moving lower in Canada, our holdings look even more attractive from a yield perspective.

Information below is specific to individual securities held in the Portfolio. It is only intended to describe key characteristics of individual holdings at a point in time and makes no inference about the return nor yield of either the Preferred Shares or the Class A Shares of the Canadian Large Cap Leaders Split Corp.

Table 1

From the chart above, we can see that our holdings, on average, trade at an LTM price to earnings multiple of 14.7x, compared to the 5-year average price to earnings multiple of 14.5x. However, given our outlook for lower interest rates (and supported by a significant discount to the S&P 500, which currently trades at about 22x forward earnings, according to FactSet), multiples still have plenty of room to expand in Canada. Further, with the Class A Shares trading approximately 10% below the reported NAV at the close on January 31, 2025, we can adjust this table to visualize the implied valuation today:

Information below is specific to individual securities held in the Portfolio. It is only intended to describe key characteristics of individual holdings at a point in time and makes no inference about the return nor yield of either the Preferred Shares or the Class A Shares of the Canadian Large Cap Leaders Split Corp.

Chart 2

The implied discount was currently 1.2x worth of multiple points at the close on January 31, 2025, which highlights the opportunity to buy our portfolio of Canadian high-quality, dividend payers significantly below long-term historic valuations through the purchase of shares of NPS on the open market.

Because we are quite disappointed with the persistent trading discount, we solicited opinions from major financial institutions that have significant experience with split corps.  After much analysis and consultation, we concluded that a Class A share split, while maintaining the same distribution amount per share, and concurrent private placement of Preferred Shares could potentially alleviate some of this discount.  It would reward Class A shareholders with more stock, it would increase the dollar amount of distributions paid to each Class A by approximately 15%, it would increase the yield on each Class A shares to approximately 11% and it would theoretically improve trading liquidity since there would be a greater number of shares outstanding. While it is still early after completing the split, we are optimistic that the Class A shares will trade closer to net asset value over time.

Finally, we would like to highlight that the Canadian Large Cap Leaders Split Corp has announced its next distribution, payable on February 14, 2025, to Class A Shareholders of record at the close of business on January 31, 2025. As planned, holders of the Class A Shares will receive the $0.12500 per share regular monthly dividend.

As always, we appreciate the support of all those who have invested in the Canadian Large Cap Leaders Split Corp.

Until next month,

John, Jeff & Colin
Ninepoint Partners

Historical Commentary

View All
  • Commentary
    February 2025
    Canadian Large Cap Leaders Split Corp.
    We have just passed the one-year anniversary of the Canadian Large Cap Leaders Split Corp and can now finally begin reporting performance stats.
    Equities
  • Commentary
    December 2024
    Canadian Large Cap Leaders Split Corp.
    It was another excellent year for equities (and most other asset classes), with the S&P 500 posting a +23.3% return (+25.0% on a total return basis), making it two years of +20% returns in a row. For Canadian domestic investors, the TSX posted a +18.0% return (+21.7% on a total return basis), which was a relatively decent performance. Broadly speaking, US stocks outperformed Canadian stocks, large caps outperformed small caps and growth outperformed value, consistent with the trends of the past several years.
    Equities
  • Commentary
    November 2024
    Canadian Large Cap Leaders Split Corp.
    As we approach the holiday season and the end of 2024, investors should be pleased with their returns for the year. Further, although we are already part way through December, we are entering what has historically been a seasonally strong period for the equity markets, especially after excellent year-to-date performance. We think that the themes and trends that have been working are likely to persist through the balance of the year and into early 2025, as investors chase performance while refraining from selling winners to avoid realizing taxable capital gains.
    Equities
  • Commentary
    October 2024
    Canadian Large Cap Leaders Split Corp.
    As we write this October commentary, it is amazing how much has happened during the month and into the first week of November.
    Equities
  • Commentary
    September 2024
    Canadian Large Cap Leaders Split Corp.
    The US Federal Reserve has now begun easing monetary policy. After 525 bps of tightening from March 2022 to July 2023, the FOMC has finally lowered interest rates by 50 bps to 5.00% on September 18.
    Equities
  • Commentary
    August 2024
    Canadian Large Cap Leaders Split Corp.
    In August, the S&P 500 returned 2.3% and 2.4% on a total return basis while the TSX Composite returned 1.0% and 1.2% on a total return basis.
    Equities
  • Commentary
    July 2024
    Canadian Large Cap Leaders Split Corp.
    In the stock market, things can happen slowly then suddenly all at once. Historically, 5% drawdowns happen about three times a year while 10% drawdowns happen about once a year and we’ve just experienced the latter.
    Equities
  • Commentary
    June 2024
    Canadian Large Cap Leaders Split Corp.
    The Canadian Large Cap Leaders Split Corp has now been active for three complete months. We have been through a quarterly dividend cycle and cash flow from each of our holdings has flowed into the Corp. Importantly, we’ve had several of our companies boost dividend payments, including Bank of Montreal, Canadian Natural Resources, Manulife and TELUS, supported by generally solid results.
    Equities
  • Commentary
    May 2024
    Canadian Large Cap Leaders Split Corp.
    The Canadian Large Cap Leaders Split Corp has now been active for three complete months. We have been through a quarterly dividend cycle and cash flow from each of our holdings has flowed into the Corp. Importantly, we’ve had several of our companies boost dividend payments, including Bank of Montreal, Canadian Natural Resources, Manulife and TELUS, supported by generally solid results.
    Equities
  • Commentary
    April 2024
    Canadian Large Cap Leaders Split Corp.
    The Canadian Large Cap Leaders Split Corp has now been active for two complete months. We are fully invested in ten approximately equally-weighted, high-quality Canadian Dividend Growth Companies. From a macro perspective, we think that the timing for the launch of the Corp was opportune, and we are confident that the first interest rate cuts of the cycle are approaching, both in Canada and the United States.
    Equities
View All
All Funds
  • NPS
    (Class A)
    Tax-Efficient Funds Split Share Corps. Equity
    $13.71 $0.15 (1.08%)
    As at 4/2/2025
    Growth of $10,000 Invested as at 3/31/2025
    Performance as at 3/31/2025
    1 Year
    19.69%
    3 Year
    -
    5 Year
    -
    10 Year
    -
    Incept.1
    23.49%
    1 Inception Date 2/22/2024
    Go To Fund

    Ninepoint Partners LP is the investment manager to Canadian Large Cap Leaders Split Corp. (the “Company”). Important information about the Company, including its investment objectives and strategies, purchase options, and applicable management fees, performance fees (if any), and expenses, is contained in its prospectus. There is no assurance of a return on a subscriber’s initial investment. Please read the prospectus carefully before investing. This communication does not constitute an offer to sell or solicitation to purchase securities of the Company.

    The indicated rates of return for Class A units and Preferred Shares are based on the Net Asset Value per Class A share or the redemption price plus accrued interest per Preferred share and assume that distributions made by the Fund on the Class A shares and Preferred shares in the periods shown were reinvested (at Net Asset Value per Class A share or the redemption price plus accrued interest per Preferred share) in additional Class A shares and Preferred shares of the Fund.

    The Canadian Large Cap Leaders Split Corp. is generally exposed to the following risks. See the prospectus of the Company for a description of these risks: No Assurances on Achieving Objectives, Concentration Risk, Risk Related to Passive Investments, Performance of the Portfolio Issuers and Other Considerations, Greater Volatility of the Class A Shares, Equity Risk, COVID-19, Market Volatility, Market Disruptions, Recent and Future Global Financial Developments, Sensitivity to Interest Rates, Changes in Credit Rating, Reliance on the Manager and the Portfolio Manager, Conflicts of Interest, Use of Options and Other Derivative Instruments, Securities Lending, Sensitivity to Volatility Levels, Taxation, Significant Retractions, Loss of Investment, non-concurrent Retraction, Changes in Legislation and Regulatory Risk, Lack of Operating History, Cybersecurity Risk.

    The information contained herein does not constitute an offer or solicitation by anyone in the United States or in any other jurisdiction in which such an offer or solicitation is not authorized or to any person to whom it is unlawful to make such an offer or solicitation. Prospective investors who are not resident in Canada should contact their financial advisor to determine whether securities of the Company may be lawfully sold in their jurisdiction.

    Ninepoint Partners LP: Toll Free: 1.866.299.9906. Dealer Services: CIBC Mellon GSSC Record Keeping Services: Toll Free: 1.877.358.0540

The Canadian Large Cap Leaders Split Corp. is generally exposed to the following risks. See the prospectus of the Company for a description of these risks: No Assurances on Achieving Objectives, Concentration Risk, Risk Related to Passive Investments, Performance of the Portfolio Issuers and Other Considerations, Greater Volatility of the Class A Shares, Equity Risk, COVID-19, Market Volatility, Market Disruptions, Recent and Future Global Financial Developments, Sensitivity to Interest Rates, Changes in Credit Rating, Reliance on the Manager and the Portfolio Manager, Conflicts of Interest, Use of Options and Other Derivative Instruments, Securities Lending, Sensitivity to Volatility Levels, Taxation, Significant Retractions, Loss of Investment, non-concurrent Retraction, Changes in Legislation and Regulatory Risk, Lack of Operating History, Cybersecurity Risk.

Ninepoint Partners LP is the investment manager to Canadian Large Cap Leaders Split Corp. (the “Company”). Important information about the Company, including its investment objectives and strategies, purchase options, and applicable management fees, performance fees (if any), and expenses, is contained in its prospectus. There is no assurance of a return on a subscriber’s initial investment. Please read the prospectus carefully before investing. This communication does not constitute an offer to sell or solicitation to purchase securities of the Company.

The information contained herein does not constitute an offer or solicitation by anyone in the United States or in any other jurisdiction in which such an offer or solicitation is not authorized or to any person to whom it is unlawful to make such an offer or solicitation. Prospective investors who are not resident in Canada should contact their financial advisor to determine whether securities of the Company may be lawfully sold in their jurisdiction.

The opinions, estimates and projections (“information”) contained within this report are solely those of Ninepoint Partners LP and are subject to change without notice. Ninepoint Partners makes every effort to ensure that the information has been derived from sources believed to be reliable and accurate. However, Ninepoint Partners assumes no responsibility for any losses or damages, whether direct or indirect, which arise out of the use of this information. Ninepoint Partners is not under any obligation to update or keep current the information contained herein. The information should not be regarded by recipients as a substitute for the exercise of their own judgment. Please contact your own personal advisor on your particular circumstances.

Views expressed regarding a particular company, security, industry or market sector should not be considered an indication of trading intent of any investment funds managed by Ninepoint Partners LP. Any reference to a particular company is for illustrative purposes only and should not to be considered as investment advice or a recommendation to buy or sell nor should it be considered as an indication of how the portfolio of any investment fund managed by Ninepoint Partners LP is or will be invested.

Ninepoint Partners LP and/ or its affiliates may collectively beneficially own/control 1% or more of any class of the equity securities of the issuers mentioned in this report. Ninepoint Partners LP and/or its affiliates may hold short position in any class of the equity securities of the issuers mentioned in this report. During the preceding 12 months, Ninepoint Partners LP and/or its affiliates may have received remuneration other than normal course investment advisory or trade execution services from the issuers mentioned in this report.