March 31, 2025
Commentary
Monthly Update
For the trailing one year-period, ended March 31, the Canadian Large Cap Leaders Split Corp Class A Shares generated a total return of 19.69% and the Preferred Shares generated a total return of 7.73%. For the month, the Class A Shares generated a total return of 0.56% while the Preferred Shares generated a total return of 0.62%1.
CANADIAN LARGE CAP LEADER SPLIT CORP. - COMPOUNDED RETURNS¹ AS OF MARCH 31, 2025 | INCEPTION DATE: FEBRUARY 22, 2024
1M |
YTD |
3M |
6M |
1YR |
Inception |
|
|---|---|---|---|---|---|---|
Canadian Large Cap Leaders Split Corp - Class A Shares |
0.56% |
3.45% |
1.05% |
1.05% |
19.69% |
23.31% |
Canadian Large Cap Leaders Split Corp - Pref Shares |
0.62% |
1.87% |
1.24% |
1.24% |
7.73% |
7.73% |
President Trump’s so-called Liberation Day of “reciprocal” tariffs has triggered the worst one-day selloff since the depths of the Covid-19 crisis in 2020. On a two-day basis, the roughly 10% drawdown is comparable to the 1987 stock market crash, the 2008 Global Financial Crisis and the Covid-19 pandemic. The math used to justify the retaliatory tariffs is dubious at best and the mechanism used to apply specific rates to individual countries seems to have come from ChatGPT or some other LLM, based on attempts to recreate the logic.
Beyond the ridiculous methodology, Trump’s ultimate goal of reshoring all industrial manufacturing to the United States seems questionable. Does he really believe that American consumers will be willing to pay significantly higher prices for domestically manufactured goods just to “Buy American”? It may not be a perfect system, but globalization has raised the standard of living around the world and generated tremendous wealth for millions and millions of people.
The stock market understands the risks of Trump’s trade war and the bizarre situation of a single individual looking to break the global economy without much evidence of any tangible benefits in the future. To be clear, the current tariff rates are worse than the worst-case scenarios of almost every economist or strategist. Most now expect that prices will surge, global growth will slow, and job losses will increase. Perhaps the correction becomes a true bear market before investors see some relief. But it is important to remember that selloffs eventually end and, given the pace of this most recent decline, even the tiniest bit of positive news could spark a powerful rally.
In this environment, we remain invested in a diversified portfolio of high quality, dividend-paying Canadian companies while we wait for the stock markets to stabilize. Again, we expect that interest rates will continue moving lower in Canada, making our holdings 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.
From the chart above, we can see that our holdings, on average, trade at an LTM price to earnings multiple of 14.4x, compared to the 5-year average price to earnings multiple of 15.2x. However, given our outlook for lower interest rates (and supported by a significant discount to the S&P 500, which currently trades at about 18.5x forward earnings, according to FactSet), multiples still have plenty of room to expand in Canada. Further, with the Class A Shares trading approximately 15% below the reported NAV at the close on March 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.
The implied discount was currently 3.0x worth of multiple points at the close on March 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.
Finally, we would like to highlight that the Canadian Large Cap Leaders Split Corp has announced its next distributions, payable on April 14, 2025, to both Class A and Preferred Shareholders of record at the close of business on March 31, 2025. As planned, holders of the Class A Shares will receive the $0.12500 per share regular monthly dividend and holders of the Preferred Shares will receive the $0.18750 regular quarterly 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
1All returns are based on Net Asset Value per Class A share, or the redemption price plus accrued interest per Preferred share and assumes that distributions made by the Fund on the Class A shares, or Preferred shares in the period shown were reinvested in additional Class A shares and Preferred shares of the Fund as at 3/31/2025.