Ninepoint Focused Global Dividend Class

May 2018 Commentary

Year-to-date to May 31, the Ninepoint Focused Global Dividend Class generated a total return of 4.22% compared to the S&P Global 1200 Index, which generated a total return of 3.72%.

Returns in the month of May were good both on an absolute and relative basis, with the Fund generating a total return of 1.59% while the benchmark generated a total return of 1.38%. Information technology, industrials and energy led the advance over the course of the month and we have maintained an overweight positioning to all three of these sectors.

Our modelling indicates that the Canadian dollar should continue to weaken in 2018. Because a resolution to the ongoing NAFTA negotiations is looking less likely in the near term, we have reduced some of our currency hedging, returning to a more neutral positioning relative to our benchmark.

Top contributors to the year-to-date performance of the Ninepoint Focused Global Dividend Class included Mastercard (+118 bps), Microsoft (+83 bps) and Visa (+75 bps). Top detractors year-to-date included Brookfield Asset Management (-45 bps), MGM Resorts (-35 bps) and Affiliated Managers Group (-29 bps). Note that we have sold our position in MGM Resorts after the Company lowered Q2 RevPar guidance and looked to be facing labour unrest at its casino properties.

Microsoft Corporation (MSFT US) has undergone one of the most impressive transformations for a mega cap technology company in recent memory. Under the leadership of Satya Nadella, Microsoft has successfully diversified away from PC desktops and has truly become a leading software-as-a-service provider to the enterprise, education and consumer markets. The Company is a massive cash machine and is expected to generate $34 billion of free cash flow in fiscal 2018, building upon the $132 billion of cash on the balance sheet as of March 31, 2018. Thankfully, shareholders directly benefit from this cash hoard, as Microsoft currently has a $40 billion share buyback program in place (with approximately $30 billion remaining) and returns approximately $3.2 billion each quarter through dividends.

Three key segments have each posted impressive revenue growth in the most recent quarter and look to have plenty of room for future growth. The Productivity & Business Processes segment includes Office 365 (with commercial revenue up 42%), LinkedIn (with revenue up 37%) and Dynamics 365 (Microsoft’s ERP and CRM offering, with revenue up 65%). The Intelligent Cloud segment includes server products and cloud services (with Azure revenue up 93%). Finally, the More Personal Computing segment includes Windows (with OEM revenue up 4%) but also gaming (led by Xbox software and services, with revenue up 24%) and search advertising (with revenue excluding TAC up 16%).

The Ninepoint Focused Global Dividend Class was concentrated in 27 positions as at May 31, 2018 with the top 10 holdings accounting for approximately 45.9% of the fund. Over the past year, 22 out of our 27 holdings have announced a dividend increase, with an average hike of 18.8%. We will continue to apply a disciplined investment process, balancing various quality and valuation metrics, in an effort to generate solid risk-adjusted returns.

Jeffrey Sayer, CFA

 

1 All returns and fund details are a) based on Series F shares; b) net of fees; c) annualized if period is greater than one year; d) as at May 31, 2018; e) 2015 annual returns are from 11/25/15 to 12/31/15. 

The Fund is generally exposed to the following risks. See the prospectus of the Fund for a description of these risks: ADR risk; Capital depletion risk; Capital gains risk; Class risk; Credit risk; Currency risk; Cybersecurity risk; Derivatives risk; Exchange traded funds risk; Foreign investment risk; In ation risk; Interest rate risk; Liquidity risk; Market risk; Securities lending, repurchase and reverse repurchase transactions risk; Series risk; Short selling risk; Speci c issuer risk; Tax risk.

Ninepoint Partners LP is the investment manager to the Ninepoint Funds (collectively, the “Funds”). Commissions, trailing commissions, management fees, performance fees (if any), and other expenses all may be associated with investing in the Funds. Please read the prospectus carefully before investing. The indicated rate of return for series F shares of the Fund for the period ended May 31, 2018 is based on the historical annual compounded total return including changes in share value and reinvestment of all distributions and does 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 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 Fund 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.

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