Ninepoint International Small Cap Fund Market View

September 04, 2020

Dear Clients and Colleagues

COVID-19 has resulted in a shift in consumer spending. Post-lockdown, there has been an uptick in home spending and increased demand for hygiene, health and well-being products, while demand for products associated with socializing or going to work has declined. Spending on technology hardware, such as PCs, laptops and cartridges has almost reached pre-COVID levels, while spending on gardening products has increased by a low single-digit year over year.

At this stage, we remain underweight within the consumer discretionary sector. We tend to favour consumer companies that can rely on several distribution channels and possess strong brands. In times of crisis, consumers tend to prefer to stick with brands they know and trust. Our investment philosophy also prioritizes companies that offer above average industry growth, better margins and stronger balance sheets.

Husqvarna, a company we included in our international portfolios during COVID-19, fits these characteristics. Husqvarna is a global leader in outdoor power products, including chainsaws, trimmers, lawn mowers, and garden tractors. It is also active in consumer watering products under the Gardena brand. Husqvarna’s portfolio includes products for consumer and professional use. The company generates 36% of its sales in North America, 48% in Europe and 16% in other international markets. For its 2019 fiscal year, the company reported sales of US$4,472 million and an EBITDA of US$612 million.

Husqvarna remains the global leader in robotic lawn mowers and battery-powered products. In fact, the company invented robotic lawn mowers 20 years ago. There has been a recent increase in the market penetration and popularity of robotic mowers, stemming from several factors: a labour shortage in the service industry, the rising costs of contractors, lower productivity, and a lack of quality of the work done by contractors. Another reason for the increased use of robotic mowers comes from a sustainability standpoint. Robotic mowers are petrol free and generate only 60 decibels, a fraction of the noise made by conventional petrol-based mowers. Robotic mowers are also designed to service professional markets. Landscapers, property managers and other fleet owners are all adopters of the solution and this represents a very new and untapped market.

In an attempt to contain greenhouse gas emissions, citizens and consumers are expected to take on environmental initiatives. We anticipate increasing environmental consumer awareness to intensify within many product categories. We believe battery-powered products will continue to experience high consumer demand.

Market Size

  • The lawn and garden equipment market is expected to reach $45 billion by 2025, growing at 3%-4% per annum.
  • The U.S. market for power lawn and garden equipment is about $12 billion. On average, approximately 6 million petrol-based lawn mowers are purchased every year.
  • Electric-powered equipment should grow 8% per annum until 2025.
  • The global construction equipment market was estimated at $125 billion in 2019. Approximately 25% of that market is for concrete and road equipment. That segment is expected to grow 4% per annum.

Growth strategy

  • Product development driving by innovation (e.g., batter-powered products)
  • Bolt-on acquisitions in niche areas (e.g., in the construction segment that is very fragmented) to increase the product range.
  • Growing the distribution network by signing new dealers, increasing the number of SKUs for the online channel, and signing new retail partners or increasing penetration with existing ones.


  • Husqvarna is the dominant player in mid- to high-end products for home gardening, landscaping and construction. Thanks to a strong brand, the company has a solid market share: No. 1 in Watering and Construction in Europe, No. 1 Globally in Robotic Lawn Mowers, and No. 2 Globally in Chainsaws.
  • Ability to innovate. The company spends more than peers on R&D.
  • Widespread global coverage with a network of 25,000 dealers.
  • Broad diversification of products, geographies and clients.
  • Strong balance sheet.


  • Housing activity and urbanisation overall.
  • Smart gardening, green roof technology and staycation trends post-COVID.
  • Demand for battery-powered products driven by environmental considerations (noise pollution, vibration, protection).
  • Professional markets opportunity with many areas underserved.
  • Circular economy and growing emphasis on sharing products.
  • Construction infrastructure spending.


  • There is a high seasonality in the business skewed towards the first half of the year.
  • Excluding the construction segment, recurring revenue is relatively small with 10% of total revenue.
  • Excluding the construction segment, most of their products are discretionary and could be impacted by a retail shutdown and the levels of disposable income.

Have a great weekend.
The Global Alpha Team


Fund 2.9% -9.4% 4.1% 0.7% 2.3% -0.4%
Index 4.5% -3.0% 6.1% 6.9% 8.5% -0.1%

1 All returns and fund details are a) based on Series F units; b) net of fees; c) annualized if period is greater than one year; d) as at August 31, 2020; e) since inception (March 15, 2018). The index is 100% MSCI EAFE Small Cap NR USD (CAD) and is computed by Ninepoint Partners LP based on publicly available index information.

Ninepoint Partners LP is the investment manager to a number of 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 rates of return for Series F of the Funds for the period ended August 31, 2020 are based on the historical annual compounded total returns including changes in [unit/share] value and reinvestment of all distributions or dividends and do not take into account sales, redemption, distribution or optional charges or income taxes payable by any security holder that would have reduced returns. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. This communication does not constitute an offer to sell or solicitation to purchase securities of the Funds.

The Fund is generally exposed to the following risks. See the prospectus of the Fund for a description of these risks: ADR risk; Concentration risk; Credit risk; Currency risk; Cybersecurity risk; Emerging markets risk; Foreign investment risk; Inflation risk; Liquidity risk; Market risk; Regulatory risk; Securities lending, repurchase and reverse repurchase transactions risk; Series risk; Small company risk; Specific issuer risk; Sub-adviser risk; Tax 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 Funds may be lawfully sold in their jurisdiction.

The opinions, estimates and projections (“information”) contained within this report are solely those of Ninepoint Partners LP (“Ninepiont”) and are subject to change without notice. Ninepoint makes every effort to ensure that the information has been derived from sources believed to be reliable and accurate. However, Ninepoint assumes no responsibility for any losses or damages, whether direct or indirect, which arise out of the use of this information. Ninepoint 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. 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 is or will be invested.

Ninepoint 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 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 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.

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

Investment Team

Related Funds

Historical Commentary