Ninepoint Concentrated Canadian Equity Fund

October 2020 Commentary


The S&P/TSX decreased 3.1% with Health Care (+7%) as the only sector in the “black”, while Information Technology (-9%), Consumer Staples (-7%) and Energy (-5%) led the market lower.

Our portfolio outperformed the benchmark as security selection in Materials, Consumer Discretionary, Real Estate, and Communication Services added value, along with no positions in the Information Technology sector. Offsetting these gains were security selection losses in Industrials.

In Materials, Methanex (+22%) reported stronger Q3 results (versus Q2) as methanol prices improved, as did their balance sheet. Despite the price rise, we continue to see decent upside potential.

In Consumer Discretionary, Linamar (+10%) added value as did no position in Restaurants Brands Int’l (-9%). Linamar did well as auto sales improved based on strong demand along with low inventory levels. A Restaurant Brands reported weak Q3 same store sales for both Tim Hortons & Burger King.

In Real Estate, both Brookfield Property Partners (+15%) and H&R REIT (+6%) increased as some of the pessimism around retail and office properties started to ebb as the economy continues to re-open. Both of our real estate names own diversified portfolios, and we believe the market is overly discounting their asset values due to retail and office exposure. Brookfield Property’s Class A focused retail portfolio positions it well to benefit from consolidation in the mall space and its office portfolio is best-in-class. H&R’s solid rent collections in the quarter benefitted from its industrial and residential portfolios, and we view its retail portfolio as well-positioned to outperform in Canada. Despite the share price increases in the stocks, we continue to believe that they both represent decent upside potential from current levels.

In Communication Services, Rogers Communications (+2%) outperformed as they surpassed revenue and earnings expectations with good cost control and no additional provisions for bad debts.

In Information Technology, our sector underweight (driven by no position in Shopify, down 10%), added value.

In the Industrials sector, Westshore Terminals (-12%) and NFI Group (-9%) both detracted value, continuing their underperformance from September. As stated last month, we continue to believe that both names have very attractive valuations and represent excellent upside potential.

GDP results for Q3 demonstrated that despite the rise in COVID-19 cases, that the blunt use of lockdowns is unlikely to cause a sustained economic slowdown, as was feared earlier in the year. In China, growth is expected to be +2% for the year, as their swift regional containment actions did not have lasting effects on their economic export engine. In the U.S., although the election uncertainty is a concern, politics is unlikely to “trump” the economic outlook, as the economy grinds forward. As a bottom-up equity value manager who doesn’t believe in trying to time markets, we focus on our fundamental analysis of earnings, cash flow and book value, to find companies that will enhance shareholder and other stakeholder value over time. As such, our portfolio consists of companies that trade at a discount to their long-term intrinsic value, and we are patient holding the names knowing that market fundamentals will likely reassert themselves in the fullness of time.

Ratul Kapur, CFA
Scheer Rowlett & Associates - Sub-Advisor

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 October 31, 2020; e) since inception (March 29,2018). The index is 100% S&P/TSX composite Index and is computed by Ninepoint Partners LP based on publicly available index information.

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; 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.

Ninepoint Partners LP is the investment manager to the Ninepoint Funds (collectively, the “Funds”). Commissions, trailing commissions, management fees, performance fees (if any), other charges and expenses all may be associated with mutual fund investments. Please read the prospectus carefully before investing. The indicated rate of return for series F units of the Fund for the period ended October 31, 2020 is based on the historical annual compounded total return including changes in unit 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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