Shipping constraints abate

The Fund was slightly positive, +0.14%, against the index which declined -2.26% in March 2022.

Top Holdings (alphabetically)

Cogeco Communications

Canada

Communication Services

Sendas Distribuidora SA

Brazil

Consumer Staples

Serco Group PLC

United Kingdom

Industrials

Softchoice Corp

Canada

Information Technology

TietoEVRY Oyj

Finland

Information Technology

March was a volatile month as the major markets plummeted in the first ten days of the month only to see a broad-based recovery by the end. Thanks to strong employment data, the S&P 500 ended on a positive note despite growing inflationary concerns. The VIX Index itself was volatile peaking at 35 and ending the month at 20.

While supply chain issues are likely to linger well into next year, we are starting to see shipping constraints abate.  We see this as a positive development because it may offset some of the inflationary pressure facing the world, at least in the 2H of 2022. While the war in Ukraine continues to be a major concern, any type of resolution would further help put a stop to rising prices.  Longer-term we believe inflation is still the primary concern facing global markets.  The U.S. dollar, a safe-haven asset, is approximately 20% above the Purchase Price Parity (PPP) level. We see this as unsustainable and expect it to reverse when growth resumes, with the dollar typically acting countercyclically. Non-US stocks continue to trade at a meaningful discount to US stocks (14x PE vs. 18x PE).  While we expect volatility, less negative geopolitical news and supportive valuations should help stocks to hold the bottom they found in March.

The Fund had a good month in the Consumer Discretion and Information Technology sectors. Regionally, South and North America drove most of March outperformance. As of March 31, 2022, the top 10 positions account for 38.7% of the portfolio. Regional and sector exposure remained relatively unchanged month over month.  Adding Assai (Sendas Distribudora) and Softchoice during periods of weakness paid off in the first quarter as both stocks performed well. They were there two largest contributors to returns.

Despite all the market and geopolitical turmoil, it was a reasonably quite period for the Fund in terms of activity.  The Fund completed exiting 5 smaller positions which we had been reducing exposure to, as we continue to tighten up the portfolio.  One new position was added this month, MTY Foods in Canada.  MTY operates as a multi-brand franchisor of restaurants in Canada and America.  The business model is tremendously cash generative and largely protected against inflation.  Management has been able to add brands to their portfolio over time at very high returns on investment.  We like the significant recurring free cash flow associated with this business and the opportunity to redeploy the capital if opportunities present themselves.