Small-Cap Equity Fund

March 31, 2024

Market Context

• The Canadian small-cap market (Morningstar Canada Small Cap Index) rose 7.4% in the quarter. U.S. small-caps gained 7.9% in Canadian dollar terms.
  
• Energy, healthcare, and basic materials were the best performing sectors. Communication services and consumer stocks, on the other hand, were laggards.

Portfolio Specifics

• The fund consists of 20 companies, ranging from very small (Diversified Royalty) to medium-sized businesses (Vail Resorts). While the majority of holdings are Canadian, there are five U.S. companies which make up 22% of the portfolio’s stocks.
  
• The portfolio had another strong quarter following a stellar 2023. Performance was led by our resource holdings. Oil producer MEG energy, copper miner Capstone Copper, and gold producer Torex Gold Resources all gained roughly 30%. Our exposure to commodity-related stocks has historically been much lower than their weight in the Canadian market, and this continues to be the case. Nonetheless, these three companies are generating solid operating results and have been important contributors to performance.
  
• Hydrovac specialist Badger Infrastructure Solutions, mattress retailer Sleep Country Canada and fashion house Aritzia also saw notable gains. Aritzia rose by more than a third early in the year and our manager, Galibier Capital, decided to sell the stock. Galibier likes the company but has been frustrated with some of management’s decisions and felt it was a good time to move on.
  
• Stocks that were down in the quarter included Park Lawn, Enghouse Systems, VF Corp., and Interfor. We added to our positions in all four companies, viewing the price declines as a buying opportunity. We also bought additional shares in Generac Holdings, Henry Schein, and Finning International.
  
• Two stocks were sold, Northland Power and Aritzia (as mentioned). Northland has been a disappointment. The clean power provider is a good business that operates many attractive assets, but its management team has entered some bad contracts and hasn’t met Galibier’s expectations.
  
• The core of the portfolio continues to be companies that are providing fundamental products and services to Canadian businesses and individuals. Many of these are industrial and consumer companies, such as Boyd Group Services (collision repair), Cargojet (overnight air freight), Premium Brands Holdings (specialty food manufacturer and distributor), and Finning (Caterpillar dealer).
  

Positioning

• The portfolio has a unique composition, with key areas of investment being capital goods, industrial services, food & beverage, and consumer discretionary companies. This is in contrast to the small-cap market’s heavy focus on resource companies.
  

Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Important information about the Steadyhand funds is contained in our Simplified Prospectus. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently, and past performance may not be repeated.