NexC Partners Corp. March Commentary

Market Commentary

Global stock markets were roiled by geopolitical events as Russia annexed Crimea triggering widespread condemnation of the action including Russia’s expulsion from the G-8. The U.S. Fed, now chaired by Yellen, announced a continuation of the tapering plan, with new guidelines highlighting that they would be taking a broader view than just jobs growth and inflation. They also indicated hiking interest rates beginning in 2015, a timeline which was perceived as hawkish by the market. Stock markets were generally volatile selling off mid-month and then recovering and approaching new highs by month end.

Commodities were again very active as the events in Russia continued to impact agriculture and energy exports from the region. Lean hogs were up significantly as a fatal swine disease negatively impacted production. Copper and iron ore collapsed on Chinese credit fears, while gold and silver sold off on the Fed’s hawkish guidance. Currencies saw increased volatility, with the Canadian dollar touching 1.1280 before 1.1280 before settling back down at 1.10 by month end.

Fund Commentary

The Fund gained in the month of March as value equities rallied. The best performing sectors were energy, consumer staples and telecommunications, while the worst performing sectors were industrials real estate and materials.

The best performing stocks were Lorillard, AT&T and Cenovus Energy. Our worst performing stocks were Teck Resources, Rayonier and Great West Life. Lorillard was up on speculation of consolidation in the industry with Reynolds as a possible suitor. AT&T recovered along with the telecom sector and a 300 million share buyback helped buoy the stock into month end. Cenovus outperformed as they received regulatory approval for the Grand Rapids oil sands project with a projected 180,000 barrels-per-day production capacity.

Teck Resources was down on the month as copper and coal declined over the month. Rayonier continued to underperform as the company prepared to spin off their performance fibers division from their real-estate and forest resources business. Great West Life underperformed as their U.K. payout annuity business would be negatively impacted by changes in the U.K. budget

The portfolio held 18 U.S. equities and 22 Canadian equities, and continued to hedge USD currency exposure maintaining a net USD exposure at approximately 10% of the Fund’s NAV. We continued the option overwriting program on 14 Canadian names and 5 U.S. names. The Fund has not deployed leverage.

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