NexC Partners Corp. May Commentary

Market Commentary

The Fund gained in the month of May, as equity markets continued to grind higher. The best performing sectors were consumer staples, telecommunications and financials, while the worst performing sectors were utilities, materials and energy.

The best performing stocks were Lorillard, Reynolds America and Telus Inc. Lorillard continued to outperform on speculation of consolidation in the industry with Reynolds, a possible suitor, also outperforming. Telus was up after strong Q1 earnings reported better than expected subscriber growth. Their decision to end plans to bid for Mobilicity also had a positive effect on the stock.

The Fund’s worst performing stocks were Teck Resources, Great West Life and Integrys Energy. Teck Resources underperformed as low coal prices, weak margins and a high cash burn weighed down the company’s fundamentals. Great West Life was down this month as their earnings showed that their Putman division continued to struggle. Integrys Energy declined after they missed earnings estimates on weaker than expected retail electric margins.

The Fund completed its quarterly rebalance and maintained its U.S. holdings at 45% of the Fund. The Fund added Camden Property Trust, Ingredion, Lyondellbasell, Tim Hortons and George Weston Inc. and sold its positions in BCE, Meadwestvaco, Philip Morris Intl., Riocan REIT and Rayonier.

The rebalanced portfolio holds 18 U.S. equities and 22 Canadian equities, and continues to hedge U.S. dollar exposure, maintaining a net U.S. dollar exposure at approximately 10% of the Fund’s NAV. We continued the option overwriting program on 7 Canadian names and 6 U.S. names. The Fund has not deployed leverage.

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