Purpose Best Ideas Fund September Commentary

Fund Commentary

The Fund was negative in September. The top performing sectors were information technology, healthcare and financials while the lagging performing sectors were consumer discretionary, industrials and staples.
The best performing stocks were Valeant Pharmaceuticals, Actavis and Motorola Solutions while the worst performers were Hertz, CBS and Priceline.
Merger and takeover speculation ran rampant across the pharma sector which helped lift prices of Valeant and Actavis this month. Valeant had upbeat guidance for Q3 earnings and hinted at an increased bid for Allergan. Actavis was rumoured to have a competing bid for Allergan and also was a rumoured merger target from Pfizer. Motorola shares were lifted after it offloaded over $4 bn in pension liabilities to Prudential Insurers.
Hertz shares slid lower this month on negative earnings revisions, despite coming to an agreement with activist Carl Icahn allowing him to nominate 3 of his directors to the board. CBS fell on concerns that its aging broadcast business model would continue to see shrinking ad revenue in the face of increased competition from new online video providers. Priceline pulled back with general market weakness and concern over its lowered forecasts from the previous month’s earnings call.
The portfolio continues to hedge USD currency exposure maintaining a net USD exposure at approximately 10% of the Fund’s NAV.

Market Commentary

Geopolitical concerns in Russia/Ukraine and the Middle East continued to overhang markets this month. Pro-democracy protests in Hong Kong and an independence referendum in Scotland also contributed to the general sense of unease. Economic data pointed towards slowdown in China, and European data was also sluggish. In response, the PBOC added liquidity to support China’s 5 largest banks, while the ECB made a surprise rate cut and added almost $1tr in stimulus in an attempt to fend off deflationary pressures. Canadian markets fell on weakness experienced across cyclical commodity sectors. The US continued to diverge from other developed nations and posted a strong Q2 GDP, as well as improving economic activity. Speculation over the path of future US interest rate hikes continued to weigh on investors’ minds.

Commodities experienced heavy selling this month as the S&P GSCI closed down 6%. The combination of supply overhang, weak Chinese demand and a strong US dollar saw negative performance across grains, metals and energy.

The US dollar had another month of strong gains. The diverging interest rate and growth outlook between the US and other developed countries saw the US dollar appreciate against every G10 currency. The loonie fell 3% this month to 1.1200.

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