Purpose Tactical Hedged Equity Fund November Commentary

Fund Commentary

The Fund holds a portfolio of fundamentally selected stocks together with a dynamic futures hedge. The Fund also incorporates an un-hedged series (PHE.B) which maintains the same portfolio of equities and short S&P futures but does not hedge its USD exposure.
The Fund was negative this month. The best performing sectors were consumer discretionary, technology and healthcare while energy and materials were the worst.

The best performing stocks were Best Buy, Walmart and Pilgrim’s Pride. The retail sector saw generally positive Q3 earnings and was boosted further by optimism going into the important holiday sales season. Best Buy rose after topping analyst earnings expectations by doubling its profit on the back of improving operating margins. Walmart surged to all-time highs on the back of better than expected sales and earnings. It received a rare boost from same store sales which rose for the first time in 2 years. Pilgrim’s Pride bounced back from weakness the previous month on a strong earnings report, and a bullish demand outlook for poultry.

The worst performers were Oasis Petroleum, SM Energy and Nu Skin Enterprises. Oasis and SM fell with oil prices as OPEC’s decision not to cut production was viewed as squeezing out higher cost U.S. producers. Oasis indicated that a WTI price sub $80 per barrel would prompt it to cut capital expenditures and limit spending to only core wells. Nu Skin beat Q3 earnings estimates, but dropped after offering a weak Q4 forecast. It also acknowledged that key sales in China had slumped following a government investigation, and revenues were negatively affected by the stronger dollar.

The Fund completed a monthly rebalance, turning over 17 names in the portfolio. The new additions were AOL, Alliant Techsystems, Baxter International, Dana Holdings, Denbury Resources, Flowers Foods, General Motors, Huntsman, Laboratory Corp. of America Holdings, Lyondellbasell, Micron Technology, Nabors Industries, Supervalu, Tenneco, Triumph Group, Domtar and Unit. The holdings sold were Asbury Automotive Group, Anixter International, Cardinal Health, Cabot, Chesapeake Energy, Commercial Metals, Chevron, EMC, Fluor, Jacobs Engineering Group, Kellogg, Macy’s, Magellan Health, Nu Skin, Rowan Companies, Reliance Steel and Aluminum and Whirlpool.

The rebalance decreased the short futures hedge to approximately 25% of the Fund’s NAV.

The Fund continued to hedge its USD currency exposure maintaining a net USD exposure at approximately 10% of the Fund’s NAV.

Market Commentary

Stocks moved higher this month. In the U.S., generally strong data continued to support a positive economic outlook for 2015, and widen the economic gap between the U.S. and other developed countries. Conversely, Japan and Europe saw weakening economic data which prompted the BOJ and ECB towards even more aggressive stimulus measures in order to fend off deflationary pressures. In addition, the Bank of China unexpectedly cut rates to improve liquidity sending global stocks higher. Commodities were under pressure all month highlighted by an 18% plunge in crude prices. The end of month OPEC meeting was pointed to as a potential catalyst for stemming the fall in prices; however OPEC kept its production ceiling unchanged escalating its price war with other oil producing nations. The U.S. dollar pushed higher this month in particular against the Japanese Yen and currencies from commodity exporting nations. The loonie sold off in tandem with oil prices as USD/CAD closed at the year highs above 1.1400.

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