Your Fund ended the first quarter with a net asset value of $4,494.32 per unit, an increase of $132.53 from the December 31st, 2024 net asset value of $4,361.79 per unit [after distributions]. Year-to-date, March 31st, your fund returned: 3.04%.

 
While there is rarely a single cause behind a market correction, the April selloff can largely be traced to renewed growth fears – spurred in large part by Trump’s tariff threats and policy uncertainty.  

Hawkish Fed comments and cracks in the AI narrative, fueled by the emergence of Chinese AI low-cost competition, have further contributed to a stock selloff and P/E multiple compression in tech stocks.  

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After notching a record high on February 19th, the S&P 500, NASDAQ 100, and the Russell 2000 all fell briefly into correction territory. Most of the damage came from the last two years’ highflyers: shares of the so-called “Magnificent Seven”. Nvidia, the AI poster child, had its P/E multiple drop from 53x trailing earning (mid-April) to 35x. Today, the S&P 500 remains well above the bear lows of 3,577 reached in 2022, and the March 2020 Covid low of 2,237. Long term equity returns are firmly in positive territory. 

The TSX has been bucking the North American trend, and is at record highs as of May. Gold, oil, banks, and lack of tech highflyers has enabled the TSX to outperform its sexier tech dominated southern neighbor. For Trump … Canada has become the pesky “honey badger” of North America. Never underestimate the scrappy and fearless honey badger. 

During the quarter we continued to reduce our position in Berkshire Hathaway. From a peak of 31,000 Class B shares, your Fund now owns 20,000 shares. Despite the trimming, the position still represents approximately 28% of your Fund assets. However, with Buffet’s announcement at the company’s annual meeting that he would be stepping down as CEO on January 1, 2026, the shares sold off 5%. Nonetheless, Buffet will continue to “hang around” in the Chairman’s role. 

At the end of the day, the performance of Berkshire stock will depend on its ability to continue improving its earnings within its existing roster of businesses, and its ability to “wisely” allocate capital with its copious free cash flow, and $350 billion cash hoard. 

If I was a betting man, the company’s new CEO, Canadian Greg Abel, will become Berkshire’s “Tim Cook” (the highly successful successor to Steve Jobs at Apple). Moreover, Buffet openly admitted that he has perhaps been lax managing Berkshire’s roster of companies. But Greg Abel is a superb business manager, and will likely coax (generate) greater profitability from Berkshire’s existing deck of cards.  

Greg has also demonstrated the ability to make value-creating acquisitions for Berkshire. For example, over the years, he has used his “contrarian” investing skills to acquire undervalued & unloved assets in the energy sector.  

What would worry us? If Berkshire’s head insurance genius/guru, Ajit Jain, was no longer in the picture. That would cause us serious concern. Publicly, we have never heard any mention of who would succeed Jain – in a God forbid situation. 

On a more positive note, TD bank shares, our largest Canadian holding, has come roaring back to life after spending 2 plus years in the penalty box. They are now at 52-week highs. 

As we predicted, out of TD’s U.S. money laundering debacle, positive and constructive changes would result. In hindsight, it would have been nice to have sold half our TD position and then bought it back when the TD news was dripping with negativity. That course of action would have crystallized a huge capital gain, and a lot of investor blowback.

 
The following are a few of the recent initiatives and catalysts that we feel will have the potential to once again position TD as a superior long-term Canadian investment. 

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1. Raymond Chun – new CEO Leadership

2. Improved capital allocation

3. More focus on profitable business lines in both the U.S. and Canada

4. Money laundering collateral effect – future TD growth handcuffed by U.S. regulator. Thus regulatory roadblocks to making more overpriced, low-return U.S. acquisitions. Actually a positive in our opinion.

5. Massive TD share buybacks - $8 billion earmarked for buybacks as a result of Schwab sale.

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So far, the market likes what it sees, as TD shares have rallied from $74.00 to $94.00 dollars. The question we ask, when will the markets rotate out of growth stocks (Magnificent 7 stocks being the poster child), and into “value” stocks? In our opinion, this rotation will have to wait for the bottom of the next bear market. It is our hunch that small cap stocks will eventually become irresistible bargains, and thus lead the way to outperformance at the start of the next business cycle. 

In conclusion, it appears that until the next bear market is in full swing (at least in the U.S. markets), it will be more of the same old, same old tech leaders. Simply stated, a handful of tech titans currently enjoy massive “moats” through technological advantages, dominant market share and above average profit margins. Most don’t require heavy capital investment (like auto or steel) and thus produce above average ROEs. 

Nonetheless, history has often demonstrated that there is no guarantee of future greatness where new technologies can emerge, new competitors can “leapfrog incumbents”, or antitrust regulators move in for a breakup. Moreover, over the long term, “price paid” still determines investment returns, no matter how great a company’s business model, or its supposed fabulous growth potential.  

How many leading “growth” names of 1969 (the Nifty Fifty growth stock era) are today missing from the S&P500? Relics of that bygone era include: Kodak, Polaroid, Avon, Digital Equipment etc… Size is no guarantee of longevity.  

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