Brendan Caldwell, President and CEO, Caldwell Investment Management

FOCUS: Canadian Value stocks



We have performed very well for our investors and owe much of this to our focused investment strategy, which helps us avoid painful losses and participate in areas of strength. Looking forward, we see increasing value in a focused strategy as slowing growth rates in almost every sector and geography in the world will make it very difficult to perform well using a passive, market index or quasi-index strategy.

Top Picks:

Imvescor Restaurant Group (IRG.TO). Bought 02/02/2016 @ $2.45 (gain of 12 per cent).

Imvescor operates 227 restaurants, the bulk of which are franchised. They operate under the Baton Rouge, Pizza Delight, Scores, and Trattoria di Mikes brands mainly in Quebec, Ontario, and Atlantic Canada. We like Imvescor for the following reasons:

  1. Turnaround story. A new CEO took over in 2014. He is a strong operator with considerable experience in the restaurant industry. He put a plan in place to return to growth by renovating franchises to create a better dining experience. While they are still in the early innings of this plan, it has been working very well, as renovated restaurants are seeing a big boost in sales.
  2. Strong franchise model. Imvescor is very selective in who they choose as franchisees and have incentives in place to encourage franchisees to renovate their restaurants. This typically leads to better franchise sales and profitability.
  3. Attractive valuation. Imvescor is one of the cheapest restaurant names in the space and their recent return to growth should give them an opportunity for multiple expansion.

IBI Group (IBG.TO). Bought 03/28/2016 @ $3.77 (gain of 38 per cent).

IBI Group provides architecture, engineering, and planning services with a focus in niche markets of transportation, education, hospitals, and multi-residential. We like IBI Group for the following reasons:

  1. Balance sheet improvement. Debt had been an investor concern in recent years. However, management has gone to great lengths to improve the balance sheet, having redeemed the 2017 convertible debentures, successfully refinanced its credit facilities, completed a rights offering and private placement and introduced a 'sinking fund,' money earmarked for the repayment of 2018 debentures.
  2. Strong growth trajectory. Infrastructure is a focus of public spending in both Canada and the U.S. IBI Group is well positioned in the area of focus, which is leading to strong revenue growth.
  3. Margin improvement. Management continues to focus on cost efficiencies which (combined with leverage from revenue growth) is leading to an improved margin profile.
  4. Attractive valuation. Despite its strong 2016 performance (up over 130 per cent) driven by the points mentioned above, the stock continues to trade at an attractive multiple. IBI Group trades at a 25 per cent discount on a forward basis to its pure play engineering Canadian peer group despite having a better near term organic growth profile (due to lack of exposure in oil and gas/Western Canada).

Calian Group (CGY.TO). Bought 02/24/2016 @ $19.27 (gain of 3 per cent).

Calian Group provides a diverse set of IT, outsourcing, healthcare and engineering products/services with a focus on serving public sectors, specifically satellite/communications and defense/security. We like Calian Group for the following reasons:

  1. New CEO. Calian hired a new CEO in April 2015. The new CEO is very focused on operational and strategic initiatives, which gives us confidence in their ability to execute.
  2. Growth strategy. Their strategy involves leveraging their different businesses to drive growth. They plan to grow through new client wins as well as through M&A.
  3. Improving government spend. The Canadian government is Calian's largest customer, accounting for 62 per cent of revenue. The election of the Liberals and their willingness to increase spending should benefit Calian.
  4. Attractive valuation. Despite having a strong growth strategy, Calian trades at a significant discount to the broader market. We believe there is upside here.  
Disclosure Personal Family Portfolio/Fund

Past Picks:  September 2, 2015

Tricon Capital Group (TCN.TO)

  • Then: $11.45
  • Now: $9.09
  • Return: -20.61%
  • TR: -18.40%

Hardwoods Distribution (HWD.TO)

  • Then: $17.45
  • Now: $17.32
  • Return: -0.75%
  • TR: +0.56%

CCL Industries (CCLb.TO)

  • Then: $176.95
  • Now: $225.31
  • Return: +27.33%
  • TR: +28.38%

Total Return Average: +3.51%

Disclosure Personal Family Portfolio/Fund


Fund Profile

Caldwell Canadian Value Momentum Fund

Performance as of: June 30, 2016

1 year: Fund 11.1%, Index* -0.2%

3 year: Fund 10.6%, Index* 8.3%

* Index: S&P/TSX Composite Total Return Index

* Identify if your fund’s returns are based on reinvested dividends. Returns provided must be net of fees!

Top Holdings

  1. New Flyer – 7.3%
  2. Calian Group – 6.7%
  3. Tree Island Steel – 6.5%
  4. IBI Group – 6.1%
  5. Premium Brands – 5.8%