[On screen: A middle-aged man with balding hair and a light complexion. He's wearing a dark suit jacket, a white shirt with no tie, and is seated. The background is an interior room with a large window to his left, through which we can see a building and the sky. On his right, there's a tall, dark floor lamp and a wooden desk, upon which sits a model of a sailing ship with white sails. ]

ANDREW LUCAS: One question came in, and I'm going to get to it in a minute, but before I get to that, you talked about crushing the consumer is the erosion that has to happen. A question that pops up, and I don't know if you have the answer to this, but I've had a few folks mention this to me and said, last time-- In Nova Scotia right now we're about a $1.90-something per liter of gas. Obviously, diesel, way higher than that.

If you go back to the first time we hit $100-barrel of oil years ago, I think it was in the financial crisis era, we hit $1.00 at the pumps, and it was sort of a dollar-for-a-dollar. Now, we're $100-oil and a $1.90. Do you have any insight on what's causing that? You're seeing record profits for companies that grow, a Dutch Shell. Is that part of it or is it just-- Is there something else going on that people aren't necessarily aware of?

[On screen: A man with neatly combed blond hair and a light complexion. He's in a professional setting, wearing a dark blue blazer over a crisp white shirt. His posture is upright, and he looks directly at the camera. Behind him is a plain wall adorned with a large framed artwork depicting a muted landscape with industrial elements, including a crane. ]

SPEAKER 2: Yes, I'm not a refining expert but what's going on is we have a carbon tax now when we didn't then, so that's a significant tax. There's also, now, a shortage of products, so the crack spread, that spread between what you buy-- The refinery buys oil for and sells it for is higher because inventories are so profoundly low. Now, we've got a demand surge post-COVID where there's a-- You've got a rebounding economy, and we've got weakness in China which I would assume would be over in the next month or so as lockdowns can't persist forever. You've got like a diesel shortage, you've got a rebounding economy, we're all going to be traveling. I've been doing business travel a lot. The airports are jammed, so like the demand on jet fuel is huge. At the same time, a lot of refineries have been shut down because they've been long in the tooth and the industry hasn't been investing enough in them, so there's this mismatch.

I think gasoline prices are going meaningfully higher from here going forward as mainly due to oil. A lot. If I'm right that supply growth cannot match demand growth, then you've got to kill the demand growth. You've got to go high enough and stay there long enough to change people's behavior. I won't bore you with the math but that's an oil price way above $150 a barrel.

Good morning everybody. I've been getting a lot of questions lately on the market, so I want to give a little update on our views where we are and then a little bit of positioning on the two major equity portfolios that we're running for you. So I thought I'd take a bit of time just to talk with the three sort of top macro thoughts we have right now that are that are impacting everything and I think that the first one will be no surprise to anybody, inflation. A year ago there was a lot of talk around temporary or transitory I should say inflation. What was that going to look like? How long it was going to be here for? and at the time, that was probably a realistic thing to look at was transitory inflation. It's caused primarily by supply chain restrictions and constraints that we had due to COVID restrictions around the world. But then you throw on top of that the demand side of the equation. Where you had numerous people doing very well in their investment portfolio or getting paid while they're at home. There's a lot of money obviously thrown into the system. So that spiked that demand, so you throw the demand side of the equation in with the supply side constraint and that's where you get this inflation issue that we have today. There's no longer transitory, It's here to stay. We believe it's here for quite some time. But on the good news, we think it's probably peaked. And why I say that is that you have to remember, inflation is a year over year comparison. So we are coming off of some terrible numbers from a year ago. Well and obviously now you just have to go fill up your car, go to the grocery store, where you know  that numbers significantly higher, but will they continue to grow at that same pace or will that pace change? decelerate a bit?. If you look at sort of underlying commodity prices Oils off 20-25% from its highs in March, lumber is down about 50%, silver, copper, even fertilizers are down slightly. Used Cars are down about 6% according to Mannheim, which is a huge driver of CPI numbers. That doesn't mean inflation's going away it's still here, it's still going to be high, it's just that rate of change we believe is going to start to decelerate going forward. So what does that mean in terms of interest rates? Well, the market believes the Fed is going to hike another 10 times. We don't necessarily see that happening in this current environment and you see already the impact that the rate hikes are having and even before those rate hikes happen, you're starting to see a bit of a slowdown. So the fact that there were the Fed and Canadian Central Bank is currently starting to hike into this slowing economic cycle, to us isn't necessarily the best long term movement. They have to do it, they back themselves into that quarter they have to start raising those rates. However, raising rates into an environment like this will be quite challenging. On a personal level How inflation impacts us all? I just got a bill for my heating and my house It's about four or $500 higher than normal. So when those necessities are going up, it just takes away all of our comfort and discretionary spending from other things as we all know. What I've been told is about a 1% interest rate hike drops your purchasing power for a whole about 10%. So if a year ago you were comfortable buying half $1,000,000 home today, that's probably more around a $400,000 home. Because of the fact that we've basically seen mortgages go up about 2% in that time frame, so it will start to impact. I think we're going to see that in our unemployment levels, I think we'll start to see that cause we're starting to see payroll numbers soften up a little bit in broader industries. So that impact will start to roll over and affect us and what that's going to do, it's going to slow our growth down and we already knew that growth was going to slow down. Again, you're looking at it on a year to year comparable. So our 2021 numbers were absolutely off the charts in Q2. But again, if you compare that to Q2 2020, when the world was locked down, it was inevitable that 2021 was going to be a fantastic year, and now we're comparing against that. So we always knew there was going to be a slowdown this quarter, but now you've got all these other things throwing you into it. That's also impacting companies profit margins. They're actually being hit in two ways, one the inflation side, you're seeing input costs go up, so even if a company's top line has stayed strong that input cost has gone up dramatically. Whether that's labor, whether that's fuel surcharges, whether that's shipping, we know all the things that are going on here. So what you're now seeing is that profit margins starting to shrink for businesses and now if we get that roll over in the consumer spending, then we'll also see that top line start to come down a bit. So we're looking at that we're prepared for that. We think it's going to be something that is going to happen. But on the plus side of that businesses for the most part are sitting on a lot of cash and what they will most likely do over the, we believe starting in this sort of the second half of this year is that they will start to invest that capital to help improve those margins, help improve that productivity and that is where that fourth industrial revolution that we've always talked about continues to come into play. Because that is how business helps to increase their productivity, to embrace technology, embrace innovation, improve that productivity thereby improving your profit margins. So we, think that we're in for a bit of a continued bumpy ride as the market deals with higher interest rates, higher inflation numbers that are a little bit more permanent and a little bit slower growth. We haven't seen this type of an environment for a couple of decades so it's going to take some adjusting and we will continue to try to navigate that for us all. Again there's opportunities and we just have to try to find those opportunities and where we want to be.

This information, including any opinion, is based on various sources believed to be reliable, but its accuracy cannot be guaranteed and is subject to change. CIBC and CIBC World Markets Inc., their affiliates, directors, officers and employees may buy, sell, or hold a position in securities of a company mentioned herein, its affiliates or subsidiaries, and may also perform financial advisory services, investment banking or other services for, or have lending or other credit relationships with the same. CIBC World Markets Inc. and its representatives will receive sales commissions and/or a spread between bid and ask prices if you purchase, sell or hold the securities referred to above. © CIBC World Markets Inc. 2022.

If you are currently a CIBC Wood Gundy client, please contact your Investment Advisor.

Commissions, trailing commissions, management fees, and expenses may all be associated with hedge fund investments. Hedge funds may be sold by Prospectus to the general public, but more often are sold by Offering Memorandum to those investors who meet certain eligibility or minimum purchase requirements. An Offering Memorandum is not required in some jurisdictions. The Prospectus or Offering Memorandum contains important information about hedge funds - you should obtain a copy and read it before making an investment decision. Hedge funds are not guaranteed. Their value changes frequently, and past performance may not be repeated. Hedge funds are for sophisticated investors only.

Good morning everybody. I've been getting a lot of questions lately on the market, so I want to give a little update on our views where we are and then a little bit of positioning on the two major equity portfolios that we're running for you.

 So I thought I'd take a bit of time just to talk with the three sort of top macro thoughts we have right now that are that are impacting everything and I think that the first one will be no surprise to anybody, inflation. A year ago there was a lot of talk around temporary or transitory I should say inflation. What was that going to look like? How long it was going to be here for? and at the time, that was probably a realistic thing to look at was transitory inflation. It's caused primarily by supply chain restrictions and constraints that we had due to COVID restrictions around the world. But then you throw on top of that the demand side of the equation. Where you had numerous people doing very well in their investment portfolio or getting paid while they're at home. There's a lot of money obviously thrown into the system. So that spiked that demand, so you throw the demand side of the equation in with the supply side constraint and that's where you get this inflation issue that we have today. There's no longer transitory, It's here to stay. We believe it's here for quite some time. But on the good news, we think it's probably peaked. And why I say that is that you have to remember, inflation is a year over year comparison. So we are coming off of some terrible numbers from a year ago. Well and obviously now you just have to go fill up your car, go to the grocery store, where you know  that numbers significantly higher, but will they continue to grow at that same pace or will that pace change? decelerate a bit?. If you look at sort of underlying commodity prices Oils off 20-25% from its highs in March, lumber is down about 50%, silver, copper, even fertilizers are down slightly. Used Cars are down about 6% according to Mannheim, which is a huge driver of CPI numbers. That doesn't mean inflation's going away it's still here, it's still going to be high, it's just that rate of change we believe is going to start to decelerate going forward. So what does that mean in terms of interest rates? Well, the market believes the Fed is going to hike another 10 times. We don't necessarily see that happening in this current environment and you see already the impact that the rate hikes are having and even before those rate hikes happen, you're starting to see a bit of a slowdown. So the fact that there were the Fed and Canadian Central Bank is currently starting to hike into this slowing economic cycle, to us isn't necessarily the best long term movement. They have to do it, they back themselves into that quarter they have to start raising those rates. However, raising rates into an environment like this will be quite challenging. On a personal level How inflation impacts us all? I just got a bill for my heating in  my house It's about four or $500 higher than normal. So when those necessities are going up, it just takes away all of our comfort and discretionary spending from other things as we all know. What I've been told is about a 1% interest rate hike drops your purchasing power for a whole about 10%. So if a year ago you were comfortable buying half $1,000,000 home today, that's probably more around a $400,000 home. Because of the fact that we've basically seen mortgages go up about 2% in that time frame, so it will start to impact. I think we're going to see that in our unemployment levels, I think we'll start to see that cause we're starting to see payroll numbers soften up a little bit in broader industries. So that impact will start to roll over and affect us and what that's going to do, it's going to slow our growth down and we already knew that growth was going to slow down. Again, you're looking at it on a year to year comparable. So our 2021 numbers were absolutely off the charts in Q2. But again, if you compare that to Q2 2020, when the world was locked down, it was inevitable that 2021 was going to be a fantastic year, and now we're comparing against that. So we always knew there was going to be a slowdown this quarter, but now you've got all these other things throwing you into it. That's also impacting companies profit margins. They're actually being hit in two ways, one the inflation side, you're seeing input costs go up, so even if a company's top line has stayed strong that input cost has gone up dramatically. Whether that's labor, whether that's fuel surcharges, whether that's shipping, we know all the things that are going on here. So what you're now seeing is that profit margins starting to shrink for businesses and now if we get that roll over in the consumer spending, then we'll also see that top line start to come down a bit. So we're looking at that we're prepared for that. We think it's going to be something that is going to happen. But on the plus side of that businesses for the most part are sitting on a lot of cash and what they will most likely do over the, we believe starting in this sort of the second half of this year is that they will start to invest that capital to help improve those margins, help improve that productivity and that is where that fourth industrial revolution that we've always talked about continues to come into play. Because that is how business helps to increase their productivity, to embrace technology, embrace innovation, improve that productivity thereby improving your profit margins. So we, think that we're in for a bit of a continued bumpy ride as the market deals with higher interest rates, higher inflation numbers that are a little bit more permanent and a little bit slower growth. We haven't seen this type of an environment for a couple of decades so it's going to take some adjusting and we will continue to try to navigate that for us all. Again there's opportunities and we just have to try to find those opportunities and where we want to be.

And I guess that takes us into a bit of the update on the two equity portfolios. So the North American core portfolio is essentially a dividend  portfolio as you know. Even with the start to this year, that is actually still in a positive return for the year to date. So we're very happy to say that we still have a year to date positive. The one year return is still fantastic and the big reason for that has been the overweight allocation into gold and into energy. Those are two areas that have done very well and then, because of the focus on dividends, it was very underweight technology which has really been the spot that has had the biggest pain. So we don't have a lot of technology we don't have a lot of smaller mid cap names again because of that focus on dividends, there is roughly a 10% weighting in gold, we're looking at about a 6.% weighting in kind of a defensive go anywhere. Fixed income product, 5% cash and then 18% in energy, which includes pipelines. That is 1 area the Canadian oil patch is 1 area that we believe is going to continue to benefit and continue to do quite well. The other specific name that has helped us quite a bit is a is a position we've had on there for quite some time. In nutrient the world's largest, basically, largest fertilizer manufacturing and obviously with the war in Ukraine bringing offline a number of or a huge amount of fertilizer, ammonium, potash production that has benefited the remaining companies like a like a nutrition quite well. We like the trend already, the war is unfortunately as we know just been a humanitarian disaster and from an investment standpoint it has caused that, as we've discussed in the past, some serious issues when it comes to things like fertilizers and other sort of pieces that comes into that pot.

On a more challenging note has been the alpha portfolio. That one is a little bit more of a growth type of portfolio and has a little bit more exposure to technology as we know and if we look coming out of March of 2020, that portfolio did extremely well, whereas the North American core portfolio lagged a little bit over the last 12 months. It's kind of been flip flop so that is why we try to have a bit of balance  to both of them in our portfolios. So we are down a little bit this year it was heard as most other said, is that technology exposure and I'll touch on some of those names though in a little bit. We have benefited though from the gold we do have about a 6 or 7% weighting in gold there we also have that same defensive go anywhere portfolio. We're also in double digits cash and that is a buffer that we've put into to try to protect as well and waiting on the opportunity to deploy that and the final piece that has worked extremely well for us has been our protection. Basically what we've had is we've had a short position on and we've also had a volatility position. So as the volatility in the markets increases, that goes up for us. So it's a nice hedge against everything else. So when you see the markets going down, that volatility in that short position are going to give us something to the upside that we can then trim take a little bit of cash and build that up for another day. So from a position standpoint, we're constantly changing and adapting, but at the end of the day, what we have to recognize is that we're buying businesses and the biggest thing is are those quality businesses are the businesses that we want to own for the long term. So I'm just going to pull up some stats here so I can look at. Ran through a few of our more growth oriented technology names that we have and give you a couple of examples of ones that you may or may not know. A company called C3 AI as an example. It is a leading artificial intelligence company. It's pureplay in AI we believe that AI is going to continue to drive a lot of growth in the future. So that is something that we continue to be bullish on over the over the next number of years. So if we look at that company, it's down the IPO last year ran up to about $140.00 or so has plummeted back down. We didn't own it through that whole upside or the whole downside. We started buying it after it had collapsed once fallen more since that point. But when we look at the business it's about $1.8 billion company. Well, they have cash and cash equivalents of about a billion dollars, so you're getting that billion dollars of cash and you're paying $1.8 billion for that which means you're getting sort of all that future potential and growth for not a lot of money. And when we look at what's called the current ratio and the current ratio is looking at you short term liabilities, so within one year and your short term assets, so again within one year and how many assets do you have to pay those liabilities. That's a real big number that we look at to make sure that a company in a challenging market for financing is going to be able to keep itself going, if they're sort of at an early revenue stage type of a company. C3 AI has a current ratio of 8.2% as of May the 5th. So to give you some context, they could sort of easy, and this does simplify it a bit, but essentially they have eight years of liabilities, current liabilities, if they stayed at these levels covered. So we are comfortable with C3 AI even though it's down knowing that it's the business we like the business, we like the team. The largest client is also the largest shareholder company called Baker Hughes. So those are things that for us give us comfort that it'll get through this downturn and come back on the other side. Another example is coming called 26. It is a 6.7 billion dollar company. They are huge player in the 5G space. They're also in sort of the EV autonomous driving space as well, with some of their some of their products. They are now trading at about a 20 times earnings, so not a crazy multiple to be growing in the type of space that they're growing and that's what we want to see there, is what we're not paying a huge premium for that company to be in a space that we really like. So although it's down, we're still from our purchase price or initial purchase price, we're still basically slightly positive, so it's been painful to watch it fall but again we're quite comfortable with the last one. I guess I could mention as well just kind of going through the list here to see some names is a company called Keysight Technologies. It's in the 5G space. 26 is trading at about 18 times earnings, I don't know what I mentioned there. Key side is trading at around 20 times. Keysight technologies is the leading testing company in the 5G space, roughly 75% of hardware that's out there in the 5G world is tested on their on their products. Again they have roughly $2 billion in cash, a current ratio of 1.6. So nice and high. It's a company that we just love. We truly believe that 55G's not going away. It's going to continue to get rolled out over the coming years and they dominate the market. So for us, when we look at something like that it's been challenged here in the short term. So I hope that gives you a little bit of a of an update on our three, I guess big macro views and also a quick little view on current positioning in the portfolios. if you have any questions, any concerns please? feel free to reach out to us. We're always here for you. And thank you all.

This information, including any opinion, is based on various sources believed to be reliable, but its accuracy cannot be guaranteed and is subject to change. CIBC and CIBC World Markets Inc., their affiliates, directors, officers and employees may buy, sell, or hold a position in securities of a company mentioned herein, its affiliates or subsidiaries, and may also perform financial advisory services, investment banking or other services for, or have lending or other credit relationships with the same. CIBC World Markets Inc. and its representatives will receive sales commissions and/or a spread between bid and ask prices if you purchase, sell or hold the securities referred to above. © CIBC World Markets Inc. 2022.

If you are currently a CIBC Wood Gundy client, please contact your Investment Advisor.

Commissions, trailing commissions, management fees, and expenses may all be associated with hedge fund investments. Hedge funds may be sold by Prospectus to the general public, but more often are sold by Offering Memorandum to those investors who meet certain eligibility or minimum purchase requirements. An Offering Memorandum is not required in some jurisdictions. The Prospectus or Offering Memorandum contains important information about hedge funds - you should obtain a copy and read it before making an investment decision. Hedge funds are not guaranteed. Their value changes frequently, and past performance may not be repeated. Hedge funds are for sophisticated investors only.

Andrew L

That makes perfect sense. So  you had mentioned there the dot com days and everything else and you have a slide pull up, but clearly we're in a different market dynamic and I know as I think everybody's got a great sense so far that you really do focus on the fundamentals of the business. Yes, looking out 5, 10, 15-20 years so that you are not caught off guard. But the economic cycle is the economic cycle and you can't really control that. So if you're looking now though, and say, alright, we're, in a higher inflationary period potentially slower growth, how does that or does that impact what you're what you're doing? I'm just going to pull up here your sort of 6 distinct markets that you've been investing with Turtle Creek since the late 90s. Maybe just sort of go through a bit where you think or how you think this might or might not impact you going forward.

Andrew B

Yeah, no, it's a good question. I get it a lot and it's I kind of joke, if you look at this slide, it used to be 5. distinct markets and when it was five I would make the statements that we've been around long enough I think we've pretty much seen everything. Then I now say I didn't think about a pandemic. So we've added that as the 6th distinct market and maybe as you say, we might be entering another distinct market. I mean, I did have an email or a text from one of my longest investors who on the one hand is happy, but he's never really been happy if you know what I mean. So he said yeah but you've never lived through a war in Europe and or he didn't even say where he said you've never lived through a war. I said that's kind of ignoring what's been happening in the Middle East and places like Syria or Afghanistan. But let's accept that Ukraine different because it's in Europe. There are always new things that occur, and while Turtle Creek didn't exist back when there was stagflation. To your question, are we going to do anything different? No. we're really not going to do anything different if I look at that chart, I think if you had to guess we might be in the second market phase. In other words, the valuations have been pretty frothy. Everyone recognizes that. There have been a lot of articles written about that but the thing to remember about the dot com, there was a lot of enthusiasm about the Internet, so there has to be something that's really true and valid. But then things can get carried away on valuation and I feel like that's happened in a number of pockets of the market now. What happened post the dotcom, there wasn't a crash, it wasn't like the credit crisis or the COVID crash in March of 2020. It was a call it 2 1/2 year period of just the air coming out of the market. So it was kind of this jagged line. But when you looked at it over 2 1/2 years, I think the S&P 500 was down close to 50% at least in Canadian dollars. So there was a brutal bear market for people and Andrew, you mentioned you know, we weren't out talking to a lot of let's say the investment advisor community until a number of years in to Turtle Creek and as we did that, I still remember so many advisors saying I've made no money for my clients in the US for the last decade. I mean people forget that because, of course, the last 10 years have been terrific and it was because of that high starting condition that high valuations in 2000 we could be experiencing the same thing now going forward again, not a crash, but just air coming out inn valuations. That's why we work so hard to fight and take out any frothiness in our portfolio. When Badger runs to $50 or frankly, premium brands, which is a company that is one of our top holdings when it ran over a few years, a long time ago now, but over a 2-3 year period, it went from 25 to over 100. We owned a lot fewer shares north of a 100  dollars than we owned a 25 today. The stocks still at 100 it's moved around. We own a lot more shares now than we did call it four years ago when it first went through 100. I mean, it's four years later the companies worth a lot more. Being so focused on valuation means that there is no frothy valuation in the portfolio. If you look at what happened in that bear market, it's hard to see the green is us and the black is the market, but you can see that we really managed to be up a little bit in that 2 1/2 year period. I've view that as in a way a better accomplishment than how we did in the dotcom.  I had a comment years ago from an advisor who was a great, he said, the thing is I had managers who did really well in the dotcom like you did they just gave it all back after the dotcom bubble burst and you didn't and I think it's because of our activity. We're not a buying hold. If something is going up, we're trimming it. Yeah, because we are trying to own the right amount today for each of our holdings.

This information, including any opinion, is based on various sources believed to be reliable, but its accuracy cannot be guaranteed and is subject to change. CIBC and CIBC World Markets Inc., their affiliates, directors, officers and employees may buy, sell, or hold a position in securities of a company mentioned herein, its affiliates or subsidiaries, and may also perform financial advisory services, investment banking or other services for, or have lending or other credit relationships with the same. CIBC World Markets Inc. and its representatives will receive sales commissions and/or a spread between bid and ask prices if you purchase, sell or hold the securities referred to above. © CIBC World Markets Inc. 2022.

If you are currently a CIBC Wood Gundy client, please contact your Investment Advisor.

Commissions, trailing commissions, management fees, and expenses may all be associated with hedge fund investments. Hedge funds may be sold by Prospectus to the general public, but more often are sold by Offering Memorandum to those investors who meet certain eligibility or minimum purchase requirements. An Offering Memorandum is not required in some jurisdictions. The Prospectus or Offering Memorandum contains important information about hedge funds - you should obtain a copy and read it before making an investment decision. Hedge funds are not guaranteed. Their value changes frequently, and past performance may not be repeated. Hedge funds are for sophisticated investors only.

Andrew L
So talking about  good solid companies and understanding companies, a question came in about specifically, on spatial computerized glasses companies, but I think we take that broader. You've never owned Canadian banks, you don't own oil and gas. In technology, you have an ATS automation to be viewed as a technology company and open text is obviously, a technology company. So you do have growth type of returns when we look at your long term track record. But you view yourself in more of a value type place. So when it comes to investing in technology and the some of these future disruptive type of technologies. I guess that doesn't really fit your bucket. So maybe just could you touch a little bit on that? 
Andrew B 
I would strongly disagree with that assumption. If you look at my resume before I set up the private equity subsidiary for Scotiabank, I had been in mergers and acquisitions back in the 80s, but I actually set up the high technology practice for McLeod Young Weir or Scotia Capital. So I covered tech and I've got a science undergrad. There was a biotech bubble in the early 90s. That was insane. It was more of a bubble, just smaller in the sense of market, the size and number of companies. It was a bigger valuation bubble than the.com craze that peaked in 2000. So we are very comfortable with technology and very focused on technology change and what disruption will happen to our companies or companies that we’re following. I'm not interested in companies that are about to boil the ocean because 99 times out of 100, there's a fatal flaw. Years ago we did very well owning a manufacturer of DVDs, knowing that DVDs are going away. You just didn't know when and how quickly and that was actually at the beginning of DVD. So VHS tapes and in 2000 everyone assumed that everything was going over the Internet. I thought yes, but not for a long time and that's exactly how it played out. The point of the story is we weren't big enough and we weren't looking at U.S. companies. I was really interested in Netflix recall back then they started as a mail order DVD company and are one of those rare companies that have transitioned the way they have transitioned. But if you come back to the companies that we look at and own and follow, I want to own the company that is not going to get flattened or blindsided by something coming out of Silicon Valley. If you think of the portfolio, we own SS and C technologies, that that's a Connecticut based company. It's one of our top holdings. Their CEO, founder, was a force of nature. They started as a hedge fund administrator 30 years ago. They're now a basically a vertical software company and financial services. They've got artificial intelligence, mind-blowing kind of trading systems. They're not going to get caught off-guard by something coming out of the valley.
This information, including any opinion, is based on various sources believed to be reliable, but its accuracy cannot be guaranteed and is subject to change. CIBC and CIBC World Markets Inc., their affiliates, directors, officers and employees may buy, sell, or hold a position in securities of a company mentioned herein, its affiliates or subsidiaries, and may also perform financial advisory services, investment banking or other services for, or have lending or other credit relationships with the same. CIBC World Markets Inc. and its representatives will receive sales commissions and/or a spread between bid and ask prices if you purchase, sell or hold the securities referred to above. © CIBC World Markets Inc. 2022.
If you are currently a CIBC Wood Gundy client, please contact your Investment Advisor. 

Commissions, trailing commissions, management fees, and expenses may all be associated with hedge fund investments. Hedge funds may be sold by Prospectus to the general public, but more often are sold by Offering Memorandum to those investors who meet certain eligibility or minimum purchase requirements. An Offering Memorandum is not required in some jurisdictions. The Prospectus or Offering Memorandum contains important information about hedge funds - you should obtain a copy and read it before making an investment decision. Hedge funds are not guaranteed. Their value changes frequently, and past performance may not be repeated. Hedge funds are for sophisticated investors only. 

[Slide on screen: A wide panoramic view of a landscape during dusk. In the foreground are rolling hills with patches of grass, leading to a large lake that spans across the middle of the slide. Beyond the lake, mountain ranges are silhouetted against a soft gradient of orange and blue from the setting sun. Overlaying this serene backdrop, centered towards the top, is a white, rectangular border framing the words "How we invest" in large, bold letters. In the top right corner, there's a square logo reading "CI Global Asset Management".]* 

PRESENTER: Now what I'll do is, is touch on sort of how we invest, what we do and how we find these great growth investments. And so firstly, our philosophy to how we look at the world. Well, our philosophy is really, really simple. 

[Slide on screen: The slide titled “Philosophy: Growth” is structured to illustrate the philosophy behind growth investing.  

At the top, there are three core principles outlined: 

Earnings growth drives stock prices.  

Sustained earnings growth is more valuable than cyclical earnings growth.  

The market often misprices growth and its sustainability.  

Below these principles, there are two line graphs side by side, showcasing the relationship between earnings per share (EPS) and stock prices for two companies: MasterCard and Bank of America. 

Graph 1 - Structural Growth: MasterCard 

The Y-axis ranges from 0 to $450, denoting share price in US dollars. 

The X-axis spans from 2008 to 2020, representing years. 

A light blue line represents the projected earnings per share (EPS). This line begins around $1 in 2008 and rises steeply to slightly above $9 by 2020. 

A darker blue line represents the actual share price. This line begins just above $50 in 2008 and ascends steadily to nearly $450 by 2020. 

Graph 2 - Macroeconomics: Bank of America 

The Y-axis ranges from 0 to $50, indicating share price in US dollars. 

The X-axis is the same as Graph 1, from 2008 to 2020. 

The light blue line (EPS) shows more variability, with peaks around 2010 and 2017 and troughs around 2012 and 2016. 

The dark blue line, depicting share price, closely mirrors the light blue line's movements. ] 

PRESENTER: So firstly, we think earnings growth drive stock prices. And to many of you, what that effectively means, and, to many people, what that means is effectively, if a company makes more money every year, its share price generally goes up.  

Secondly, we think sustained earnings growth is worth more than cyclical earnings growth. So if a company can sustainably grow its earnings through the economic cycle, we think you should pay a higher multiple for those earnings.  

And then lastly, we think the market often misprices growth and its sustainability. So the market will often believe in what we think, what we know now is mean reversion. So if earnings for a company are going up, then the market will assume they'll eventually roll off. Or if earnings are going down, the market will assume they'll eventually bounce and come back up. So as growth investors, as structural growth investors, we essentially don't believe in mean reversion.  

So we believe in structural earnings growth independent of an economic cycle driven by some structural change in an industry. And so what I'm showing you down the bottom is two companies, two financial or two payment related companies, one MasterCard on the left, and one Bank of America on the right. And what I'm showing you in the light blue line is the earnings per share expectations.  

So effectively how much money the company is gonna make. And then in the dark blue line, I'm showing you the share price. And what's quite obviously, first of all, coming back to that first step of the philosophy is that that earnings growth is what's driving the share price in both situations.  

Now, on the right, Bank of America's earnings. Its earnings are driven by macroeconomic factors. Factors, where we might have a view but not necessarily have an edge. So it's driven by net interest margins, unemployment, GDP levels, terms of trade for the US, et cetera, et cetera.  

On the left, MasterCard, its earnings are driven by a structural change. Now that structural change is a shift from physical to digital cash. Now that's a change in the world that we all know and understand really well in our everyday lives, but it's a change that the market has been incapable of pricing in the structural nature of that growth for a long period of time now. And you've seen those earnings grow from roughly a dollar a share in 2008 to over $9 a share in 2020.  

And so that's what we're about at Munro. Consistently and over and over and over, we're trying to find these MasterCard type situations, these situations of structural growth over the cycle where earnings growth is driving a share price higher over time. And so. 

*ALTERNATIVE CONCISE VERSION 

[Slide on screen:  The "CI Global Asset Management" logo is in the top right corner. The background shows a dusk landscape with a lake and silhouetted mountains. Centered towards the top is the text "How we invest".] 

Andrew:

Thank you for that and just I guess on that last focusing on types of businesses. You know the sectors that. You know the way some people might look at that and say, “oh, geez, they're really in that aggressive, high-growth area.” But you know, because of your screens? And when I look at your holdings, you know you're not playing in the, you know the video conference businesses of the world that are down 80-90% over the last 12 months. So, it's clearly making a shift to that growth, but still have some sort of brains. I guess that is holding you back from getting you know, really, really impressive, and in that high growth space is that, is that accurate?

Murdo:

Very much so you know we are just to sort of back up for a second there with that with that sort of philosophy that we have about it being the internal wealth that drives the share prices, you first of all need to have internal wealth. You need to be investing in businesses that actually earn a profit and you know there's so many companies over the last few years that have done exceptionally well and be rewarded by the market that don't actually make any money and we want to invest in businesses. Beats the Pon, their earnings that they're generating now tangible earnings, not the promise of earnings and I think what we're seeing now in January all be it that it's rather volatile and all that sort of thing is a bit of a change. I think in the market focus, and as things settle down, which they will, the market will probably seek to reward those businesses that do have earnings right now. If you look at this, this sort of portfolio here a lot of numbers on here, but basically this suggests that somewhere in the region of 50% of the portfolio is exposed to two sectors, healthcare and technology. You may also note that it's not really exposed to areas that are quite large in the Canadian equity landscape - energy, materials and financials. We don't really have a huge exposure to them now. First of all, just touching upon the healthcare and it just looking at the healthcare slide here. Uhm? I think when you tell people you have 30% tech, they assume that you own the sort of businesses you've just said. The high flying growth business is extremely high valuations, probably not a lot of earnings yet, but that's the way you invest in tech and it's fast moving and it's disruptive. We don't invest in those businesses, We invest in these businesses here in front of you that some of which will be household names and some of them grow very quickly. They are all profitable and we have these characteristics on the bottom, which I think is very interesting and tells you a great deal. These businesses on average have been around almost 50 years, so the notion is that in tech it's constant disruption,  fast moving, you know you can't stay on top forever. Well, Microsoft is a business that was the largest company in the World 3 decades ago and is still there or thereabouts today because it has a good management team that has constantly reinvented itself. It can be done, and these businesses I think, are great evidence of that. On average, they have almost a 30% operating profit margin and they have virtually no debt as well. These things are all connected. They're not individually coincidental. We think that each and every business here is bringing something different to the portfolio, but at the end of the day, one thing as well that doesn't come out here, which is important to stress, is that typically they will sell to other companies rather than to consumers, and that's crucial as well. That is why they are so stable and consistent, because consumers tend to be rather fickle and sensitive to things businesses make, long term considered decisions. That's very important, I think. In healthcare, you'll also see the similar slide, which says a very similar story here. Healthcare we think is underpinned by very long-term demographic related tailwinds. So on the one hand you have pharmaceutical businesses, you know, like Rausch or Novartis, or other businesses that are developing drugs to treat things like cancer and diabetes which are increasingly prevalent, unfortunately, as the world gets older. But you also have companies in here that make devices that treat things like heart conditions. Indeed, there are companies that actually make systems for surgery, surgical procedures that are operated by a human. But there are. They're basically part human, part robot. These are better ways of doing things we've been doing for decades, if not more, that result in better outcomes for yours and my shorter recovery periods. So just to your point, Andrew, yes, you're right. It's not this sort of high growth, high risk sort of area of the market we're investing in. We're investing in businesses that are tried and tested, but ultimately we also believe are going to be the winners over the next ten, 20-30 years as well, because of the innovation that they have in their businesses.

This information, including any opinion, is based on various sources believed to be reliable, but its accuracy cannot be guaranteed and is subject to change. CIBC and CIBC World Markets Inc., their affiliates, directors, officers and employees may buy, sell, or hold a position in securities of a company mentioned herein, its affiliates or subsidiaries, and may also perform financial advisory services, investment banking or other services for, or have lending or other credit relationships with the same. CIBC World Markets Inc. and its representatives will receive sales commissions and/or a spread between bid and ask prices if you purchase, sell or hold the securities referred to above. © CIBC World Markets Inc. 2022.

Andrew:

But maybe you could talk about a bit on that fundamental side. So how do you choose as a team? The 30-40 businesses that you actually buy for a long period of time?

Murdo:

It's a very good question, and it's something that certainly I think, when you first joined the firm, I think that's the question everyone is asking - well, how on Earth do I sort of figure out what works? It's certainly something that I think you get a sense of as you spend more and more time at Walter Scott. You are equipped at the start with this philosophy which is hammered into you from day one. Which is that what drives share prices, which is what everyone talks about constantly when you look turn on the TV, what drives share prices isn't necessarily what the Fed does. It isn't what COVID does. Hence why one share price looks different from another is the companies themselves. It is the internal workings of that company. How good is this company at growing its revenues and growing its profits and its earnings? How consistently do they do that versus another business and that is really what I think we're trying to do is. We're trying to find businesses that are amongst the very best at growing that wealth as we would say, because that is what ultimately is reflected in the share price overtime. That's why you have to think longer term because it takes time for the market to award that consistency when you're talking, days, hours, months. It does have lots of factors that influence share prices, so you need to look longer term. We are equipped with a couple of tools which are very important in taking this universe of some 1500 companies down to a manageable size. You start with this spreadsheet in the middle here. You're obviously not supposed to see this in any great detail, but it's just to represent the fact that the first stage is the number stage. We take a business and, you know, in lots of ways you can screen and prescreen companies. We want businesses that grow their earnings at 15%. Plus, we want businesses that have an operating margin of above 20% - things like this. We want businesses that don't have much debt. That gives you a little bit of an easier universe. We put the business taking all of its annual reports into this spreadsheet. So we crunch the numbers. Then you look at all the ratios of the business growth rates. If you come up with a business that's very attractive in that sense, then we can move forward and look at constructing a sort of case for the business looking at the industry that it's operating in and looking at its history. What are the barriers to entry for these businesses? So this stage takes the longest, because this is really when you're getting to know this business intimately. You'll be speaking to the company. Many times you'll be having interviews with management. to understand how they think, because that's crucially important. Because it's all very well understanding how a business has performed over the years, how it analyzes. But if you don't know what the management is thinking and what they're really focused on when we go through periods of uncertainty, the tendency is you just sell the business and move on because you don't know. So we spend a lot of time trying to get under the skin of management as well, using these different tools.. We're looking for businesses that have these sort of qualities from a numbers perspective, sustainable growth, financial metrics that are superior. So really high return profile. Great margins which tell you that this is a business that's doing something special. This is a business that tells you and I how much to pay for their goods rather than the other way around. And that's so important. Smart businesses do this. The less smart businesses tend not to manage their business in a responsible way. So, just like Andrew manages many of your assets, probably in a balanced, pragmatic manner, we want these businesses to do the same thing with the shareholder equity that they have. So, run a great business, invest for growth, but maintain a solid balance sheet, because at some point you will need that and that is something that we will not compromise on. And I think it's very important when we look at the longer term performance we've delivered, is that these businesses grow very nicely, but when you go through choppy waters, they tend to protect you rather better than the average business will. And then we're looking for businesses that are exposed to growth. Tailwinds, really strong tailwinds, to their business, so it's unsurprising really that when we when we look at the portfolio and where it's positioning is that the portfolio is skewed towards businesses that are in the ascendancy within sectors such as technology and healthcare, but also in areas such as industrials. But within industrials, again, not your cyclical “One year profitable next year loss-making” sort of business, but businesses that are exposed to things like automation, things like robotics and just better ways of doing things -  ways of doing things that people are increasingly going to shift towards as we go forward. So that's what we want to align the portfolio towards, because it’s frankly easier to make money in those businesses than trying to battle against the tide of relatively average or poor businesses.  Hoping that you get the timing right, because that is basically what you're doing when you're investing in businesses like that, so hopefully that gives you a sense, Andrew of, how we get to that point? What we're looking for in essence.

This information, including any opinion, is based on various sources believed to be reliable, but its accuracy cannot be guaranteed and is subject to change. CIBC and CIBC World Markets Inc., their affiliates, directors, officers and employees may buy, sell, or hold a position in securities of a company mentioned herein, its affiliates or subsidiaries, and may also perform financial advisory services, investment banking or other services for, or have lending or other credit relationships with the same. CIBC World Markets Inc. and its representatives will receive sales commissions and/or a spread between bid and ask prices if you purchase, sell or hold the securities referred to above. © CIBC World Markets Inc. 2022.

A:

With another question about going to talking about this, cause sure, you know? Obviously the start of this year has been challenging for a lot of you, growth, growth names and I love seeing a small up there, cause that's probably our top individual holding that we have. So when we go through this rotation, which is really I think, a lot being driven by  an interest rate, sort of, scare or the fact that rates are going to be going up. And of course those historically pulled back some of the growth. What do you say when you're going through a cycle like this? You know when you look at these type of businesses, how will another couple percent potentially of interest rates affect these businesses?

K:

Yeah, no. It's a great question and certainly the start of this year has been a difficult one for us and for many growth investors Why don't I jump back to the interest rate point first of all and then I can touch on what we're focused on? So firstly, on  interest rates. Well, actually, sorry. Why don't I jump back one slide? So what we do as a growth investor? We're really focused on this equation. So when we look at the economy and what's going on in the world and what's going on in markets, we're really focused on this equation. And what this is we call it the equity risk premium or the carry trade. And so what it shows you is effectively, are you incentivized to own equities over bonds or bonds over equities? And what it is, is effectively 1 divided by the PE of the market. So the PE of the S&P 500 minus the US 10 year bond yield. So the P is 20 * 1 / 20 is 5% minus the 10 year bond yield 1.5%. So you get effectively, 3.5percent equity risk premium. And so what we've done is we've tracked this equity risk premium over time, and we've tracked it over a number of years now. And we still think it's very much in your favor to own equities over bonds and so that equity risk premium, we think, it sits at roughly around 300 today, and so we think the positive carry that you get from owning equities over bonds is still there today. So it's still in your favor as investors to own equities. If I jump to the next slide, and to address your question a little bit more directly, Andrew, is about interest rates; Well, what's become really evident in in the interest rate market in the fixed income market throughout 2021 was that we saw big inflationary concerns and we saw that all through the year. If you look at different asset classes in commodities, in natural gas in things like lumber, we saw it in a whole range of different asset classes and so our view is that actually if we look at the 10 year bond yield, we saw all these inflationary factors happen in 2021. All these asset classes at some point throughout the year exhibit inflationary factors. And then at the end of 2021, if you looked at the US 10 year bond yield, it was only roughly 1.5%. And even as we've had now effectively four hikes being priced into the market for the Federal Reserve in 2022, the US 10 year bond yield is still only up at roughly 1.8%. But the interest rate conundrum we think comes back to this equation, and what I'm showing you here, is your total debt outstanding in the dark blue line over time. You can see since the early 1970’s it's gradually increased over time and accelerated through that covid period. And what I'm showing you on the lighter blue line coming down over time is that US 10 year bond yield. And so in the post-COVID world, where do we get? Where do interest rates go? Well, we think in the long end of the interest rate curve. So the 10-year and above are pegged down to a certain level due to this amount of debt in the world today. So we think the level of debt in the world in the US in particular is particularly high and interest rates simply can't go too high because of the amount of depth in the world today. And so the total debt outstanding is at record levels, then we think effectively the US 10-year, which is the key risk indicator for us, as growth investors won't get too far above that 2 to 3%, we think. So we think longer term interest rates are going to be lower for longer.

This information, including any opinion, is based on various sources believed to be reliable, but its accuracy cannot be guaranteed and is subject to change. CIBC and CIBC World Markets Inc., their affiliates, directors, officers and employees may buy, sell, or hold a position in securities of a company mentioned herein, its affiliates or subsidiaries, and may also perform financial advisory services, investment banking or other services for, or have lending or other credit relationships with the same. CIBC World Markets Inc. and its representatives will receive sales commissions and/or a spread between bid and ask prices if you purchase, sell or hold the securities referred to above. © CIBC World Markets Inc. 2022.

A:

With another question about going to talking about this, cause sure, you know? Obviously the start of this year has been challenging for a lot of you, growth, growth names and I love seeing a small up there, cause that's probably our top individual holding that we have. So when we go through this rotation, which is really I think, a lot being driven by  an interest rate, sort of, scare or the fact that rates are going to be going up. And of course those historically pulled back some of the growth. What do you say when you're going through a cycle like this? You know when you look at these type of businesses, how will another couple percent potentially of interest rates affect these businesses?

K:

Yeah, no. It's a great question and certainly the start of this year has been a difficult one for us and for many growth investors Why don't I jump back to the interest rate point first of all and then I can touch on what we're focused on? So firstly, on  interest rates. Well, actually, sorry. Why don't I jump back one slide? So what we do as a growth investor? We're really focused on this equation. So when we look at the economy and what's going on in the world and what's going on in markets, we're really focused on this equation. And what this is we call it the equity risk premium or the carry trade. And so what it shows you is effectively, are you incentivized to own equities over bonds or bonds over equities? And what it is, is effectively 1 divided by the PE of the market. So the PE of the S&P 500 minus the US 10 year bond yield. So the P is 20 * 1 / 20 is 5% minus the 10 year bond yield 1.5%. So you get effectively, 3.5percent equity risk premium. And so what we've done is we've tracked this equity risk premium over time, and we've tracked it over a number of years now. And we still think it's very much in your favor to own equities over bonds and so that equity risk premium, we think, it sits at roughly around 300 today, and so we think the positive carry that you get from owning equities over bonds is still there today. So it's still in your favor as investors to own equities. If I jump to the next slide, and to address your question a little bit more directly, Andrew, is about interest rates; Well, what's become really evident in in the interest rate market in the fixed income market throughout 2021 was that we saw big inflationary concerns and we saw that all through the year. If you look at different asset classes in commodities, in natural gas in things like lumber, we saw it in a whole range of different asset classes and so our view is that actually if we look at the 10 year bond yield, we saw all these inflationary factors happen in 2021. All these asset classes at some point throughout the year exhibit inflationary factors. And then at the end of 2021, if you looked at the US 10 year bond yield, it was only roughly 1.5%. And even as we've had now effectively four hikes being priced into the market for the Federal Reserve in 2022, the US 10 year bond yield is still only up at roughly 1.8%. But the interest rate conundrum we think comes back to this equation, and what I'm showing you here, is your total debt outstanding in the dark blue line over time. You can see since the early 1970’s it's gradually increased over time and accelerated through that covid period. And what I'm showing you on the lighter blue line coming down over time is that US 10 year bond yield. And so in the post-COVID world, where do we get? Where do interest rates go? Well, we think in the long end of the interest rate curve. So the 10-year and above are pegged down to a certain level due to this amount of debt in the world today. So we think the level of debt in the world in the US in particular is particularly high and interest rates simply can't go too high because of the amount of depth in the world today. And so the total debt outstanding is at record levels, then we think effectively the US 10-year, which is the key risk indicator for us, as growth investors won't get too far above that 2 to 3%, we think. So we think longer term interest rates are going to be lower for longer.

This information, including any opinion, is based on various sources believed to be reliable, but its accuracy cannot be guaranteed and is subject to change. CIBC and CIBC World Markets Inc., their affiliates, directors, officers and employees may buy, sell, or hold a position in securities of a company mentioned herein, its affiliates or subsidiaries, and may also perform financial advisory services, investment banking or other services for, or have lending or other credit relationships with the same. CIBC World Markets Inc. and its representatives will receive sales commissions and/or a spread between bid and ask prices if you purchase, sell or hold the securities referred to above. © CIBC World Markets Inc. 2022