NCM Income Growth Class overview

TRANSCRIPT

Why was NCM Income Growth Class launched in 2005?

If you asked a question about, “Why did you start this fund?,” the real reason we started this fund is because we knew small/mid-cap dividend payers were going to outperform large cap dividend payers over a business cycle. We knew it was differentiated, and we knew it fit really nicely into an advisor’s asset allocation strategy.

How is NCM Income Growth Class managed?

The NCM Income Growth fund is a Canadian equity balance fund. The fund invests in Canada and focuses in on small and mid-sized growth companies. The fund has a risk rating of medium.

I often get the question about the fund being small/mid-cap focused and whether or not small equals risk. My answer to that is that's not the way the fund is being managed. These are real businesses. We call them mini blue chips because they are big enough, strong enough, with solid balance sheets, enough to pay a consistent dividend, a dividend that we think is growing.

When you put a bunch of business together in a portfolio that grow faster, that have better margins and have higher return on equity, that have higher return on capital, have a 50% payout ratio, and have higher free cash flow yield, typically, you might not outperform every week, every quarter, every month, but certainly over a business cycle, with that kind of investment methodology, the fund should outperform.

Where does NCM Income Growth Class fit?

We're asking people to think about splitting the ticket. Take some of your dividend-focused holdings, that sliver of your portfolio, allocate a sleeve to the Income Growth fund.

There's a few different reasons for that. One, we have a very high active share, meaning our fund is different. A lot of our competitor’s products and a lot of advisors will invest in REITs, utilities and pipelines. We are focused more on the growth side of the dividend story. So those companies that have a low payout ratio, meaning that they reinvest back into the business, but still have enough cash flow and free cash flow that they can support the dividend and growing the dividend.

And in terms of predictors, your free cash flow metric is your best predictor of stock price movements over a business cycle. So the dividends provide downside support in terms of bear market plus dividends also help you outperform in the good markets.

The fund is 18 years old. I've been managing it over that time period and it's been managed with the same consistent investment methodology. It is what we call our proven and repeatable investment methodology.

The information in this video is current as of September 25, 2024 but is subject to change. The contents of this video (including facts, opinions, descriptions of or references to, products or securities) are for informational purposes only and are not intended to provide financial, legal, accounting or tax advice and should not be relied upon in that regard. This presentation may include information obtained from third party sources, including charts and data ("Third Party Content"). Third Party Content is for general informational purposes only. Third Party Content has been obtained from sources believed to be reliable, however, no guarantees are made by NCM or by the source of such Third Party Content as to its accuracy, completeness or timeliness, and no liability is accepted for any reliance thereon. Particular investments and/or trading strategies should be evaluated relative to the individual’s investment objectives and professional advice should be obtained with respect to any circumstance. The viewpoints expressed by the Portfolio Manager represents their assessment of the markets at the time of publication. Those views are subject to change without notice at any time without any kind of notice. The information provided herein does not constitute a solicitation of an offer to buy, or an offer to sell securities nor should the information be relied upon as investment advice. The communication may contain forward-looking statements which are not guarantees of future performance. Forward-looking statements involve inherent risk and uncertainties, so it is possible that predictions, forecasts, projections and other forward-looking statements will not be achieved. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated.