February was another positive month for equities, with global indices continuing their ascent. Our three ABC Funds not only outperformed their respective index benchmarks but also achieved new all-time highs, marking a continuation of our funds’ strong performance.

The standout event of February was NVIDIA’s blowout earnings report, which propelled the stock to new record highs. NVIDIA has emerged as the uncontested leader of the current bull market advance and is uniquely positioned at the heart of the artificial intelligence revolution. The company’s influence extends far beyond AI, playing a critical role in drug discovery and healthcare, robotics, industrial automation, interactive gaming, and automotive.

Jensen Huang, founder and CEO of NVIDIA, captured the company’s momentum in the earnings release when he stated:

“Accelerated computing and generative AI have hit the tipping point. Demand is surging worldwide across companies, industries, and nations.”

His remarks underscore the magnitude of the technological shift underway. We believe this represents the greatest advancement in technology since the industrial revolution and has presented our funds with unparalleled investment opportunities.

NVIDIA has been a cornerstone of ABC Funds for many years and remains a top pick, reflecting our strategic commitment to identifying and capitalizing on industry leaders. In addition to NVIDIA, other ABC Funds holdings that contributed notably to our February performance included Meta, Amazon, ASML, Broadcom, Waste Management, and Canadian Pacific Kansas City.

Moreover, the technicals remain bullish, with a broadening rally that now encompasses the industrials, healthcare, and financial services sectors, indicating strong market internals. This expansion reinforces our positive economic and investment outlook.

Looking ahead, we remain confident with our three well-diversified portfolios and expect their positive performance to continue throughout 2024.

Irwin A. Michael, President
I.A. Michael Investment Counsel Ltd.

All three ABC Funds outperformed their respective benchmarks in the month of January, powering forward to new all-time highs. The equity markets continued their upward trajectory, buoyed by strong performances from large capitalization stocks. Leading the way were sectors pivotal to innovation and the “new economy” – semiconductors, software, medical technology, and infrastructure. Moreover, companies at the forefront of the artificial intelligence revolution emerged as significant beneficiaries, reflecting the growing impact of AI across various sectors.

In January, our standout performers were NVIDIA, ASML, Meta, Microsoft, ServiceNow, Boston Scientific, and Broadcom. Their contributions were pivotal to our funds’ outperformance during the month.

Looking ahead to February, our outlook remains optimistic, underpinned by a resilient economy, the continued deceleration of inflation, and the prospect of declining interest rates later in 2024 — all contributing to a favourable backdrop for investment. Moreover, corporate earnings have been notably strong, as evidenced by Meta and Amazon—key holdings within our ABC Funds—which, after reporting their impressive earnings results and forward guidance after yesterday’s close, saw their stock prices increase by 20% and 7% respectively today. Meta also announced a $50 billion share buyback program and initiated its first-ever dividend.

Moving forward, our positive stance on the stock market, the broader economy, and our portfolio’s strategic positioning remains unchanged. We believe our ABC Funds are well-positioned to continue their trajectory of outperformance, capitalizing on the numerous opportunities that 2024 presents.

Irwin A. Michael, President
I.A. Michael Investment Counsel Ltd.

The remarkable stock market rally that began in late autumn extended into December, ending 2023 with strong performances across all major equity indices. Our ABC Funds capitalized on this positive momentum, adding to their meaningful year-to-date outperformance with additional December gains. Notably, all three ABC Funds ended the year reaching new all-time highs since inception. These strong results were driven by a number of key portfolio contributors including NVIDIA, Broadcom, ASML, Autodesk, Meta, Alphabet, Canadian Pacific Kansas City, Thermo Fisher Scientific, and Brookfield Corp.

Looking ahead to 2024, our optimism is underpinned by several key factors shaping the market landscape. First and foremost is our expectation of falling interest rates and more dovish central bank monetary policies. Any reduction in interest rates should be enthusiastically received by investors and provide a major catalyst for higher stock prices. Secondly, negative investor psychology continues to overhang the marketplace, which presents excellent risk/reward common stock opportunities. Additionally, there remains significant investor cash reserves on the sidelines which could be committed to equities with any potential positive catalysts. Finally, we are optimistic with regard to expanding North American economic activity, resulting in increasing corporate earnings, growing M&A, and company share buyback activity.

Furthermore, central to our investment thesis is a great new wave of innovation which we believe is at the heart of the current investment cycle and will fuel corporate earnings for years to come. Our ABC Funds are strategically positioned with portfolio holdings at the forefront of significant technological advances including artificial intelligence, robotics, spatial computing, and new drug discoveries.

In summary, our investment team remains optimistic on the economic and investment prospects for 2024. As a result, our portfolios are committed to our large capitalization and diversified North American common stock selections.

Irwin A. Michael, President
I.A. Michael Investment Counsel Ltd.

The month of November provided a remarkable stock market recovery, as common stocks rebounded strongly, underscoring their resilience and continued upward momentum. All three ABC Funds exceeded their index benchmarks during the month, but more importantly we were particularly pleased with their year-to-date outperformance.

In November, numerous holdings within our ABC Funds portfolios reached new 52-week and all-time highs, significantly bolstering our results for the month. The market’s leadership was particularly strong in the technology and communication services sectors, areas where our portfolios are strategically overweight. This sector strength was exemplified by standout performances from Apple, Microsoft, NVIDIA, Amazon, Broadcom, ServiceNow, Visa, Mastercard, Adobe, S&P Global, Thermo Fisher Scientific, and Zoetis.

The market narrative for November was characterized by a confluence of positive factors: robust corporate earnings, a significant easing of inflationary pressures, and a substantial shift in interest rate expectations. Interestingly, the market has shifted from bracing for further interest rate hikes to now anticipating rate cuts in 2024. This realignment highlights the increasing confidence that monetary authorities have successfully steered the economy towards a soft landing. We believe that any reduction in interest rates will be enthusiastically received by investors, serving as a major catalyst for higher equity prices. Furthermore, these positive macroeconomic developments in the month of November effectively pivoted investor sentiment away from the pervasive pessimism of October and towards a more optimistic and opportunistic view.

As we enter the final month of the year, we see the combination of renewed investor confidence, traditionally lower seasonal volumes, and substantial cash reserves on the sidelines as precursors to a potential end-of-year rally, setting a favourable stage for 2024. Consequently, we remain fully invested and committed to our new value investment philosophy.

Irwin A. Michael, President
I.A. Michael Investment Counsel Ltd.

Navigating through the month of October, the markets faced a number of challenges, including rising yields, persistent inflation, and geopolitical turmoil. Despite these conditions, our three ABC Funds outperformed their respective benchmarks.

The completion of Microsoft’s $69 billion acquisition of Activision Blizzard, held in all three portfolios, marked an important development in the tech sector this month. Both were significant holdings in our portfolios and the takeover at $95 USD added to our October returns.

On the earnings front, a number of our core holdings, including Amazon, Meta, Microsoft, Visa, and ServiceNow, reported strong results and offered positive forward guidance. Additional portfolio outperformers included Broadcom, Adobe, Waste Management, and ASML.

As we look to the final months of the year, we are optimistic. Historically, November and December are strong months for the markets, and we believe current conditions have created attractive opportunities in equities.

Furthermore, we anticipate a stabilization in yields and subsiding inflationary pressures, creating a conducive environment for corporate earnings growth. Technological advances, particularly in AI, remain a focal point of our strategy, as we see these innovations driving future earnings and share price increases.

Our portfolios remain fully invested, reflecting our confidence in our strategy and outlook. We are committed to maintaining our focus on quality and performance as we close out the year.

Irwin A. Michael, President
I.A. Michael Investment Counsel Ltd.

Historically, September has never been an easy month for financial markets. It was no different for the month of September 2023. Market headwinds included the growing investor recognition of “higher for longer” interest rates, as well as the recent Federal Reserve comments interpreted as alarmingly hawkish. Additionally, the impending threat of a U.S. government shutdown, with its huge risks and repercussions, kept investor sentiment on edge.

While decelerating, inflation remains stubbornly above the Federal Reserve’s 2% target. This has encouraged the central bank to continue with its tightening efforts. Consequently, bond yields have climbed to levels not seen since 2007, contributing to the steepest drop in bond prices in nearly four decades.

Despite the pervasive negativity overhanging financial markets, we remain optimistic with regard to our diversified, large-capitalization portfolios. Common stocks appear technically oversold, which we believe sets the stage for a significant snapback rally, buoyed by solid corporate earnings and transformative innovations in technology including generative AI and digital transformation. Additionally, as we enter October, seasonal market trends are encouraging. In fact, the October to April period has a track record of delivering superior returns relative to the rest of the year.

In summary, although the challenges of August and September have priced significant negativity into the financial marketplace, we believe our portfolios are resilient and strategically positioned to capitalize on an eventual market rebound into year-end.

Irwin A. Michael, President
I.A. Michael Investment Counsel Ltd.

Our three ABC Funds generated positive returns during the month of August despite all major stock indices closing the month in negative territory. This outperformance was driven by a number of our common stock holdings including Amazon, Mastercard, Visa, Boston Scientific, Danaher, Thermo Fisher Scientific, Broadcom, Adobe, Autodesk, and Alphabet.

Of particular importance, NVIDIA stood out as our top common stock performer, reinforcing its longstanding position as a core holding in our ABC Funds. On August 23, the company reported exceptional second quarter earnings results, authorized a $25 billion share buyback program, and delivered forward guidance that shocked Wall Street. A cornerstone of NVIDIA’s success is their groundbreaking H100 chip, a pivotal asset in the race to build out large language models and generative AI capabilities. This chip offers unparalleled computational prowess, enabling a new generation of AI-powered solutions from autonomous vehicles and advanced language models to virtual reality simulations and precision medicine. NVIDIA founder and CEO Jensen Huang said it best in the earnings press release: “A new computing era has begun. Companies worldwide are transitioning from general-purpose to accelerated computing and generative AI.” With numerous tailwinds in data center, automotive, professional visualization, and gaming, NVIDIA remains a prime ABC Funds holding.

Looking ahead to 2024, while many investors have been less sanguine on the North American economy and equities, the fact is most corporate earnings results have exceeded analysts’ expectations, inflation while not eradicated is decelerating, and there is now a sense that the U.S. Federal Reserve and the Bank of Canada have become less hawkish since the beginning of the year. Furthermore, we believe that any perceptible weakness in economic activity resulting in central bank ease could spawn a deluge of common stock buying. This event could easily take place before the end of 2023 or early 2024. Consequently, we remain optimistic and fully invested as we enter the final four months of the year.

Irwin A. Michael, President
I.A. Michael Investment Counsel Ltd.

The strength of the equity market in the first half of 2023 continued into the month of July. Interestingly, this advance confounded many of the investment pessimists who have prognosticated an impending economic recession, given that both the Bank of Canada and the U.S. Federal Reserve increased interest rates during the month. Also notable during this period was Fed Chairman Powell’s statement that the Federal Reserve upgraded its 2023 economic forecast and does not anticipate a recession for the balance of the year.

Clearly, both the U.S. and Canadian economies have demonstrated remarkable resilience in the face of rising interest rates, significant recession concerns, and stubbornly high, albeit, declining inflation. However, a major positive factor that the pessimists are overlooking is corporate earnings results. For instance, over 70% of Q2 company results have beaten analysts’ expectations, including results from major corporations such as Caterpillar, Intel, Meta, Comcast, Alphabet, and General Electric. These results are impressive, and obviously, investors have taken note, pushing up year-to-date returns of the NASDAQ and S&P 500 over 31% and 19.5% respectively.

Our three ABC Funds provided notably positive returns for the month, and more impressively, excellent year-to-date outperformance. Individual ABC top performers this past month included: Adobe, Meta, Alphabet, NVIDIA, Activision Blizzard, Zoetis, Danaher, Becton Dickinson, Thermo Fisher Scientific, ServiceNow, and Autodesk.

Now entering the last five months of 2023, we remain optimistic with our diversified portfolios and anticipate positive results to year-end.

Irwin A. Michael, President
I.A. Michael Investment Counsel Ltd.

North American equity markets extended their upward ascent during the month of June and ended the first half of 2023 well into positive territory. This appreciation occurred despite continued central bank interest rate hikes, economic uncertainty, persistent global inflation, and an opaque corporate earnings landscape.

Remarkably, equity markets have continued to climb the proverbial “wall of worry”, with the S&P 500 rising over 15% and the Nasdaq Composite increasing over 31% for the first half of 2023. This performance defied all bearish prognostications, demonstrating the strength and resilience of the markets. Most noteworthy, it appears that there is still significant investible cash sitting on the sidelines anxiously awaiting a wishful market selloff. This did not occur during the first six months of 2023.

Our three ABC Funds capitalized on the positive momentum in June, posting excellent returns and adding to our impressive year-to-date results. In particular, three sectors lifted our performance: information technology, communications, and consumer discretionary. Other positive factors included:

• Prioritizing U.S. equities versus Canadian equities
• Focusing on large capitalization securities
• Maintaining fully invested portfolios
• Our U.S./Canadian dollar hedge to mitigate currency risk

Particularly notable was that our top three ABC Funds holdings, Apple, Microsoft, and NVIDIA reached new all-time highs during the month of June. Additional contributors to our performance included: Adobe, Becton Dickinson, Broadcom, S&P Global, Meta, Honeywell, Amazon, Mastercard, Visa, and Waste Management.

Looking ahead to the second half of 2023, we remain very optimistic and expect North American equity markets to continue scaling the “wall of worry” to higher levels. Our ABC portfolios are well diversified, and we believe their composition positions them favourably to navigate an evolving market landscape.

Irwin A. Michael, President
I.A. Michael Investment Counsel Ltd.