Patient Capital 2023 Q4 Commentary

Equity markets continued their upward trend in the fourth quarter of 2023. Optimism was largely based on the expectation that Central Bankers had concluded their interest rate hikes and inflation was on its way to the two percent target rate. Investors drove equity prices up as they anticipate several interest rates cuts in 2024.

Artificial Intelligence (AI) was a significant driver of market sentiment. The shares of companies that had direct or indirect exposure to AI increased in value dramatically. The perceived benefits of AI along with the expected decline in interest rates propelled several large technology companies to extremely high valuations. Indeed, a significant percentage of the increase in the S&P 500 and MSCI World Index was due to substantial price increase by just a few high technology companies: Amazon, Apple, Alphabet, Meta, Microsoft, Nvidia and Tesla. These seven companies, dubbed the “Magnificent Seven” accounted for approximately 77% of S&P 500’s index’s advance in 2023.1

In the U.S., fourth quarter real gross domestic product (GDP) increased at an annual rate of 3.3 percent in the fourth quarter of 2023 exceeding expectations.  Personal income increased by 0.4% in November 2023.2 The strong employment environment and increasing personal income resulted in robust consumer spending.

In Canada economic growth was muted. Canada’s economy put on the brakes in the final three months of 2023 as a sharp slowdown in business inventory-building countered an improvement in net trade and a modest recovery in household spending. The performance was below market expectations for an advance of 1.6% for the latest quarter.3

While inflation was a concern at the start of the year, the rate of inflation cooled significantly as 2023 came to an end. The Federal Reserve acknowledged that the rise in interest rates was starting to take effect leading some Central Bankers to suggest there could be a pause in interest rate increases in 2024. Equity investors jumped on these remarks and began to believe that inflation would fall to the two per cent target rate and interest rates would fall in 2024. As well, investors now believe that a “soft economic landing” or a mild recession will occur in 2024. Consequently, equity markets experienced strong returns in 2023.

During the fourth quarter, Lysander-Patient Capital Equity Fund (the “Fund”) increased its positions in BCE Inc., Bank of Nova Scotia, CIBC, Canadian Utilities, Firm Capital Property Trust, and Linamar. A new position in Firm Capital Investment Trust was established.

The Fund continues to be well positioned for current market conditions.  In our view, the Fund’s value-based investment philosophy will stand up well as interest rates normalize and valuations return to historical means.

  1. Forbes  Jan. 22, 2024 ↩︎
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Lysander Funds Limited (“Lysander”) is the investment fund manager of Lysander-Patient Capital Equity Fund (the “Fund”). Patient Capital Management (“Patient Capital”) is the portfolio manager of the Fund. This document was prepared by Patient Capital as portfolio manager of the Fund. In this presentation, “we”, “us”, and “our” means Patient Capital. This document has been prepared solely for information purposes. Information in this document is not intended to constitute legal, tax, securities or investment advice and is made available on an “as is" basis. Neither Lysander nor Patient Capital make any warranties or representations regarding the information herein. Information in this document is subject to change without notice. Neither Lysander nor Patient Capital assume any duty to update any information herein. Certain information in this document has been derived or obtained from sources believed to be trustworthy and/or reliable. Neither Lysander nor Patient Capital assume responsibility for the accuracy, currency, reliability or correctness of any such information.

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This document is not an invitation to invest in the Fund and does not constitute a public offering of sale. Purchases in the Fund can only be made through an Investment Professional on the terms in the applicable Fund’s offering document by eligible investors. Each purchaser of units in a fund may have statutory or contractual right of action.

This document may contain forward-looking statements. Statements concerning a Fund’s or entity’s objectives, goals, strategies, intentions, plans, beliefs, expectations and estimates, and the business, operations, financial performance and condition are forward looking statements. The words “believe”, “expect”, “anticipate”, “estimate”, “intend”, “aims”, “may”, “will”, “would” and similar expressions and the negative of such expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. These forward- looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from current expectations. Readers are cautioned not to place undue reliance on these forward-looking statements. While Lysander and Patient Capital consider these risks and uncertainties to be reasonable based on information currently available, they may prove to be incorrect.

Nothing in this document should be considered a recommendation to buy, sell or short a particular security. Any specific securities or positions discussed are intended as an illustration of the portfolio manager’s selection process. The portfolio manager may sell these positions at any time, or purchase positions that have previously been sold. The positions may increase or decrease in value after the date hereof, and the portfolio that hold such positions may accordingly gain or lose money on the investment. The statements by the portfolio manager in its commentaries are intended to illustrate its approach in managing the portfolio, and should not be relied upon for any other purpose. Certain information in this document has been derived or obtained from sources believed to be trustworthy and/or reliable. Neither Lysander nor Patient Capital assume responsibility for the accuracy, currency, reliability or correctness of any such information.

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