ZDCAF - Donville Kent Asset Management February 2025 Commentary

2025-03-13 04:05:00 ET

Summary

• The second half of February and the start of March have seen a pronounced selloff in stocks, especially in momentum stocks.
• The Capital Ideas Fund declined 6.23% in February and is now down 5.25% in 2025.
• For many of our companies, growth in 2025 and 2026 is baked in, balance sheets are strong, and these stocks will be the ones that perform well when sentiment bounces back.

The second half of February and the start of March have seen a pronounced selloff in stocks, especially in momentum stocks. The pace and magnitude of media coverage, casual conversations, and daily reports surrounding tariffs has reached a fever pitch. The tariffs are the most widely discussed political and market topic since Covid. This has led to a sell first and ask questions later mentality, which we'll speak to in more detail below.

A stock market correction, especially in momentum, was somewhat expected after such a strong run in 2024. The pieces are still in place for a good 2025. Many small companies in Canada go through a period without any news from November until March or even April (based on delayed reporting of Q4 earnings). As the average holding period for investors these days continues to decline, this lull in news can lead to stagnant or correcting stock prices. This sell-off has been across the board, with more than 1/3 of all TSX stocks down more than 20% from their highs. ¹ ...

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