Quarterly Check-in: Fall 2025 Update

In our Q3-F25 quarterly webinar, Portfolio Manager Sam LaBell discussed current market valuation risks, the gold rally, the case for active management and the future direction of the market.

Sam reviewed the performance of our three funds: the Veritas Canadian Equity Fund (a long-only strategy), the Veritas Absolute Return Fund (a long-short strategy), and the Veritas Next Edge Premium Yield Fund (targeting a 5% annual yield through covered calls). All three funds have demonstrated lower volatility than their respective benchmarks, which is a key differentiator for Veritas’ investment approach.

Top Wins YTD (7:12)

Sam comments on several top-performing names, including Bombardier Inc. (TSX: BBD.b), and several gold names, including Agnico Eagle Mines Ltd. (NYSE, TSX: AEM), Barrick Mining Corp. (NYSE: B, TSX: ABX), Wheaton Precious Metals Corp. (NYSE, TSX: WPM), and Hudbay Minerals Inc. (NYSE, TSX: HBM). His approach to gold miners focuses on those with the lowest risk. “Your main risk in terms of owning a gold miner is operations.”

Other successful positions include Rogers Communications Inc. (NYSE: RCI, TSX: RCI.b), Maple Leaf Foods Inc. (TSX: MFI), Toronto-Dominion Bank (NYSE, TSX: TD), MINISO Group Holding Limited (NYSE: MNSO), Royal Bank of Canada (NYSE, TSX: RY), AtkinsRealis Group Inc. (TSX: ATRL), Fortis Inc. (TSX: FTS), Canada Goose Holdings Inc. (NYSE, TSX: GOOS), and Fairfax Financial Holdings Ltd. (TSX: FFH).

Successful short positions include Cargojet Inc. (TSX: CJT), TransAlta Corp. (TSX: TA), Alimentation Couche-Tard Inc. (TSX: ATD), goeasy Ltd. (TSX: GSY), Williams-Sonoma Inc. (NYSE: WSM), TFI International Inc. (NYSE, TSX: TFII), General Mills Inc. (NYSE: GIS), Teck Resources Ltd. (NYSE, TECK, TSX: TECK.b), and Advance Auto Parts Inc. (NYSE, AAP).

“We’re trying to build a portfolio of 25 to 40 names that just underperforms the market. The chance of you finding a great short that goes to zero every year is quite difficult.”

Market Valuation Risks‎ (25:40)

“There is a lot of reason to be a little bit concerned,” Sam said, showing that when investors paid more than 20 times actual operating earnings, subsequent returns were typically underwhelming. The current market is at approximately 23 times estimates, placing it in the highest-risk group, where average historical returns have been negative (-9%). If analyst estimates prove 10% too high, the market would be at 25.7 times operating earnings, further increasing risk.* Additional analysis of price-to-trailing earnings shows that when markets trade above 24 times trailing earnings (the current market is at 28 times), there’s a 36% probability of losing money over five years and an 18% probability of a 15% end-to-end loss.**

“It’s definitely a warning flashing here that the market is very expensive and you might want to take a little bit of risk off the table.”

Gold Rally Analysis ‎(34:40)

Sam examines the drivers behind gold’s dramatic rally to over US$4,000 an ounce. He explains that gold supply is relatively constrained, making demand the key factor in price movements. While technology and fabrication demand tend to decrease as prices rise, central bank buying (driven by diversification from U.S. dollars) and investment demand (particularly ETF flows) have been the main drivers. Sam is concerned that ETF demand is pro-cyclical and potentially unstable. “People are looking for a speculative return.” As gold prices rise, more money flows into ETFs, accentuating the cycle, but this could reverse if prices stagnate or fall. Analyzing gold’s historical value relative to U.S. GDP since 1970, he notes that previous price peaks were followed by dramatic corrections (27-51% drops). “That’s the risk we want to keep in the back of our heads. We want to participate in the rally [but take some risk off the table.]”***

Case for Active Management ‎(46:30)

In years when the S&P/TSX Composite rose more than 10%, about 80% of stocks rose, making it difficult to distinguish great active managers from the average ones. However, in years when the index returned less than 10%, approximately 54% of stocks lost money and 36% lost more than 10%. These challenging market conditions, which occurred in 10 of the last 20 years, require greater due diligence and judgment. The Veritas Canadian Equity Fund has a downside capture of 71% (quarterly performance in down quarters for the S&P/TSX since May 23, 2018 inception), while the Veritas Absolute Return Fund has a downside capture of 15% (quarterly performance in down quarters for the S&P/TSX since September 30, 2019 inception), compared to 26% for a bond index. Meanwhile, the Veritas Next Edge Premium Yield Fund has a downside capture of 75% (based on its monthly performance in down months compared to the S&P/TSX since its inception on June 28, 2022).****

Conclusions and Outlook ‎(53.25)

“We’re not saying get out of the market,” Sam said. “We do think it is still worth looking for growth at a reasonable price.” Focus on companies with consistent operations, strong cash flows, solid balance sheets, good management, and the ability to weather a full economic cycle. “Risk comes in cycles. It’s time to de-risk a little bit.”

DISCLOSURES

* S&P Global data, Veritas Asset Management Inc.
** Shiller.com Market Data Set, Veritas Asset Management Inc.
*** World Gold Council data, Bloomberg data, Veritas Asset Management Inc.
****Workplace data, Bloomberg data, Veritas Asset Management Inc.

Notes: Performance for all funds listed above are for Series/Class F units as of September 30, 2025. Inception, three-year and five-year returns are calculated on an annualized basis using historical daily returns on net asset value per unit, adjusted to reflect reinvested distributions. Correlation is calculated using daily returns between the funds and the index. Volatility is expressed in terms of historical annual volatility. Historical daily volatility is measured by the standard deviation of daily returns. Historical annual volatility is measured by annualized daily data.

The S&P/TSX Composite Total Return Index is a Canadian dollar denominated, capitalization-weighted index that includes the largest float-adjusted stocks trading on the Toronto Stock Exchange, subject to inclusion criteria. The index provides the broadest representation of market-weighted returns for large capitalization Canadian-listed stocks, including reinvested dividends, making it an appropriate index for diversified portfolios that invest primarily in Canadian stocks, such as the Veritas Absolute Return Fund and the Veritas Canadian Equity Fund. We may also refer to exchange traded funds (ETF) that closely track the S&P/TSX Composite total return, such as the iShares Core S&P/TSX Capped Composite ETF which carries a 0.99 or greater correlation to the index. While our funds are benchmarked against the S&P/TSX Composite, we may reference returns for the S&P 500 and NASDAQ Composite, as well as yields on U.S. ten-year Treasury bonds, which we view as relevant investment benchmarks for investors in North American equities. The S&P 500 represents approximately 80% of the total market capitalization of U.S. stocks, and remains the most broad-based indicator of large-cap U.S. equity returns. In contrast, the NASDAQ has a greater proportion of technology and growth stocks, which we view as providing additional insight into investors’ risk appetite. The ten-year U.S. Treasury rate is referenced as a measure of the lowest-risk investment alternative to equities (‘the risk-free rate’). Contact Veritas Asset Management Inc. for more information regarding comparative indices.

The information contained herein is for general information purposes and does not constitute a solicitation for the purchase or sale of securities. The full details of the Fund, its investment strategies and the risks are detailed in the Fund’s current simplified prospectus and fund facts document, copies of which may be obtained from Sedar, your dealer, Veritas Asset Management Inc. (“VAM”) or at Veritasfunds.com. Please read the prospectus before investing. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. All performance data assume reinvestment of all distributions or dividends and do not take into account other charges or income taxes payable by any unitholder that would have reduced returns. The performance of the Fund is not guaranteed, unit values change frequently and past performance may not be repeated. Performance is presented in Canadian dollars, unless otherwise stated, and is net of fees of Series F units of the Fund. VAM is an affiliate of Veritas Investment Research Corporation (“VIR”) by virtue of being under common control that may also from time to time have certain common directors, officers and/or employees. VIR produces and issues independent equity research regarding public issuers to investors and other capital markets participants. VAM is a client of VIR and receives research reports from VIR at the same time as VIR’s other clients. VIR and VAM have implemented policies and procedures to minimize the potential for and to address conflicts of interest, which are available upon request.

Cautionary Note Regarding Forward-Looking Statements

The information in this release may contain forward-looking statements. All statements, other than statements of historical fact, that address activities, events or developments that Veritas Asset Management Inc., the Portfolio Manager, or any affiliates thereof (the ‘Companies’) believe, expect, or anticipate will or may occur in the future (including, without limitation, statements regarding any targeted returns, projections, forecasts, statements, and future plans and objectives of the Companies) are forward-looking statements. These forward-looking statements reflect the current expectations, assumptions or beliefs of the Companies based on information currently available to the Companies. Forward-looking statements are subject to a number of risks and uncertainties that may cause the actual results of the Companies to differ materially from those discussed in the forward-looking statements, and even if such actual results are realized or substantially realized, there can be no assurance that they will have the expected consequences to, or effects on, the Companies.

For a list of factors that could cause actual results or events to differ materially from current expectations, please refer to our Prospectus and the section ‘Risk Factors’. Any forward-looking statement speaks only as of the date on which it is made and, except as may be required by applicable securities laws, the Companies disclaim any intent or obligation to update any forward-looking statement, whether as a result of new information, future events, or results or otherwise. Although the Companies believe that the assumptions inherent in the forward-looking statements are reasonable, forward-looking statements are not guarantees of future performance and accordingly undue reliance should not be put on such statements due to the inherent uncertainty therein.

Performance to September 30, 2025