In many ways, I can summarize the 2024 market picture exactly the same way I did in 2023: shifting investor expectations surrounding interest rates, combined with geopolitical tensions, led to substantial stock market volatility. There is, however, one major distinction: 2024 was an exceptional year for stock markets, whereas 2023 was not.
By Jordan Zinberg, CEO and President of Bedford Park Capital
Consistent with the past several years, Canadian equities in 2024 underperformed relative to their U.S. peers. Also consistent with past years, small-cap stocks did not fare as well as their large-cap peers. That said, in 2024 regardless of where one chose to invest it was an “easy” year for equity investors, and unfortunately, I don’t get to say that very often.
All major North American stock indexes were up double digits in 2024, and the equity market rally was broad. An investor could have bought Canadian bank stocks and made 20%, or bought the Nasdaq and made 30%. I’m extremely pleased to report that the funds performance in 2024 exceeded those figures by a substantial margin, and as I reflect on that performance, our first place win at the 2024 Canadian Hedge Fund Awards, and all of the progress we made as a firm over the past year, its very clear that 2024 was truly “One for the Ages”.
Before I discuss full-year results for the fund for 2024, below is a brief review of the fourth quarter. The main event in Q4 was the reporting of third quarter operating results for our portfolio companies, which I would characterize as quite strong. Among the names in our portfolio, only four companies reported results below our expectations (for clarity, that does not mean the results were bad, simply that they were below what we were expecting). The rest of the earnings results for our portfolio companies were either in line with our expectations, or in several cases, well beyond our expectations. For the fourth quarter of 2024, the Bedford Park Opportunities Fund was up 11.3%, net of all fees and expenses.
Bedford Park Opportunities Fund performance v Benchmarks
| Q4 2024 | |
| Bedford Park Opportunities Fund* | 11.3% |
| S&P/TSX Small Cap Total Return Index | 0.7% |
| S&P/TSX Small Cap Index | 0.1% |
With respect to the fund’s full year performance, our holdings as an aggregate performed extremely well. Driving that performance were the high-quality financial results that our portfolio companies achieved, results which were then subsequently rewarded by investors with higher valuation multiples as the year progressed – a combination I like to refer to as the “double whammy”. For the full-year 2024, the Bedford Park Opportunities Fund was up 58.6%, net of all fees and expenses.
As has become tradition, below is a review of the top three performing stocks in our portfolio during 2024:
Gold Medal: Propel Holdings [TSX: PRL]
2024 Total Return: 190%
After earning our Bronze Medal in 2023 with a gain of 88%, Propel shares went on an absolute tear in 2024 and rewarded investors with a total return of 190%, earning our top spot. Exceptional execution by management combined with enhanced investor awareness resulted in Propel shares finally trading at a more respectable valuation multiple.
Propel is an excellent example of our investment strategy at work we found the stock early (right before their 2021 IPO), learned as much as we could about the company, built a solid relationship with the management team and then sat back patiently and waited for others to see what we saw from the beginning a company with an extraordinary growth profile trading at a ridiculously low valuation. Why was this opportunity available to us at that time? Propel was small, operated in an industry that is not particularly well-liked or well-understood by investors, and the accounting had some nuances that take time to understand. When we were buying stock at $8 nobody wanted it…… and now at $37 per share everybody wants it.
In addition to excellent operating results throughout the year, notable highlights included multiple dividend raises and Propel’s acquisition of QuidMarket, a UK-based online lender.
Looking ahead to 2025, we will be focused on:
- The company’s ability to continue to grow its U.S. loan book at a high rate (and to a lesser extent its Canadian loan book);
- The integration of QuidMarket into Propel’s business and management’s ability to grow the UK business;
- Refinancing of the company’s debt at a lower rate; and
- Further development of Propel’s lending as a service platform
Silver Medal: Source Energy Services TSX:SHLE
2024 Total Return: 172%
Last year’s Gold Medal winner was at in again in 2024. Following a gain of 216% in 2023, shares of Source Energy Services recorded a further gain of 172% in 2024.
Source delivered everything we expected and more throughout the course of the year, which included strong operating results each quarter, a solid tuck-in acquisition that enhanced their vertical integration, an impressive new joint venture with Trican Well Services, and the refinancing of their debt at a lower rate, with maturity now pushed out to 2029.
Now that the debt refinancing is out of the way and the risk profile of the company has improved dramatically, investors can focus on operating and financial results this year.
Looking ahead to 2025, we will be focused on:
- Rising sand volumes on the back of strong demand;
- Positive impacts from Stage 1 of the LNG Canada project;
- Potential returns of capital through share buybacks or a dividend;
- Further developments in its joint venture with Trican Well Services; and
- Improved investor awareness underpinning a higher valuation.
Bronze Medal: Enterprise Group
2024 Total Return: 155%
While I have written about Propel and Source Energy numerous times in previous quarterly letters, Enterprise Group, with a gain of 155% in 2024, may be a new name for some readers.
What originally intrigued me about Enterprise was the company’s margin profile. The company exhibits profit margins that are way above what I would typically expect from a product-driven oilfield services business. Upon digging in, it became clear very quickly that what was driving these impressive margins was their power division, Evolution Power Projects.
Evolution Power Projects specializes in providing mobile power supply to customers. Specifically, the division rents natural gas generators that replace diesel generators, which results in significant reductions in emissions and substantial cost savings.
What does 2025 hold?
Looking ahead to 2025, we will be focused on:
- Continued top and bottom line growth;
- Additions to the company’s rental fleet;
- Higher adoption of natural gas generators among energy firms;
- Expansion into new customer sectors outside of energy (ie. mining, data centres);
- Potential M&A; and
- Additional analyst research coverage.
Some may have noticed a theme when reading about our top performers: two of the three medal winners from 2023 were also medal winners in 2024. The key takeaway here is that the “best companies to invest in” don’t change as often as some might think. People often believe that the job of a professional money manager is to be extremely active, constantly buying and selling shares in different companies. After managing money professionally for over twenty years and studying many of the most successful investors in history, I can assure you that this is not the case.
The investors who achieve the best results are those who can identify great businesses, often before others, and then subsequently train their minds to hold on to those businesses, despite any macro noise or other market influences, for as long as their investment thesis remains intact. It’s as simple as that. Simple, but not easy.
As we look out to 2025, there are many positive market factors in place. The macro backdrop is constructive, interest rates have eased, and both consumer spending and business investment are ticking higher. Valuations have crept higher over the past year, but we are still having no trouble finding profitable growth stocks trading at single digit earnings multiples. I want to thank all of our investors for your ongoing trust and confidence, and we are thrilled to have been able to reward you for that confidence with outstanding results in 2024.
Wishing everyone a happy and prosperous 2025,
*Based on time-weighted rates of return for lead series (series 1), net of all fees and expenses. Past performance is not indicative of future results
