Market Context, Strategy Drivers & Price Movements
U.S. equity markets declined during March amid heightened geopolitical tensions stemming from Operation Epic Fury, which pushed energy prices higher and renewed uncertainty around inflation and interest rate expectations. Disruptions to global energy supply, including the effective closure of the Strait of Hormuz, a critical global energy corridor, resulted in a sharp increase in oil prices. Higher energy costs placed upward pressure on bond yields and weighed on equity valuations.
At the same time, rapid developments in artificial intelligence continued to influence investor sentiment, particularly within software and technology‑oriented sectors. While AI offers long‑term productivity potential, near‑term concerns around margin pressure, business model disruption, and valuation sustainability led to increased volatility and multiple compression across parts of the market.
Against this backdrop, markets showed increased differentiation between companies with durable demand, strong cash flow generation, and reasonable valuations, and those with higher sensitivity to narrative and sentiment shifts.
In March, the Capstone Biblically Informed U.S. Equity Fund Series I unit price declined -5.05%, compared with a -4.8% decline for the S&P 500 Total Return Index (S&P 500) in Canadian dollars over the same period. Over the quarter, the fund’s price has changed -5.31% while the S&P 500 has increase/decrease -5.16%.
United Therapeutics
United Therapeutics was a key positive contributor during March, rising 18% following strong clinical trial results from its TETON‑1 study. The data showed Tyvaso significantly improved lung function and reduced disease progression in patients with idiopathic pulmonary fibrosis. With management planning a priority FDA review later this year, investor response reflected growing confidence in the company’s long‑term growth profile and expanded market potential.
Software Sector Exposure
Select software holdings detracted during the month as investor skepticism toward traditional SaaS business models intensified amid rapid AI advancement. Progress Software declined sharply despite strong quarterly results and a raised outlook, as concerns around margin compression and disruption outweighed near‑term fundamentals. This period highlighted how quickly valuation multiples can compress during technological transitions.
Defensive and Cash‑Flow‑Oriented Holdings
Defensive holdings across Health Care, Utilities, Industrials, and Consumer Staples provided relative stability during the volatile month. Companies with resilient demand, pricing power, or regulated cash flows helped moderate overall portfolio volatility and reinforced the role of diversification during periods of market stress.
Active Management
During March, Prestige Consumer Healthcare was added to the portfolio. The company owns a portfolio of established consumer health brands with durable demand and strong free cash flow generation. The position reflects continued emphasis on valuation discipline, defensive characteristics, and shareholder‑focused capital allocation.
Key Considerations for a Diversified Portfolio
Balanced participation and risk management
Sector positioning supported risk management during March’s volatile environment. Intentional underweights to Materials and Information Technology helped limit exposure to areas that experienced increased pressure, while overweights to more defensive sectors such as Utilities and Consumer Staples provided stability. These sector tilts are by design and are intended to improve diversification, reduce over‑concentration in any single area of the market, and support more consistent participation when markets reprice risk and volatility rises.
Valuation discipline
Recent volatility underscores the importance of maintaining a disciplined valuation framework. The Fund continues to trade at meaningfully lower valuation multiples than broad U.S. benchmarks.
- Fund and Strategy P/E Ratio: ~17.8x
- S&P/TSX Composite Index P/E: ~19.8x
In addition, the portfolio offers a 2.5% dividend yield, compared to 1.2% for the S&P 500 Index. This valuation advantage provides a margin of safety and supports the funds ability to generate attractive long‑term returns.
Multiple sources of alpha
March performance reflected a combination of stock‑specific outcomes rather than reliance on any single sector or theme. Positive contributions from idiosyncratic opportunities, such as United Therapeutics, Linde, and Royalty Pharma, helped offset broader market pressures. These holdings benefited from company‑specific developments, durable cash flows, and resilient business models, reinforcing the value of diversified, fundamentals‑driven security selection during periods of market volatility.
Research‑driven stock selection
Holdings such as United Therapeutics, Progress Software, and Prestige Consumer Healthcare show the Fund’s focus on strong fundamentals, business quality, and sensible valuations, even during uncertain markets. United Therapeutics reflects deep research and ownership of a business with clear growth drivers, supported by specialized products and identifiable medical and regulatory milestones. Progress Software highlights valuation discipline, as the Fund maintained exposure despite short‑term share price weakness driven by broader concerns around artificial intelligence, while the company continues to generate solid cash flow and recurring revenue. Prestige Consumer Healthcare demonstrates a preference for stable businesses with dependable demand, strong cash generation, and disciplined capital allocation. Together, these positions show a consistent approach that prioritizes durable businesses and reasonable prices over short‑term market noise.
This positioning reflects our core principles: stay disciplined, choose carefully, and avoid overpaying.
What Advisors and Investors Should Know
Series I of the Capstone Biblically Informed U.S. Equity Fund does not include an embedded Management Fee and is only available through a negotiated Management Fee Agreement. Investors should review the Fund Facts and prospectus before investing. As always, past performance does not guarantee future results.
IMPORTANT DISCLOSURES
Commissions, trailing commissions, management fees, and expenses may be associated with investments in mutual funds and exchange‑traded funds. Please read the prospectus before investing. Mutual funds and ETFs are not guaranteed, their values change frequently, and past performance may not be repeated. The simplified prospectus, fund facts, and ETF facts are available on SEDAR+ at www.sedarplus.ca.
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