The Prosperity Engine
The Value Fund finished the third quarter +4.0% bringing our year-to-date return to +0.2% net of fees and expenses. (1) The US dollar has remained a headwind, detracting from our returns by -3.7% so far this year. The broader North American Market Indices continued their advance with the S&P500 +11.1%, DJIA +6.9% and SPX/TSX +23.9% year-to-date. (2)
This year’s stock market rally is increasingly being fueled by AI, crypto and plenty of speculation. Jamie Dimon, Paul Tudor Jones and others we respect are voicing their concerns about the frothy market environment. Buffett rarely comments about the market, but Berkshire Hathaway’s (BRK.A/B) $350 billion cash hoard speaks volumes.
During periods of market excess, we remain focused squarely on managing risk and protecting the capital entrusted to us. We are actively identifying high-quality companies currently being overlooked, confident that our patience will be rewarded when the market’s focus inevitably returns to fundamentals
We also took some time to write about tariffs and the ongoing changes to the global economic order. But first, a review of the Value Fund portfolio.
Portfolio Update
The top contributor to the Value Fund in Q3 2025 was Alphabet Inc. (GOOG) +37.3%. As noted in our September client update, the stock reacted positively to a favourable court ruling in the search antitrust case. While GOOG continues to face a separate antitrust case related to its advertising technology business, we view the potential impact as limited given that ad-tech represents only a modest portion of the company’s overall profits.
(1) All returns and Fund details are: (a) based on Class F units; (b) net of all fees; and (c) as of September 30, 2025.
(2) Index returns are for the total return indexes, including dividends and measured in Canadian dollars, the Value Fund’s reporting currency
More significant to Alphabet’s future earnings power, the company’s Gemini AI models are gaining momentum. In September, Gemini gained a meaningful share of Global Search Instances at ChatGPT’s expense. Last week, the company launched Gemini Enterprise, which adds enterprise security, privacy, and compliance requirements to GOOG’s top-end models while integrating them into enterprise data warehouses. We continue to believe that Alphabet’s distribution advantages, proprietary hardware and balance sheet provide it with long-term advantages against competitors in the AI market.
Despite periods of negative headlines and share price volatility, we have remained long-term shareholders of GOOG. Over the past five years, Alphabet’s annual earnings have tripled—from roughly $40 billion to $120 billion—and so has its share price. We continue to view the company as one of the most competitively advantaged platforms in global technology.
Our second top contributor in the quarter was ICON Plc. (ICLR) +20.3%. We first purchased shares of ICLR earlier this year as tariff exposures, most-favoured-nation pricing, and looming patent cliffs led many investors to fear that pharmaceutical companies were about to significantly reduce their R&D investment. While the short-term industry dynamics were murky, we thought the market’s reaction was excessively punitive. Admittedly, we did not have high visibility into ICLR’s 2025 earnings. Still, we believed the company’s long track record of execution and the benefits it brings to pharmaceutical R&D would enable it to weather a challenging period.
Our view is that clinical trials will get funded and that total industry R&D spending will continue to grow. Not much has changed since our original purchase, and the next few quarters are likely to remain challenging for the CRO industry. But pharmaceutical companies are starting to reach agreements with the Trump administration, which should provide them with greater clarity on tariffs and drug pricing. That in turn will enable them to recommit to large-scale clinical trials. ICLR continues to be well-positioned to benefit from the increasing need for larger, longer, and more globally diverse clinical trials required by therapies such as GLP-1s.
Our third-best performer in Q3 was General Dynamics (GD) +16.9%. The company’s Aerospace division has largely resolved the manufacturing challenges that constrained deliveries in 2024 and has been steadily ramping up production. Backlog reached its highest level in years, driven by strong demand for the new G700 and G800 business jets, which should keep the division busy for the foreseeable future. GD also secured several billion-dollar defense contracts during the quarter, reinforcing the strength of its government business. We continue to value the stability and diversification that our defense holdings bring to the Value Fund, particularly amid the elevated global geopolitical tensions.
Our largest detractor in the quarter was Fiserv Inc. (FI), which declined -25.2%. As noted in our Q2 Scorecard, the market reacted negatively to the deceleration in volume growth of Fiserv’s flagship Clover merchant-acquiring platform. On the company’s Q2 earnings call, management reaffirmed full-year volume growth guidance, which the market again took as a negative sign, prompting further share price weakness. We continue to believe that the company’s competitive position remains intact, and the business should carry on growing at attractive rates throughout the business cycle. Trading at 13x earnings, we view the shares as significantly undervalued and have added to our position. The company seems to agree as they are buying back shares rapidly in the open market.
Our second-largest detractor in the quarter was Novo Nordisk (NVO) -19.6%. NVO lowered its guidance due to several factors, including persistent use of compounded GLP-1 medications, slower-than-expected market expansion for obesity treatments, and heightened competition from Eli-Lilly’s tirzepatide-based therapies. We welcome the recently announced changes to senior management and the company’s new focus on operating efficiency.
We believe more vigorous enforcement against illicit drug compounding is emerging, providing a tailwind for NVO’s earnings. Longer term, we believe the company’s drug pipeline is better than the market is giving them credit for and that the obesity market will continue to expand as GLP-1 therapies gain broader indications, introduce oral versions, and payer coverage improves.
During the quarter, we completely exited our position in Cboe Global Markets Inc. (CBOE) as we viewed the shares as being fully valued. CBOE maintains a strong position with its dominant options franchise, and the investment was a great one, with the stock up 300% since our initial purchase in 2020. But the recent proliferation of zero days to expiration (0DTE) option trading—especially the increase in volume traded by retail investors—raised concerns that the company may be overearning. In the event of a prolonged market downturn, we believe trading volumes in these shorter-duration contracts will contract meaningfully, putting pressure on the company’s earnings.
We made one new purchase in the quarter: Adobe Inc. (ADBE). ADBE is a global software company specializing in creative content, digital marketing, and document management. ADBE’s stock has sold off amid concerns that AI products (including GOOG’s Nano Banana) pose a threat to the company’s core Photoshop and Illustrator franchises. Our view is that ADBE is well-positioned to integrate AI products into its Creative Cloud suite, and that its tools have higher switching costs than the market is giving the company credit for.
Our top ten holdings as of the end of Q3 are listed below.
* As of September 30, 2025. The Value Fund’s holdings are subject to change and are not recommendations to buy or sell any security
The Prosperity Engine
As bottom-up investors, we typically focus on fundamentals rather than macroeconomics. Yet, with the global economic order strained by trade wars and a rising tide of nationalism, we find ourselves turning to history to grasp the long-term implications.
Human progress is the story of Enlightenment values—reason, liberty, and science—unleashed by capitalism. The system’s genius lies in its ability to unlock human potential, empowering individuals to pursue their ambitions and capitalize on their unique talents.
When people are free to invent, invest, and spend in their own self-interest, they create powerful market signals. Billions of individual decisions determine what gets made and what fades away. This process mirrors biological evolution: useful innovations reward their creators, displace inferior alternatives, and propel society forward. It is the invisible hand and creative destruction working in tandem.
For millennia, humanity endured a grueling existence rooted in subsistence farming. The Industrial Revolution, fueled by scientific discovery and cumulative knowledge, marked the inflection point. An explosion of ingenuity has since given us everything from the steam engine to artificial intelligence. The result? The average person today enjoys a quality of life unimaginable to even the wealthiest robber baron of the Gilded Age.
China’s modern economic miracle was born from catastrophe. After decades of famine and stagnation under a failed ideology, Deng Xiaoping’s free-market reforms in the late 1970s unleashed a wave of prosperity that has lifted over 800 million people from extreme poverty—an unprecedented achievement in reducing human suffering.
For capitalism to truly work its magic, certain conditions need to be in place. First, the rule of law (the protection of private property rights and the equal application of the law) is required to create a stable environment for businesses and individuals. When the rules of the game are constantly changing or are dictated by government fiat, capital remains unspent and migrates to where it is welcomed. Had China’s reforms gone further to include the rule of law, its economic miracle would have been even more impressive.
Another essential ingredient is the freedom to innovate and fail. Governments should avoid the temptation to pick winners and interfere with market signals. Governments serve their citizens’ interests best when they focus on addressing market shortcomings through regulation, taxation, redistribution, and matters of national security or common good (e.g., infrastructure, education).
When governments abandon this role in favour of heavy-handed intervention, it results in inefficiency, misallocated resources, and slower growth. Europe, with its dirigiste policies, has perfected this model. It may be surprising to learn that the average European is less prosperous than the average resident of Mississippi, America’s poorest state. As you can see in the graphic (above right) (3), on this metric, Canada doesn’t fare much better.
State-directed economies are corrosive for a more fundamental reason: they breed a culture of corruption. When success depends on political favour rather than merit, private interests inevitably seek to bribe and influence those in power. This tragic satellite image of the Korean Peninsula at night illustrates what works and what doesn’t.
The people of these two sister nations share the same heritage and potential. Yet their fates could not be more different. One nation embraced a market system that allowed its citizens to flourish. The other is controlled by a despotic family that sacrifices its people’s well-being to maintain its grip on power, plunging an entire country into literal and figurative darkness.
Capitalism’s power is unlocked through specialization and comparative advantage, which requires the free trade of goods and services. While this system lowers costs for everyone, it inevitably creates winners and losers. This is the inherent social contract of free trade: to remain politically viable, the immense value it creates must be shared, by supporting the displaced through redistribution and retraining. If that social contract is broken, demagogues will harness the resulting frustration to seize power and wealth for themselves and their cronies.
The case for free trade, however, extends beyond prosperity. Critics who attack it are dismantling more than just an engine of wealth; they are undermining a powerful force for peace. When nations trade, their economies become intertwined, dramatically raising the cost of war. After centuries of bloodshed, Europe—the central battleground for two world wars—was rebuilt on this very principle. The economic integration that created the European Union has resulted in the longest period of sustained peace in the continent’s modern history.
With the last world war having faded from living memory, we risk forgetting that conflict is innate to every species, including our own. Centuries of warfare offer a clear lesson: the surest path to peace is shared prosperity, built on trade. Those who fail to learn from the past are doomed to repeat it.
Equally concerning is the renewed appeal of socialism, particularly among younger generations grappling with economic insecurity (higher unemployment, housing affordability). We want to introduce them to our friends Bogumil and Vitaliy, who grew up behind the Iron Curtain and now live in America. They both lived through the privations of the Soviet Union and are aghast at the romanticization of their former lives. While we are sympathetic to young people’s frustrations, history has delivered a clear verdict on this debate. To paraphrase Sir Winston Churchill:
Capitalism is the worst form of economic system except for all those other forms that have been tried.
One of Democracy’s advantages is its self-correcting mechanism: every few years, citizens can peacefully vote out their leaders when a change is needed. Autocracy, in addition to violating a fundamental law of nature—the universal desire for freedom— is a high-stakes economic gamble. It may occasionally produce a philosopher-king like Marcus Aurelius, but it offers no safety valve when a tyrant like Caligula holds rule. Free and fair elections by an informed citizenry are an important element in the story of human progress.
Yet the liberal world order, which has produced unprecedented prosperity since World War II, is starting to fray. We are witnessing a rising tide of nationalist governments run by strongmen spouting anti-immigrant and racist rhetoric. There is also an increasing tendency for Western governments to embrace state industrial policy.
Despite capitalism’s shortcomings—including the need to address income inequality through taxation and redistribution—there is no viable alternative if we wish to continue on the path of human progress. One must first create wealth before discussing how to redistribute it.
Postscript: For those not yet persuaded, just this morning, the 2025 Nobel Prize in Economics was awarded to three economists for their work explaining how innovation, free trade, and creative destruction drive economic growth.
The laureates’ work has stressed the importance of science-based innovation and a willingness to accept change, even when it has some negative consequences for particular businesses or groups of workers. We should not take progress for granted.
— Nobel Committee for the Prize in Economics
Oh Canada
Closer to home, there has been a clear and accelerating divergence of the Canadian economy from that of our larger neighbour to the south. Canadians and Americans are equally talented and educated. But through a series of poor policy choices (interprovincial trade barriers, excessive immigration), we are stifling our country’s potential. We would also argue that Canada’s protectionist attitude has played a part.
Canada is the land of oligopolies (banking, telecom, airlines, supermarkets) and quotas (dairy, poultry). Our experience trying to move US currency between two Canadian banks this past week was comically painful. Protected industries in Canada are not just trade irritants to our trading partners; they are bad for Canadians. Industry concentration and protectionist measures hurt every Canadian, especially the poor, who pay disproportionately more for basic goods when filling up their shopping baskets.
This retreat into protectionism betrays our own legacy. We are a nation of innovators who gave the world the telephone, insulin, and basketball. We are an educated, peaceful country blessed with abundant resources and favorable geography. Canada’s national balance sheet is in great shape due to decades of fiscal discipline. Government policy should be driven by the courage of what Canada has to offer the world, not by a fear of competition.
While Canada must always stand firm against unfair treatment from any nation, our default stance should be one of openness. We shouldn’t fear a level playing field; we should compete on it, confident in our ability to export Canadian goods and services to the rest of the world.
Let’s encourage the government to get out of the business of running the economy and back to its central role: ensuring the rules are transparent, fair, and applied equally to everyone. It’s time to dismantle the barriers and protectionist policies that shield politically connected industries at the expense of everyone else. When other nations mistreat us, we must respond decisively. Otherwise, we should let the prosperity engine work its magic.
Embracing capitalism’s creative destruction improves our lot. But it does create dislocations, winners and losers. A just society should also be measured by how well it treats its less fortunate. We think that Canada deserves high marks on this front.
Canada gets many things right, and we are proud and blessed to live in this wonderful country. By making a few astute policy changes—choosing courage over fear and competition over protectionism—we can unlock an even brighter future for all Canadians.
Happy Thanksgiving!
Firm Update
We try to practice what we preach at GreensKeeper and are in the process of registering the firm with the US Securities and Exchange Commission (SEC). We hope that more Canadian companies show the world what we have to offer.
We are also in the planning stage for another video town hall taking place next month. If you have any topics that you would like us to address, please send us a note with your questions.
Michael P. McCloskey Michael Van Loon
President, Founder & Associate Portfolio Manager
Chief Investment Officer