Benj Gallander, president of Contra The Heard Investment Letter
Focus: Contrarian investing

MARKET OUTLOOK

A decade ago, a huge swath of the population was afraid to invest in the stock market. Effectively that was the time to buy in, when the blood was running in the streets. With markets near record highs, investors are more likely to chase the Joneses. Meanwhile, there are far more danger signs. It’s a good time for investors to be wary.

TOP PICKS

BLACK DIAMOND GROUP (BDI.TO)
Initial sell target: $10.24.

This provider of modular workforce accommodation and workspace is growing again after a major retrenchment when oil and gas prices hit their nadir. Debt has been slashed. The company is still not profitable and black ink is necessary for the stock price to cruise forward. Restoration of the dividend would also help, although this is not imminent.

STUART OLSEN (SOX.TO)
Initial sell target: $14.54.

Stuart Olsen slashed its dividend in half as revenues dropped. They’re expected to drop further this quarter, possibly negatively impacting the stock price further. Management, however, forecasts that there will be a rebound later this year.

FIRST US BANCSHARES (FUSB.O)
Initial sell target: $23.44.

First US Bancshares is a small bank, with the vast majority of its branches in Alabama. The recent takeover of the Peoples Bank is boosting revenue and the bottom line. The dividend of better than 25 cents per quarter prior to the recession was eliminated. Restored in 2014 after three years, it’s currently 2 cents per quarter and likely to grow.

PAST PICKS: APRIL 18, 2018

GMP CAPITAL (GMP.TO)

• Then: $3.06
• Now: $2.08
• Return: -32%
• Total return: -28%

OBSIDIAN ENERGY (OBE.TO)
Sold at $0.46.

• Then: $1.44
• Now: $0.51
• Return: -65%
• Total return: -65%

CATHEDRAL ENERGY (CET.TO)

• Then: $1.60
• Now: $0.76
• Return: -53%
• Total return: -53%

Total return average: -49%