Benj Gallander, President, Contra The Heard Investment Letter

FOCUS: Contrarian Investing

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MARKET OUTLOOK:

I will suggest with at least 90 per cent probability that there will be a housing bust before the end of 2018. Given that the government is acting like we are in a recession already and has used many of the policies in the tool kit to ward off deeper problems, there will be less ammunition to deal with upcoming difficulties. Studying the problem to death as they like to do will not help. Naturally, if there is a major downturn this will hurt the Canadian stock market.

Top Picks:

United Security Bancshares (USBI.C) 2015 - $8.32

This Alabama based bank has excellent capitalization ratios, is profitable and pays a dividend. Insiders own almost 8 per cent and trades at about two-thirds of book value. It has traded at over $33 in the past and a triple from the current trading price would not be a surprise.

Innodata (INOD.O)2015 - $2.21

This is my second time that I have owned this stock. The first time it was bought at $2.50 and sold at $6.44 around a year later. The balance sheet features a reasonable amount of cash and nominal debt. Insiders own about 5 per cent.

Reitmans (RET.TO) 2016 - $3.81

By many metrics except the bottom line and margins, Reitmans is doing well. Same stores sales are up, there is lots of money in the bank and the dividend remains a nickel a quarter. However, black ink for this retailer that has been closing stores remains elusive. There is almost zero debt.

Past Picks:  June 19, 2015

Extendicare  (EXE.TO)

• Then: $7.52
• Now: $8.18
• Return: +8.78%
• TR: +15.49%

Orvana Minerals (ORV.TO)

• Then: $0.29
• Now: $0.20
• Return: -31.03%
• TR: -31.03%

United Security Bancshares (USBI.C)

• Then: $8.25
• Now: $8.69
• Return: +5.33%
• TR: +6.31%

Total Return Average: -3.08%

Website: www.contratheheard.com