Bruce Campbell's Top Picks
Bruce Campbell, president and portfolio manager, StoneCastle Investment Management
FOCUS: Canadian stocks
Markets continue to face multiple headwinds that have investors nervous. High Inflation, geopolitical conflict, an inverted yield curve, fear of a recession and a U.S. Federal Reserve intent on eliminating inflation by aggressively raising rates are some of the fears facing investors.
Multiple sentiment indicators are hitting levels last seen at the market’s lows during the COVID crash, great financial crisis and the savings and loan crisis. The economy continues to be stronger than any of those previous lows, but markets continue to have lots to be worried about.
During all the uncertainty, we have started to see some positive improvements under the surface. The relationship between high yield bonds and government bonds continues to improve in favour of high yield bonds. Investors may be concerned about inflation and higher rates, but they do not appear to be concerned about credit quality.
Many small and mid cap indices that started their correction in Q1 2021 are now showing relative strength vs. large cap indices. Broad indices such as the NYSE Composite Index or the S&P Completion Index are both showing signs of improvements and strengthening in relative strength.
We have not seen enough of the indicators we follow switch to positive, giving us an the “all clear” signal, but our models are moving to neutral offense from neutral. We continue to see opportunities in areas where company’s share prices have declined dramatically while their underlying business have continued to improve.
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Avanti is a helium exploration company focused in Alberta and Montana. The company is led by experienced oil and gas veterans. The long-term demand for helium continues to increase while the global supply is being disrupted. AVN has drilled their first wells which produced strong results giving the company confidence to move forward with a processing unit. The company is funded to drill several more wells in the area which will build out their helium reserves. Last purchase was $1.07. , funds own, I own it personally, and by my family owns it. (NOTE: this is normally formatted as a bullet, but not sure how it should look with other points. A: this last sentence looks like its mainly for the chase producer so they can fill out the disclosure board below. Just remove it.)
SGMD is in the post-operative medical device market primarily in the USA. The company is led by experienced industry veterans who have built and successfully exited a prior company in the same market segment. The company has been growing via acquisition and organically and trades at a 1.2x sales multiple vs. peers in the 4-6x sales. Last purchase was $0.96. funds own, I own it personally, and my family owns it.
XBC is a global provider of clean energy solutions for renewable and low carbon gases. Twenty six countries have policy or proposed legislation to achieve carbon neutrality and XBC designs and sells the systems to achieve the goals. At the company’s investor day in March, management released a strategic plan for a projected 40 per cent CAGR by the end of 2024. Following the investor day, XBC announced the largest contract in company history. Last purchase was $2.30. funds own, none owned personally, and none owned by my family.
PAST PICKS: May 11, 2021
Skylight Health Group (SLHG TSXV)
- Then: $1.49
- Now: $1.08
- Return: -86%
- Total Return: -86%
Converge Technology Solutions (CTS TSX)
- Then: $7.18
- Now: $9.10
- Return: 27%
- Total Return: 27%
Amerigo Resources (ARG TSX)
- Then: $1.60
- Now: $1.71
- Return: 7%
- Total Return: 10%
Total Return Average: -16%