Bruce Campbell, president and portfolio manager at StoneCastle Investment Management
Focus: Canadian stocks

MARKET OUTLOOK

Over the last two months, we have seen the COVID-19 crisis turn both the economic and technical data upside down. The economic data has in many cases been showing the worst rates of decline in history. The challenge assessing the data is the rate of decline measured against the potential rate of recovery on the other side. We will continue to monitor the data as we return from the lockdown to look for trends. There will be areas that emerge with stronger-than-expected and slower-than-expected rates of change. This will be important for sector- and company-specific investment allocation. Opportunities will exist where the rates of change are outside consensus.

During March, market technicals dropped to rarely seen oversold levels. This historically fast and far sell-off pushed technical indicators to extreme levels. Now opportunities will be created identifying the fast areas of recovery. The short-term indicators are getting better, while the medium- and long-term indicators are showing first signs of improvement. It’s in the medium and long term where we want to watch to exploit opportunities. As different companies and sectors are able to adapt and emerge, we will identify pockets of strength in the future.

Economic and market technicals are moving very quickly right now. Opportunities will be created by staying on top of the data’s rate of change. Each month, we review the economic and technical indicators and look for opportunities for investors in our webinar series. To receive an invite to the webinar, send us an email at info@stonecastlefunds.ca.

TOP PICKS

CLOUDMD SOFTWARE (DOC CSX)

CloudMD provides digital delivery of healthcare to patients via smartphone or computer. The company is benefitting from the COVID-19 crisis as patients are reluctant to enter doctors’ offices and as a result, provinces have opened up billing codes so doctors can be reimbursed for digital appointments. The stock trades at a fraction of the multiple of peer companies in the U.S. Last purchase was $0.45.

LIGHTSPEED  LSPD TSX)

Lightspeed is a cloud-based provider of point-of-sale solutions to retail and hospitality. The company has had strong organic growth (40 per cent annually) but COVID-19 has had an impact which creates an opportunity both for the company and for an investor. The company recently raised money and has a strong balance sheet to capitalize on the crisis. Last purchase was $12.56.

VIEMED HEALTHCARE (VMD TSXV)

Viemed provides non-invasive ventilators for patients released from hospitals. This is another company that could benefit from COVID-19. 2020 growth is estimated to be 30 per cent while trading at attractive multiples of less than eight times EV/EBITDA. Last purchase was $8.33.

PAST PICKS: APRIL 4, 2019

ICC INTERNATIONAL CANNABIS (WRLD/U CSX)
Voluntary delisting on Dec. 20, 2019.

• Then: $0.35
• Dec. 20, 2019: $0.02
• Return: -94%
• Total return: -94%

PARK LAWN CORPORATION (PLC TSX)

• Then: $25.58
• Now: $22.03
• Return: -14%
• Total return: -12%

META GROWTH CORP (META TSXV)
Formerly listed as National Access Cannabis Corp.

• Then: $0.98
• Now: $0.10
• Return: -90%
• Total return: -90%

Total return average: -65%

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