Bruce Campbell's Top Picks
Bruce Campbell, president and portfolio manager at StoneCastle Investment Management
FOCUS: Canadian stocks
Markets hit new all-time highs in January and with those highs sentiment was pushed to excessive extremes. When this happens the market often has a reset to shake out weaker investors and that is what we have seen over the last week. Sentiment has corrected but has not swung to the pessimistic side yet. Sentiment cannot be used as a market timing tool but after the uptrend that started in October coupled with investors’ expectations and February seasonality, we would not be surprised if we continue to see volatility over the next few weeks.
We have been experiencing some significant changes in our Asset Leadership Model with respect to fixed income and equities. We have also experienced some significant changes in relative relationships between global indices and fixed income. These are long term trend changes that we last saw go from negative to positive back in 2017. We continue to experience sector rotation with several leading sectors showing slowing momentum while new sectors are picking up money flow. Value and growth continue to change relative strength leadership roles and it appears we are starting another change.
We review the top-down indicators and assess the sector rotation in our monthly webinars. The next webinar is scheduled for February 16, 2021. To receive an invitation to the webinar, please send an email to email@example.com and we will add your email to our invite list.
Good Natured Products (GDNP TSXV): Good Natured Products is a North American leader in plant-based packaging products. The management team has been methodically building their platform to grow organically and by acquisition. They have experienced 50 per cent organic and acquisition growth over the last year. Their strategy is to make acquisitions and then pursue cross selling and conversion opportunities for organic growth. Analysts expect further acquisition and organic growth in the year to come that will drive positive EBITDA. Last purchase was at $1.04.
Kwesst Micro Systems (KWE TSXV): Kwesst Micro Systems is a technology company in the global defence industry, focused on the networked soldier. Their signature technology is the Tactical Awareness and Situational Control System (TASCS). This is an app-based technology that allows for real time situational awareness for the soldier in the battlefield. Led by industry veterans with deep connections, the company is expecting several contracts for their technology in the coming year. Last purchase was at $1.50.
Viemed Healthcare (VMD TSX): Viemed provides home therapy to assist with respiratory disease to help patients transition from the hospital to home. The stock has recently pulled back due to slower growth because of limited access to hospitals due to CV-19. The company continues to evaluate acquisition opportunities to expand geographic area and product diversification. The stock trades at a reasonable valuation of 8 times 2021 EBITDA forecasts. The last purchase was at $11.52.
PAST PICKS: February 13, 2020
Greenlane Renewables (GRN TSXV)
- Then: $0.73
- Now: $2.43
- Return: 233%
- Total Return: 233%
Premium Brands Holdings (PBH TSX)
- Then: $101.35
- Now: $107.66
- Return: 6%
- Total Return: 9%
Lightspeed POS (LSPD TSX)
- Then: $40.18
- Now: $92.99
- Return: 131%
- Total Return: 131%
Total Return Average: 124%
Company Twitter handle:@sc_funds
Company website: www.stonecastlefunds.ca