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

MARKET OUTLOOK

We follow top-down economic and market indicators to help us to determine if our portfolios are on offence or defence at any given time.

The top-down economic indicators were strong during the entire market correction last fall. Only a select few indicators (like the Chemical Activity Barometer) have shown some weakness over the last few months. We analyze the economic indicators using technical analysis on a short- and intermediate-term basis. One of the short-term indicators we track is the Citi Economic Surprise Index (CESI). Lately, we’ve started to see the technical indicator on the CESI bottom and improve. This signals that economists may be a little pessimistic with economic forecasts and economic numbers may surprise to the upside.

Our top-down technical indicators had us in neutral since last summer. We held a cash reserve during the correction last fall. In the last two weeks we’ve started to see improvements in the technical indicators and as a result we’ve stated to build our shopping list and put some of the cash reserve back to work in select areas.

TOP PICKS

PROTECH HOME MEDICAL (PTQ.V)

Protech sells hardware and supplies for home healthcare. Ventilation, oxygen, sleep therapy and mobility are their key markets. The company recently released Q4 results that were excellent. Management is focused on margin expansion along with growing by acquisition and organically. Management has done an excellent job turning around the company and focusing on growth. The stock trades at the low end of its peer group and analysts have been bumping up target prices following the earnings release. Last purchase was $0.60.

WESDOME GOLD MINES (WDO.TO)

Wesdome is an emerging mid-tier gold miner with three projects in Canada. Wesdome has been the darling of the markets the past year as they’ve increased production and guidance of their Eagle mine. The company has reinvented themselves in the last few years to focus more on exploration and production at the mines. There should be several catalysts this year as they move towards a new reserve assessment and production decision for their Kiena mine in Val’d’or. The last purchase was $4.93.

C21 INVESTMENTS (CXXI.CD)

C21 recently closed a transformational acquisition of Silver State Releaf in Nevada. The Nevada operation is cash-flow positive, which can be used to continue to expand as they just did with the opening their Fernley dispensary. Management is projecting 2019 sales of $75 million and cash flow of $12 million. The stock could trade at three to five times sales and still trade at a discount to peers. Last purchase was $0.80.

 

DISCLOSURE PERSONAL FAMILY PORTFOLIO/FUND
PTQ Y N Y
WDO N N Y
CXXI N N Y

 

PAST PICKS: JAN. 24, 2018

INDIVA (NDVA.V)

  • Then: $1.18
  • Now: $0.55
  • Return: -53%
  • Total return: -53%

KINAXIS (KXS.TO)

  • Then: $85.12
  • Now: $77.02
  • Return: -10%
  • Total return: -10%

GRANDE WEST TRANSPORTATION (BUS.V)

  • Then: $2.15
  • Now: $0.72
  • Return: -67%
  • Total return: -67%

Total return average: -43%

 

DISCLOSURE PERSONAL FAMILY PORTFOLIO/FUND
NDVA N N Y
KXS N N N
BUS N N N

 

FUND PROFILE

Purpose Canadian Equity Growth Fund
Performance as of: Jan. 29, 2019

  • Year-to-date: 10.1% fund, 7.5% index
  • 1 year: -11.6% fund, -1.5% index
  • 5 years: 9.1% fund, 5.5% index

INDEX: TSX Composite Index Total Return.
Returns include are net of dividends, net of fees and annualized.

TOP 5 HOLDINGS

  1. Cash: 21.2%
  2. Cannex Capital: 4.94%
  3. Protech Home Medical: 4.71%
  4. Valens Groworks: 3.25%
  5. Planet 13 Holdings: 2.88%

WEBSITE: stonecastlefunds.ca
TWITTER: @sc_funds