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

MARKET OUTLOOK

Market volatility has dropped significantly over the last two months, but uncertainty remains extremely high. Investors appear to have strong conviction on the market’s future direction but are often coming from opposite viewpoints. Some investors feel the market will drop with continued economic weakness, while other investors feel the market can look past the economic valley to better times ahead. A third group of investors sit frozen with uncertainty, concerned they could make the wrong decision on the future of the market’s direction. 

The top-down economic data does show a negative picture, but bulls look at the data and see improvement off the March levels. Concerns of a COVID-19 resurgence raise the alarm warnings about a second slowdown for the bears. Investors will have to carefully analyze the data to see the trend’s direction as well the rate of change. Fortunately, we use top-down indicators that help us to guide our process to determine if our portfolios are on offence or defence.  

Discounting the economic data, technical data is improving and continues to show the market looking beyond the valley. Record levels of stimulus from governments and central banks can’t be ignored for the market’s strong rebound while economic data has been weak. We have seen several market technical indicators provide rare positive signals only seen a few times in the last decade. As a result, we have our portfolios positioned on offence. We will carefully watch the economic data combined with the market technical data for any signs of a change that would move our portfolios back to defence. 

We review the top-down economic and market technical indicators each month during a webinar.  The next webinar is scheduled for July 9.  To receive an invitation to the webinar, please send an email to mailto:info@stonecastlefunds.ca and we will add your email to our invite list.

TOP PICKS

GR SILVER (GRSL TSX)

GR Silver is exploring for silver in a historic Mexican mining district. The company has successfully discovered 39 million ounce resources over the last couple years and trades at a discount to peers with similar sized reserves. GR Silver recently acquired a previously mined property that comes with 500 drill holes that have not been publicly reported from First Majestic Silver. They will continue to release results from drilling as they prove out a larger resource.  Last purchase was $0.27.

TOUCHSTONE EXPLORATION (TXP TSXV)

Touchstone operates and explores in Trinidad. The company operates existing facilities and continues to drill three new areas onshore in Trinidad. We anticipate further wells to be drilled and results released on those well over the next two quarters. The company has been 10 years in the making, but just starting to gain more exposure from investors.  The last purchase was $0.93.

PROTECH HOME MEDICAL (PTQ TSXV)

Protech is focused on the home healthcare sector providing ventilation, oxygen, sleep apnea and mobility equipment. The company is benefiting as in-home healthcare has been increasing. The company has been growing organically and via acquisition and the stock trades at a significant discount to peers. They have recently completed a financing which should allow the company to accelerate M&A activity with accretive acquisitions. Stock trades at a discount to peers.  Last purchase was $1.15.

PAST PICKS

INDUS HOLDINGS (INDS CNSX)

• Then: $6.97
• Now: $0.65
• Return: -91%
• Total return: 91%

KIRKLAND LAKE GOLD (KL TSX)

• Then: $55.74
• Now: $56.56
• Return: 1%
• Total return: 2%

HERITAGE CANNABIS (CANN CNSX)

• Then: $0.44
• Now: $0.13
• Return: -70%
• Total return: -70%

Total return average: -53%