Bruce Campbell, president and portfolio manager at StoneCastle Investment Management

FOCUS: Canadian stocks

MARKET OUTLOOK:

Halfway through 2021 and we are seeing one of the lowest correlations between growth and value stocks since 1993. With markets hitting all-time highs, it has not been as easy for investors as the indices would lead you to believe.

2021 has been a year of sector rotation and as we approach Q3 it appears that rotation is heading in another new direction.  

Our Asset Leadership Model continues to favour domestic and international equities over cash or fixed income. Economically we continue to see strong and improving numbers in both Canada and the U.S. 

Coming off a strong performance last year, the technology sector came into 2021 as the leader but then momentum slowed while “value” stocks took the lead for much of Q2. Technology now appears to be re-accelerating along with the healthcare sector including cannabis. Precious and base metal mining shares re-accelerated in Q2 but appear to be giving up relative strength heading into Q3. 

We review all of the top-down indicators and assess the sector rotation each month during our monthly webinar. The next webinar is scheduled for July 13, 2021.  To receive an invitation to the webinar, please send an email to info@stonecastlefunds.ca and we will add your email to our invite list.     

TOP PICKS:

Bruce Campbell's Top Picks

Bruce Campbell, president and portfolio manager at StoneCastle Investment Management, discusses his top picks: CloudMD Software, Salona Global Medical Devices, GreenPower Motor Company.

CloudMD Software (DOC TSXV) is a technology driven healthcare operator delivering healthcare solutions through primary care clinics, digital platforms and artificial intelligence. The company has grown revenue at over 100 per cent via acquisition and organically. The stock trades at 2.4 times sales, which is a significant discount to U.S., peers at 5.9 times revenue. Last purchase was $1.97, funds own, none owned personally and none owned by my family.

Salona Global Medical Devices (SGMD TSXV) is in the $30 billion medical device market specializing in non-surgical products. Management is experienced with past success in the industry building their previous company organically and via acquisition before a public take out. We estimate they could exit 2021 with $55 million in revenue. Comparable companies trade at 4-18 times revenue. The stock is undervalued at 1.2 times revenue. The stock should appreciate significantly with both revenue growth and multiple expansion. Last purchase was $0.90, funds own personally and owned by my family.

GreenPower Motor Company (GPV TSXV) builds purpose built, battery electric vehicles including passenger transportation, cargo delivery and zero-emission school buses. GreenPower Motor Company has a partnership with Momentum Dynamics for wireless charging, Perrone Robotics for Autonomous driving and Forest River for vehicle delivery. The company’s current run rate revenue based on current production is $75 million. We anticipate the company will be cash flow positive this quarter or next which should garner more U.S. investor’s attention after this year’s NASDAQ listing. Last purchase was $22.88, funds own, none owned personally, and none owned by my family. 

 

DISCLOSURE PERSONAL FAMILY PORTFOLIO/FUND
DOC TSXV  N  N  Y 
 SGMD TSXV Y  Y  Y 
 GPV TSXV N  N  Y 

 

PAST PICKS: July 2, 2020

GR Silver Mining (GRSL TSXV)

  • Then: $0.60
  • Now: $0.59
  • Return:  -2%
  • Total Return: -2%

Touchstone Exploration (TXP TSX)

  • Then: $ 0.91
  • Now: $ 1.37
  • Return: 51%
  • Total Return: 51%

Quipt Home Medical (QIPT TSXV) Formerly Protech Home Medical

  • Then: $1.12
  • Now: $7.70
  • Return: 72%
  • Total Return: 72%

Total Return Average: 40%

 

DISCLOSURE PERSONAL FAMILY PORTFOLIO/FUND
 GRSL TSXV Y  Y  Y 
 TXP TSX N  N  N 
 QIPT TSXV N  N  Y 

 

Company Twitter Handle: @sc_funds

Company Website: www.stonecastlefunds.ca