Bruce Campbell's Top Picks
Bruce Campbell, president and portfolio manager at StoneCastle Investment Management
FOCUS: Canadian stocks
The S&P 500 and S&P/TSX are both at all-time highs and participation of individual stocks has been record-breaking. According to Sentimentrader.com April was the best month in history when 95 per cent of stocks in the S&P 500 traded above their 200-day moving average for a total of 18 days.
In mid-April and following into May, we have been experiencing a considerable amount of sector rotation under the surface. The commodity and financial sectors have accelerated while Technology has been flat. This can be attributed to the U.S. dollar dropping in relation to other currencies. The move of the last two weeks has pushed sentiment to an extreme level at the same time the commodity complex has experienced strong performance. We would not be surprised to see a pause in the commodity move while sentiment and expectations get reset before an extended uptrend in the commodity complex re-starts. We feel we could be entering a multiple year period where the commodity heavy S&P/TSX outperforms the S&P 500.
Our Asset Leadership Model continues to favour domestic and international equities over cash or fixed income. We have seen gold and gold mining shares re-acceleration in the last six weeks to join the other commodity related sectors which have had strong performance. Technology and Canadian healthcare have been laggards over the same timeframe. We continue to see new trends emerging and will review the top-down indicators and assess the sector rotation in our monthly webinar. The next webinar is scheduled for May 18, 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.
Skylight Health Group operates a multi-state health network delivering a full range of services. The company has been growing via acquisition and organically and will exit 2021 with run rate revenue of between $70 and $100 million while being EBITDA and is cash flow positive. They have a strong balance sheet with multiple near-term catalysts. The stock trades at a significant discount to U.S. listed peers. Last purchase was $1.00, funds own, own personally and my family owns.
Converge Technology Solutions is building a North American IT Infrastructure firm delivering cloud, cybersecurity, and managed solutions. They have been growing organically and via acquisition (19 since 2017). Stock is undervalued at 7.5 times next year’s EBITDA vs peers at 13 times. Last purchase was $6.49, funds own, but none personally or none by my family.
Amerigo Resources is a copper producer in Chile. This is not your typical miner but rather they process tailings from the world’s largest copper mine. The company has high leverage to copper prices, when copper prices increase by 10 per cent it produces an additional $6.2 million revenue. ARG is underfollowed by the street and has upside in the copper cycle. Last purchase was $1.49, funds own, none owned personally, and none owned by my family.
PAST PICKS: May 27, 2020
Engine Media Holdings (GAME TSXV) - 1:15 stock split August 13, 2020
- Then: $12.15
- Now: $10.50
- Return: -14%
- Total Return: -14%
Xebec Adsorption (XBC TSXV)
- Then: $3.79
- Now: $4.05
- Return: +7%
- Total Return: +7%
Protech Home Medical (PTQ TSXV)
- Then: $1.17
- Now: $1.93
- Return: +65%
- Total Return: +65%
Total Return Average: +19%
Company Twitter Handle: @sc_funds
Company Website: www.stonecastlefunds.ca