Bruce Campbell, president and portfolio manager at StoneCastle Investment Management
FOCUS: Canadian equities
We follow top down economic and market indicators to help us determine if our portfolios are on offence or defence at any given time. Currently the top down economic indicators have been strong and improving. The ISM Manufacturing and ISM Services indices have been good examples of this strength. Both of the ISM indices have been hitting highs last seen over a decade ago. The market isn’t as concerned with the level of the indices as the trend direction of these indices. To track that trend direction we like to watch the Citi Economic Surprise Index (CESI), which we find tends to lead the ISM indices over the shorter term. The CESI is at a level where it looks like the next move could be down from here. If that is the case, the economic numbers could start to show weakness a few months later.
The top down market technical indicators that we follow have been positive now for the last two months. We transitioned our portfolios back to offence with the top down markets changes in September. We continue to see the top down indicators improve on several of the markets' sectors and also market capitalizations. One area we're watching that warrants some caution is the sentiment of investors right now. Sentiment is a contrarian indicator and with many sentiment indicators hitting highs it could mean a short-term pullback is possible.
Each month we host a regular monthly webinar where we update investors on the indicators and whether we are on offence or defence with our portfolios. The next webinar is November 16 at 4:30pm ET. To register contact email@example.com.
Reliq Health Technologies (RHT.V)
The company is a software technology company that provides automated patient monitoring in the home. The company’s technology allows for two-way voice technology to monitor and collect medical records that are transmitted in real time with the patient, family and the care team. The company charges a monthly subscription fee for the service. The company is forecasting profitably in the middle of 2018. Management and insiders own 24 per cent of the company. Last purchase was $0.40.
BeWhere Inc. (BEW.V)
The company is in the asset tracking industry with low powered “beacons” that can be attached to any object that needs to be tracked. Their initial move into the asset tracking sector was via Bluetooth connected devices. Recently they have moved into the low power wide area network (cellular) devices where they have announced partnerships with Bell and Huawei. The cellular devices are just going through final testing and approval with the large USA carriers. Once complete, this will lead to higher company sales as they move towards cash flow break even. Last purchase was $0.30.
StorageVault Canada (SVI.V)
The company operates a coast to coast network or Self-Storage and Portable Storage. They have been growing organically but also consolidating the fragmented industry here in Canada. Since announcing the Sentinel acquisition in May, the share price has pulled back following an equity raise. The integration process is well underway and synergies should start to show in the quarters ahead. Continued M&A is also expected in the months to come. Last purchase was $2.34.
PAST PICKS: NOVEMBER 16, 2016
GRANDE WEST TRANSPORTATION (BUS.V)
- Then: $1.39
- Now: $2.67
- Return: 92.08%
- Total return: 92.08%
CRH MEDICAL (CRH.TO)
- Then: $7.39
- Now: $2.18
- Return: -70.50%
- Total return: -70.50%
PREMIUM BRAND HOLDINGS (PBH.TO)
- Then: $67.33
- Now: $102.84
- Return: 52.74%
- Total return: 55.75%
TOTAL RETURN AVERAGE: 25.77%
Redwood Equity Growth Fund
Performance as of: November 6, 2017
Year to date: 18.63% fund, 5.26% index
1 Year: 33.92% fund, 9.82% index
5 Year: 13.56% fund, 5.42% index
*Index: S&P/TSX Composite Index
**Returns include all distributions and are net of fees
TOP HOLDINGS AND WEIGHTINGS
- Cash: 11.96%
- Canntrust Holdings: 3.18%
- Calfrac Well Services: 2.62%
- Yangarra Resources: 2.61%
- StorageVault Canada: 2.58%