Bruce Campbell, president and portfolio manager, StoneCastle Investment Management

FOCUS: Canadian Stocks

MARKET OUTLOOK:

September has been a challenging month for the markets on top of a challenging year. Bond yields have moved straight up while equity markets have moved straight down. Investors are nervous and fearful of what the future holds.

Central banks around the world continue to be taking a tough stance on inflation by increasing interest rates. Inflation is showing the early signs of moderating, but it will take more time before we know for sure how fast it will drop.  While this is happening, investors are nervous that central banks are increasing rates into a slowing economy, and this could create a recession instead of a soft landing.

In times like this it can be useful to zoom out and remove some of the emotion out of investing.  Longer term indicators that we follow are showing some interesting relative relationships. The U.S. dollar, small-, mid-, and large-cap relationships, as well as fixed income to equity relationships, are all showing momentum changes. These do not mean that we are out of the woods, but they do show new trends emerging.

• Sign up for the Market Call Top Picks newsletter at bnnbloomberg.ca/subscribe
• Listen to the Market Call podcast on iHeart, or wherever you get your podcasts

TOP PICKS:

Converge Technology Solutions (CTS TSX)

Converge Technology is a cloud software and IT provider delivering solutions to mid market customers.  CTS has been growing via acquisition, and organically, with compounded revenue growth of 49 per cent and compounded EBITDA growth of 79 per cent over the last three years. The company continues to expand to new areas via acquisition and trades at a reasonable multiple.  Our last purchase was $7.05. 

Jushi Holdings (JUSH.CSE)

Jushi is a Multi State Operator (MSO) in the U.S. cannabis Industry. They are a vertically integrated MSO with operations in seven U.S. States.  The company has been growing organically and via acquisition.  Our last purchase was $2.60. 

Viemed Healthcare (VMD TSX)

Viemed is in the home based healthcare sector focusing on respiratory care and disease management.  The company has been growing revenue at a compounded rate of 40 per cent since 2010.  The last quarter was weaker from an EBITDA standpoint as they expanded the workforce to increase revenue.  We expect the EBITDA margin to normalize in the quarters to come.  Our last purchase was $6.81.