Full episode: Market Call for Friday, June 15, 2018
Frank Mersch, chief strategist at Jemekk Capital Management
Focus: North American equities
While we’re long in the tooth for these markets we do believe, that barring any unforeseen events, the market still has further upside. Second-quarter earnings are likely to be strong with a late-cycle push from technology, industrials, energy and financials. The CRB is breaking out, as has the market generally. While volatility is likely to be elevated, the direction for the economy and the markets is still up. Trade concerns will remain, and Trump hasn’t yet completed all of his agenda and promises. The potential for a melt up is still in the cards.
THE STARS GROUP (TSGI.TO)
The Stars Group is the largest online gaming stock in the world across poker, casino, and sports betting.
It’s a momentum stock that has already had a stellar year to date. With the legalization of sports betting in the U.S., however, we believe the company is well positioned to take advantage of this opportunity. Sports betting is bigger than cannabis.
The recent acquisitions of Sky Betting and Gaming uniquely positions the company to benefit from recent court rulings in the U.S. to legalize gaming across the states.
The integration of recent acquisitions is set to lead to massive synergies.
A value play despite trade tariffs, we believe Stelco will benefit from higher steel prices. Just as we have seen our lumber stocks rocket, the same could happen to Stelco.
Stelco recently emerged from bankruptcy proceedings as one of North America’s leading integrated steel producers of premium-quality coated, cold and hot rolled steel products
The company has significantly improved its balance sheet (they’re essentially debt-free), pension obligations (it transferred pension and OPEB liabilities to a third-party trust) and negotiated friendly union contracts for the short- to mid-term.
The company is very reasonably valued and it’s now refocused on growth through reestablishing contracts with old customers (autos), introducing new products and inorganic growth through acquisitions.
CES ENERGY SOLUTIONS (CEU.TO)
A contrarian play, while recent concerns of takeaway capacity in the Permian basin have created a cloud over the frackers and their counterparts. We believe the recent margin contraction is temporary. The company has won market share and prices are expected to rebound in the second half.
The Jemekk Hedge Fund seeks to provide long-term capital growth by investing primarily in Canadian and U.S. equities, and may focus its assets in specific industry sectors and asset classes based on analysis of business cycles, industry sectors and market outlook. The fund will seek growth through strategic selection and trading of long and short positions in equity, debt and derivative securities.
Performance as of May 31, 2018
- 1 Month: 0.35% fund, 3.12% index
- 1 Year: -0.23% fund, 7.75% index
- 3 Year: 0.06% fund, 5.36% index
* Index: S&P/TSX.
* Returns provided are net of fees.
TOP 5 EQUITY HOLDINGS BY WEIGHT
- Shopify Inc.
- Stelco Inc.
- Air Canada
- Boyd Group Income Fund
- Brookfield Business Partners L.P.