James Hodgins, president and chief investment officer at Curvature Hedge Strategies
Focus: Small- and mid-cap stocks

MARKET OUTLOOK

We believe this year-end meltup is the end of the 10-year bull market in equities. It reminds us of the Y2K liquidity injections from Alan Greenspan's Fed following the dot-com bubble. On most cyclically-adjusted measures like Tobin's q or price-to-book value, equities are now the most expensive in history. Furthermore, we see a very rare termination pattern in equity markets called by technician George Lindsay the “three peaks and a domed house.” This pattern is evident at other market extremes, including in 1929 and 2000. We would use every opportunity to raise cash and even short equities here to survive the coming bust. Our only exceptions to this are the most oversold equities for a tax-loss reversion trade.

TOP PICKS

James Hodgins' Top Picks

James Hodgins, president and CIO at Curvature Hedge Strategies, shares his top picks: Cipher Pharmaceuticals, Turquoise Hill Resources and Lundin Gold.

CIPHER PHARMACEUTICALS (CPH:CT)

Cipher is currently undergoing a strategic review that we believe will either unlock substantial value in the company or result in a takeover. We value Cipher at more than three times the current stock price based upon the sum of the parts of its Canadian pharma portfolio, the lifetime Absorica royalty deal with Sun Pharma, and significant tax-loss carryforwards from the Cardiome takeover. Even without a takeover, we see significant potential upside from reversion of tax-loss selling in the name.

TURQUOISE HILL (TRQ:CT)

LUNDIN GOLD (LUG:CT)

Given the Fed's liquidity binge, we feel junior gold miners have significant near-term upside. Our current favorite is Lundin Gold, which also has the near-term catalyst of commercial deliveries beginning this month. We also believe there is significant upside to the valuation, as the original mine plan was scaled down significantly. Lundin's Fruta del Norte mine may be the highest-quality gold asset in production in the world now and should get a significant re-rating in the near term. Our upside target is $12.

 

DISCLOSURE PERSONAL FAMILY PORTFOLIO/FUND
CPH N N Y
TRQ N N Y
LUG N N N

 

PAST PICKS: DEC. 20, 2018

James Hodgins' Past Picks

James Hodgins, president and CIO at Curvature Hedge Strategies, reviews his past picks: Leucrotta Exploration, MAG Silver and Cipher Pharmaceuticals.

LEUCROTTA EXPLORATION (LXE:CV)

  • Then: $0.88
  • Now: $0.74
  • Return: -16%
  • Total return: -16%

MAG SILVER (MAG:CT)

  • Then: $9.66
  • Now: $15.55
  • Return: 61%
  • Total return: 62%

CIPHER PHARMACEUTICALS (CPH:CT)

  • Then: $1.69
  • Now: $1.01
  • Return: -40%
  • Total return: -40%

Total return average: 2%

 

DISCLOSURE PERSONAL FAMILY PORTFOLIO/FUND
LXE N N N
MAG N N Y
CPH N N Y