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

MARKET OUTLOOK

The initial selloff in what I believe is a new bear market in risk assets may be behind us, but equities remain 30 to 50 per cent overvalued using many long-term cyclical valuation measures. We continue to believe the prudent action is to sell rallies rather than buy dips — at least until central banks are clearly committed to reflating the bubble again.

TOP PICKS

LEUCROTTA EXPLORATION (LXE.V)

Leucrotta is our favourite contrarian tax-loss pick in the Canadian oil patch. We look at the company on the basis of its asset value per section; even at today's lower commodity price deck, we believe that their 220 net Montney sections are worth over $2 on a risked basis, and over $4 on an eventual de-risked basis. They have a pristine balance sheet, which means they have the ability to wait out the downturn. Our one-year target is $2.40, but we could see $3 to $5 should Canadian energy come back into favour. 

CHORUS AVIATION (CHR.TO)

The new capacity purchase deal and $100 million investment from Air Canada should remove the severe discount on Chorus’ shares. We see upside to between $10 and $12 in addition to a very stable 7 per cent dividend yield.

B2GOLD CORP (BTO.TO)

With takeover fever hitting the precious metals sector, this is our favourite takeover pick. As with his original Bema Gold stake, we believe Clive Johnson is clearly going to exit his B2 position in a sale. B2's high-quality assets should attract multiple bidders from seniors looking to replace production growth. We see upside to between $5 and $6 on a takeover potential basis. 

 

DISCLOSURE PERSONAL FAMILY PORTFOLIO/FUND
LXE N N Y
CHR N N Y
BTO N N Y

 

PAST PICKS: MARCH 26, 2018

CIPHER PHARMACEUTICALS (CPH.TO)

  • Then: $4.15
  • Now: $1.89
  • Return: -54%
  • Total return: -54%

TERAGO (TGO.V)

  • Then: $5.60
  • Now: $11.01
  • Return: 97%
  • Total return: 97%

LEUCROTTA EXPLORATION (LXE.V)

  • Then: $1.60
  • Now: $1.12
  • Return: -30%
  • Total return: -30%

Total return average: 4%

 

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

 

FUND PROFILE

Curvature Fund LP
Performance as of: Dec. 31, 2018

  • 1 month: 0.25% fund, -5.76% index
  • 1 year: -6.45% fund, -11.64% index
  • 3 years: -1.26% fund, 3.26% index

INDEX: S&P/TSX Composite.
Returns are net of fees and three-year returns are annualized.

TOP 5 HOLDINGS

  1. Parex Resources (PXT.TO): 2.96%
  2. Gran Tierra Energy 5% 04/21 (GTE 5 04/21 BOND): 2.03%
  3. Leucrotta Exploration (LXE.TO): 1.95%
  4. Transalta Corp (TA.TO): 1.92%
  5. Alimentation Couche-Tard (ATDb.TO): 1.62%

WEBSITE: curvaturehedge.com