Full episode: Market Call for Friday, May 31, 2019
James Hodgins, president and chief investment officer at Curvature Hedge Strategies
Focus: Small- and mid-cap stocks
I believe the great bull market from March 2009 is now over. Bond markets around the world are now inverted and pointing to a global recession exacerbated by trade wars. We believe that to get back to "normal" long-term valuation metrics, equities will fall up to 60 per cent over the next two or three years in real terms. Further, aggressive central bank intervention is likely to underpin a new bull market in precious metals and perhaps cryptocurrencies as well.
BAYLIN TECHNOLOGIES (BYL.TO)
Baylin's ground antennas business has a new growth driver in small cell (LTE+) densification. This is a huge opportunity with a massive spend cycle for its blue chip clients, including AT&T and Verizon, through 2025. We believe Baylin is uniquely positioned to take advantage of the opportunity in 5G, which will require five times the location density of 4G. Baylin is trading at 7.8 times 2019 enterprise value to earnings before interest, tax, depreciation and amortization (EV/EBITDA) versus comparables at 11 times with a business that’s growing at about 20 per cent compound annual growth rate (CAGR).
SILVERCREST METALS (SIL.V)
At the end of cycles, as central banks move from tightening to easing, we believe precious metals will outperform the rest of the market. Also, SilverCrest is trading at historical lows relative to gold. In addition to these macro tailwinds, the company has one of the highest grade exploration projects in the world and is a prime takeover candidate.
KNIGHT THERAPEUTICS (GUD.TO)
Interestingly, Knight is trading now at just 1.3 times cash and roughly at its book value, which consists of cash and investments limiting the downside of the investment. There is no longer any premium built in forCEO Jonathan Goodman's expertise in the specialty pharma space. We believe that when the right transaction comes along as valuations fall,. Goodman will add significant value to shareholders.
PAST PICKS: MAY 15, 2018
LEUCROTTA EXPLORATION (LXE.V)
- Then: $1.92
- Now: $0.86
- Return: -55%
- Total return: -55%
- Then: $2.51
- Now: $0.69
- Return: -73%
- Total return: -73%
- Then: $0.39
- Now: $0.38
- Return: -6%
- Total return: -6%
Total return average: -45%
FUND PROFILE: CURVATURE FUND LP
PERFORMANCE AS OF: APRIL 30, 2019
- 1 month: -0.71% fund, 2.97% index
- 1 year: -9.78% fund, 6.23% index
- 3 years: -2.93% fund, 5.92% index
Index: S&P/TSX Composite. Returns are net of fees. Three-year return is annualized.
TOP 5 HOLDINGS AND WEIGHTINGS
- Chorus Aviation: 3.04%
- goeasy: 2.3%
- Gran Tierra: 1.95%
- Knight Therapeutics : 1.37%
- Crombie REIT : 1.35%