James Hodgins, president and chief investment officer at Curvature Hedge Strategies

Focus: Market neutral investing (small- and mid-cap stocks)
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MARKET OUTLOOK
Now that the summer has come to a close, volatility appears to have returned in full as investors look towards the Federal Reserve's interest rate decision in December. We expect this recent uptick in volatility to persist over the next few months, resulting in a positive environment for market neutral funds. 

TOP PICKS

MERUS LABS (MSL.TO)
Merus is currently trading at 4x EBITDA with lowest cost of capital in the sector due to their EURIBOR plus four per cent credit facility. Stock has been unfairly hit due to similarities with Valeant and Concordia, although we believe there is a big difference in the quality of management and MSL has a significantly better balance sheet. Our one-year target is $2.00, although we see much higher prices as management executes on its growth strategy.

CORBY SPIRIT AND WINE (CSWa.TO)
Corby has an oligopolistic market share in Canadian spirits. In addition to growth in cash flow and dividends driven by U.S. expansion, the company yields a six per cent dividend, which is under the radar due to most of it being paid out as special dividends. They are also a takeover candidate by its global parent, Pernot.

ECOSYNTHETIX (ECO.TO)
Currently 70 per cent of the market cap is in U.S. denominated cash. They have numerous advanced-staged trials for Ikea products and other customers, and have also signed a significant new contract with Ikea supplier Swiss Krono. We see a potential for 50 cents per share in earnings within three years, which would easily yield a $5 target price for the stock.
 

DISCLOSURE PERSONAL FAMILY PORTFOLIO/FUND
CSWa N N Y
MSL N N Y
ECO N N Y


PAST PICKS: MAY 26, 2015

INNOVA GAMING GROUP (IGG.TO)

  • Then: $3.96
  • Now: $1.40
  • Return: -64.64%
  • TR: -64.64%

TERAGO (TGO.TO)

  • Then: $6.20
  • Now: $4.96
  • Return: -20.96%
  • TR: -20.96%

EQUITY FINANCIAL HOLDINGS (EQI.TO)

  • Then: $9.06
  • Now: $9.51
  • Return: +5.84%
  • TR: +5.84%

TOTAL RETURN AVERAGE: -26.59%
 

DISCLOSURE PERSONAL FAMILY PORTFOLIO/FUND
IGG N N Y
TGO N N Y
EQI N N Y


FUND PROFILE: CURVATURE FUND LP

PERFORMANCE AS OF: SEPTEMBER 30, 2016

  • 1 month: Fund 1.51%, Index* 0.88%
  • 1 year: Fund 5.91%, Index* 10.68%
  • 3 year: Fund 8.12%, Index* 4.82%

*Index: S&P TSX


TOP HOLDINGS AND WEIGHTINGS

  1. Burford Capital: 3.01%
  2. Fairfax Financial Holdings: 1.87%
  3. Clearwater Seafoods: 1.72%
  4. Merus Labs International: 1.71%
  5. Thompson Creek Metals: 1.61%


WEBSITE: www.curvaturehedge.com