Bruce Campbell spends his days hunting for small and mid cap stocks with the kind of upside Nvidia once had. But spotting future winners long before the crowd moves in takes discipline.
Campbell, portfolio manager at StoneCastle Investment Management, ranks a universe of 3,800 North American companies every day. Typically, he’s watching for earnings growth that’s speeding up rather than climbing steadily. In his experience, high growth stocks require above average profit gains.
At the same time, he’s not looking to fight momentum.
“We’re not trying to go against what the market’s doing,” he told me. “We’re trying to be in line with it.” So his playbook involves treating technical breakdowns as a warning that someone else may know something the market doesn’t yet.
Interestingly, he notes you should know what kind of investor you are when that momentum arrives. In particular, he’s a fan of the book “The Art of Execution,” which sorts investors by how they handle a losing or winning position. On the losing side there’s the Rabbit, who freezes and follows a stock down, the Assassin, who cuts a loss fast, and the Hunter, who buys more as a stock keeps falling. On the winning side there’s the Raider, who sells too early and banks a small profit, and the Connoisseur, who lets a winner run.
Campbell sees himself as an Assassin when he’s losing and a Connoisseur when he’s winning.
Since first joining Ticker Take last fall with seven names built around this hunt, Campbell has sold five of them: Abaxx Technologies, Kraken Robotics, Kratos Defense, TTM Technologies and Zedcor.
Abaxx had strong revenue growth but hadn’t reached earnings yet, and when negative news broke its momentum and the stock broke down technically, he sold. TTM he rode higher, harvesting profits gradually with a predetermined level in mind, and sold once it finally broke down.
Two names remain from his initial buy list, along with six new ones.
As always, this is not financial advice.
MDA Space has been a big winner since he first talked about it with us last year. But it’s also seen its fair share of volatility, which he believes is normal. Campbell says it was driven by contract delays tied to a partner rather than the company itself. In his view, the underlying thesis - falling costs of access to space - hasn’t changed.
Rocket Doctor AI (AIDR)
Rocket Doctor AI has had some struggles since Campbell first discussed it with us, but he notes that’s common when a business is early in its earnings cycle. He watches monthly patient visits instead, which have gone exponential, and expects profits to eventually follow.
RingCentral (RNG)
RingCentral built its name in cloud-based phone systems during the pandemic. Campbell likes what it’s adding now: AI-driven customer service and after-hours call handling, a new recurring revenue stream he expects to keep growing as AI adoption spreads.
Moog Inc (MOG/A)
Moog makes motion control systems for aerospace, the hardware behind ailerons, flaps and satellite components. Campbell points to a newer growth driver: motion control for data centres, including cooling pumps and systems.
Bloom Energy (BE)
Bloom builds fuel cells that power sites without the grid, cleaner than traditional combustion power. Campbell notes the company has grown to roughly $100 billion in market cap, a scale he thinks most Canadian investors underestimate, driven largely by data centre demand.
Oceaneering International (OII)
Oceaneering has historically been an offshore oil and gas name, known for unmanned underwater vehicles. Campbell likes that it’s now diversifying into defense too, giving it two separate paths to accelerating earnings.
Gentherm (THRM)
Gentherm makes the seat heating, cooling and massage systems in cars, a product most people have used without knowing who made it. Campbell owns it and likes a recent acquisition pushing the company into the medical field, which he says the market likes for both the new revenue and the margin story.
Formerly Enterprise Group, the company renamed itself Evolution PowerX Corp on August 5. It makes natural gas turbines that let operators generate their own onsite power. Originally used in oilfields, Campbell points to newer industrial uses, like recreation centres running fully off-grid on natural gas, greener and cheaper than the traditional grid over time.
The Ticker Take
For growth stock investors, hunting for the next Nvidia sounds fun. But it’s more complicated than just spotting potential winners. Small cap success involves navigating an investment after the stock moves sharply higher or lower. And for Campbell, that’s where following a playbook really helps. You cut losers before hope turns into a bigger loss, and let winners run past the point where it feels safe to sell.
Jon Erlichman is a BNN Bloomberg contributor and the host of Ticker Take on YouTube.
