Bruce Campbell, President and Portfolio Manager of StoneCastle Investment Management
FOCUS: Canadian actions
MARKET OUTLOOK:
May was another volatile month for the markets with the completion of a seven-week sale and a strong recovery in the fund. Investors are now trying to determine whether this is a rebound in the bear market before the next downward move or the start of a new bear market after the correction. Ultimately, only time will tell, but we can weigh the evidence and determine the likely outcomes.
Much of investor uncertainty revolves around uncontrolled inflation and the steps central banks must take to curb inflation. Investors are concerned that central banks are lagging behind and will have to raise rates aggressively over a longer period of time to curb inflation. So far, inflation data show few signs of decline. With oil prices above $ 110 a barrel and energy as a major component of inflation, inflation is likely to be high in May. Will higher inflation and higher rates drive the economy into a slowdown or recession? Higher inflation will cause the rate debate not to end soon and market uncertainty to continue.
On the other side of the story is market sentiment. The basics are important, but so is the feeling. At the May lows, sentiment from various sources (CNN Fear and Greed, AAII, NAAIM, Smart Money Dumb Money) pointed to extreme levels of negative sentiment. No wonder the markets bounced so pessimistically. Has this pessimism disappeared? The number of articles ruling out the rally as a bear market rally has recently reached a level that doubles the all-time high of April 2020.
Last week we experienced a significant increase in purchases where 80% of the volume of the NYSE went to advanced stocks. In the previous three times we experienced an 80% increase in the volume of the NYSE in five days after the minimum of 52 weeks (1970, 2016 and 2020), the market increased 100% of the time two months, three months, six months and a year later.
The evidence is mixed, short-term technical tools have improved while long-term tools still need further improvement. As a result, we are taking a bar-based approach with the portfolio. Maintain more effective, have some low volatility ideas and have a higher share of growth in the portfolio.
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BEST SELECTIONS:
Bruce Campbell’s best options
Bruce Campbell, President and Portfolio Manager of StoneCastle Investment Management, talks about his top options: Tidewater Midstream, Viemed Healthcare and Lightspeed Commerce.
Tidewater Midstream (TWM TSX)
Tidewater focuses on natural gas processing, liquid improvement, storage and transportation in BC and Alberta. TWM also owns 69 percent of Tidewater Renewables, a green energy platform. Management has grown organically and by acquisition, has strong minimum volume contracts and pays dividends. My last purchase was $ 1.48, equity, I don’t own it and my family doesn’t own it.
Viemed Healthcare (VMD TSX)
The company is an independent provider of non-invasive ventilation services to the home respiratory care industry. Revenues have grown by 40% CAGR since 2010. Shares are trading at a 50% discount to the industry average. Management owns 17 percent of the business and the company has a regular repurchase. The last purchase was for $ 6.81, own funds, I don’t own it personally and my family doesn’t own it.
Lightspeed Commerce (LSPD TSX)
Lightspeed offers cloud-based point-of-sale systems for payment processing, accounting, reporting and analysis in restaurants and businesses. The company has achieved a 78 percent revenue growth and is heading toward a balanced EBITDA in 2024. The return on face-to-face shopping and dining should continue to accelerate the company’s revenue. The last purchase was $ 32.94, own funds, no personal property and no property of my family.
PAST SELECTIONS: June 29, 2021
Bruce Campbell’s previous election
Bruce Campbell, President and Portfolio Manager of StoneCastle Investment Management, talks about his previous election: CloudMD Software, Salona Global Medical Devices and GreenPower Motor Company.
CloudMD Software (DOC TSXV)
- Then: $ 2.19
- Now: $ 0.50
- Yield: -77%
- Total return: -77%
Global Medical Devices Show (SGMD TSXV)
- Then: $ 1.15
- Now: $ 0.78
- Yield: -32%
- Total return: -32%
GreenPower Motor Company (GPV TSXV)
- Then: $ 25.79
- Now: $ 5.75
- Yield: -78%
- Total Yield: -78%
Average total return: -62%
DOC TSXV NNN SGMD TSXV YYY GPV TSXV NNN