James Hodgins, chief investment officer at Curvature Hedge Strategies

Focus: Market-neutral investing (small- and mid-cap stocks)
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MARKET OUTLOOK
As noted market economist John Hussman has identified, broader equity markets, at least in the U.S., are the most overvalued they have been at any point in history other than the year 2000. On a price/revenue basis, the current market is even more overvalued than at that point. As profit margins typically revert, historically, we believe forward returns in equities are likely to be close to zero over the next decade. Further, in any rolling 10-year period there has historically been at least one and sometimes two 30-per-cent corrections in equity prices. We would be adding only to positions that we consider to be special situations or precious-metals related.

TOP PICKS

LEUCROTTA EXPLORATION (LXE.V) 
We like Leucrotta here as it recently raised money at $2.20/share and the stock is now $1.80/share. The company has no debt and has 900 prime low-cost Montney drilling locations with significant infrastructure in place, enabling superior well economics. Management, including CEO Rob Zakresky, has been extremely shareholder-friendly and Rob owns significant equity in the company. We believe Leucrotta will be taken out, possibly by Arc or Tourmaline, both of whom have adjacent wells to the company, which would result in a lot of potential synergies. It is possible that Leucrotta gets taken out for up to double the current price over the next 18 months.

CASH

KLONDEX MINES (KDX.TO) 
Another special situation in that Klondex is becoming just the fourth Canadian domiciled company to enter the Russell 2000 index tonight. It's trading at a roughly 20-per-cent discount to peers and yet has the lowest risk production growth profile among intermediate producers. We are entering a strong seasonal period for gold stocks and with the huge new investor base, we believe Klondex will be a stellar performer over the summer.
 

DISCLOSURE PERSONAL FAMILY PORTFOLIO/FUND
LXE N N Y
KDX N N Y


PAST PICKS: MARCH 29, 2016

MERUS LABS (MSL.TO)

  • Then: $1.82
  • Now: $1.63
  • Return: -10.43%
  • TR: -10.43%

INTERTAIN GROUP (ITX.TO)

  • Then: $10.23
  • Now: $10.55
  • Return: 3.12%
  • TR: 3.12%

SHORT: STILLWATER MINING (SWC.N) – Delisted on May 3, 2017

  • Then: $17.35
  • Now: $18.00
  • Return: -3.74%
  • TR: -3.74%

(The returns are -3.74% because the stock was shorted)


TOTAL RETURN AVERAGE: -3.67%
 

DISCLOSURE PERSONAL FAMILY PORTFOLIO/FUND
MSL N N N
IT N N Y
SWC N N N


FUND PROFILE: CURVATURE FUND LP (CLASS I)

PERFORMANCE AS OF MAY 31, 2017:

  • 1 month: Fund 1.18%, Index* -1.52%
  • 1 year: Fund 0.28%, Index* 9.13%
  • 3 years: Fund 5.85%, Index* 1.68%

* Index: S&P TSX


TOP HOLDINGS AND WEIGHTINGS

TICKER COMPANY WEIGHT
BUR LN EQUITY BURFORD CAPITAL LTD 2.6%
DEECN 10 07/15/2021 DELPHI ENERGY CORP 10% CEL NOTES 2.5%
LXE CN EQUITY LEUCROTTA EXPLORATION INC 2.3%
VSN CN EQUITY VERESEN INC 2.3%
TCNCN 5.6 03/20 CORP TRICON CAPITAL GROUP 5.6% NOTES 2.0%


WEBSITE: curvaturehedge.com