Bruce Campbell, president and portfolio manager at StoneCastle Investment Management
Focus: Canadian equities

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MARKET OUTLOOK

We follow top-down economic and market indicators to help us determine if our portfolios are on offence or defence at any given time.

Currently, the top-down economic indicators have been strong and are not yet showing any sign of economic weakness. We see signs of expansion in the ISM Manufacturing and ISM Services indices. Both of the ISM indices have been hitting highs last seen over a decade ago. One of the leading indicators we follow, the Chemical Activity Barometer is also showing economic strength. The market isn’t as concerned with the level of the indexes as the trend direction. To track the trend direction, we like to watch the Citi Economic Surprise Index (CESI), which we find tends to lead the ISM indexes over the shorter term. The CESI has been weakening over the last few months. From the cycle analysis that we do, the CESI is getting close to the point where the index would turn up. If we see this upturn, we would expect a push higher for the ISM Indices in the months that follow.

The top-down market technical indicators that we follow have deteriorated recently. This has pushed our portfolios into a neutral position where we are holding upwards of 45 per cent cash. Sentiment is a contrarian indicator and many of the sentiment indicators we follow have bottomed, now at levels where historically uptrends have started. We’re carefully watching several of the shorter term indicators that indicate markets are short-term oversold. We wouldn’t be surprised to see a bounce for the next few weeks. The health and quality of the bounce will dictate where the market is ready for a new uptrend to begin.

Each month, we host a regular monthly webinar where we update investors on the indicators and whether we are on offence or defence with our portfolios. The next webinar is April 25, 2018 at 4:30pm ET. To register, contact info@stonecastlefunds.ca

TOP PICKS

Bruce Campbell's Top Picks

Bruce Campbell of StoneCastle Investment Management shares his top picks: Centric Health, AltaGas Subscription Receipts and Friday Night Inc

CENTRIC HEALTH (CHH.TO)

The company has two divisions: specialty pharmacy and surgical centers. The near-term growth is in the specialty pharmacy division as they continue to add to the number of long-term care beds they service. The longer term opportunity is from the surgical centers and from their new Karie home dispensing offering. Last purchase was at $0.49.

ALTAGAS SUBSCRIPTION RECEIPTS (ALAr.TO)

AltaGas operates energy infrastructure assets throughout North America. The company continues to work on the WGL acquisition that they announced in 2017. The transaction requires regulatory approval, which is causing uncertainty and creating nervousness with investors. If the company is successful with the approvals to make the acquisition, then they set a track for growth over the next three years. The last purchase was at $25.52.

FRIDAY NIGHT INC (TGIF.CD)

Friday Night Inc owns and operates three divisions: two in the medical and recreational cannabis sector in Las Vegas and the third in Canada in the risk management, security and logistics business. They continue to expand in the Nevada with their AMA brand on the recreational side, increasing their cultivation and processing capacity. Their infused CBD division is growing not just in Nevada, but countrywide. Last purchase was at $0.71.

 

DISCLOSURE PERSONAL FAMILY PORTFOLIO/FUND
CHH N N Y
ALAr N N Y
TGIF Y N Y

 

PAST PICKS: APRIL 26, 2017

Bruce Campbell's Past Picks

Bruce Campbell of StoneCastle Investment Management reviews his past picks: Patient Home Monitoring, CIBT Education Group and Veresen.

PATIENT HOME MONITORING (PHM.V) 

Viemed Healthcare spun off in Dec. 22, 2017. We received one share of PHM and one-tenth share of Viemed. The price below reflects on the PHM shares only.

  • Then: $0.25
  • Now: $0.08
  • Return: -48.63%
  • Total return: -48.63%

CIBT EDUCATION GROUP INC (MBA.TO)  

  • Then: $0.76
  • Now: $0.72
  • Return: -5.26%
  • Total return: -5.26%

VERESEN (VSN.TO)

  • Then: $15.40
  • Now: $18.51
  • Return: 20.19%
  • Total return: 22.97%

Total return average: -10.21%

 

DISCLOSURE PERSONAL FAMILY PORTFOLIO/FUND
PHM N N N
MBA N N Y
VSN N N N

 

FUND PROFILE

Redwood Equity Growth Fund
Performance as of: March 31, 2018

  • Year-to-date: -6.61% fund, -5.19% index
  • 1 Year: 35.7% fund, -1.85% index
  • 5 Year: 14.41% fund, 3.81% index

* S&P/TSX Composite Index   
* Returns include all distributions and are net of all fees.

TOP 5 HOLDINGS AND WEIGHTINGS

  1. Cash: 45.85%
  2. HIKU Brands Co: 3.16%
  3. Shopify: 2.62%
  4. Kinaxis Inc: 2.61%
  5. Enerplus: 2.18%

TWITTER: @sc_funds
WEBSITE: www.stonecastlefunds.ca