Jul 26, 2017

Bruce Campbell's Top Picks: July 26, 2017

BNN Bloomberg

Bruce Campbell , BNN

Bruce Campbell, president and portfolio manager at StoneCastle Investment Management

Focus: Canadian equities
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MARKET OUTLOOK
The economic indicators that we follow continue to be strong in both Canada and the U.S. ISM Manufacturing and Service Indices continue to show a growing economy. As well, the ECRI leading economic indicators have pulled back in recent weeks, but continue to indicate the economy is growing. These economic indicators give us comfort that the probability of a recession in the next six months is low based on the history of the indicators at these levels. After hitting a multi-year low, the Citi Economic Surprise Index has started to rebound and based on cycle analysis we should expect to see it expand for the next six to nine months.

The top-down market technical indicators that we follow have had us in neutral positioning for a few months now. We have built up a cash position and are watching the indicators closely for changes. Some of the faster-moving indicators have started to show some signs of improvement. It is still too early to act on those completely, but now is a good time to build a shopping list and start to allocate partial position to sell off opportunities. Keep a careful eye on the key indicators to assess the continued strength of the markets for the time to get back fully invested.

We continuously monitor top-down indicators for any signs of weakness that could be the start of a bear market. If economic and market indicators change, investors will want to adjust their portfolios to build a more defensive posture.

We host a regular monthly webinar where we update investors on the indicators and whether we are on offence or defence. The next webinar is August 2, 2017 at 4:30 p.m. ET. To register, contact info@stonecastlefunds.ca.

TOP PICKS

PATIENT HOME MONITORING (PHM.V)
The company has two divisions that service the U.S. health-care market. PHM’s new management team has been working hard to restructure and grow the company. The company reported their second quarter of positive cash flow on the back of 30 per cent organic revenue growth. The company has strong macro tailwinds of an aging population and trades a very reasonable valuation, especially considering their organic growth rate. Management owns a significant amount of the company. The last purchase was $0.43. Funds own, but none personally or family.

SIYATA MOBILE (SIM.V)
The company provides mobile communication and infrastructure systems for corporate workforces, fleets and buildings. They are best known for their push to talk over cellular products. The company has experienced strong organic growth of their mobile devices and is rolling out their push to talk over cellular devices in a large multi-billion dollar segment. Their last quarter saw strong revenue growth and was EBITDA positive. They have announced strong Q2 revenue growth and will report full numbers in August. The last purchase was $0.70. Funds own, but none personally or family.

AGF MANAGEMENT (AGFb.TO)
AGF is one of the oldest investment management companies in Canada. During the last two years they have been focused on aligning the product line to produce more consistent performance. The result of this focus has been to stabilize assets under management and this has produced stronger financial results. Insiders continue to control the company and lead this turnaround. Last purchase was $7.25. Funds own, but none personally or family.