Bruce Campbell, President and Portfolio Manager, StoneCastle Investment Management
Focus: Canadian stocks
MARKET PERSPECTIVE:
May seemed to be another volatile month for the markets with the end of a seven-week sell-off and a sharp retreat from the bottom. Now investors are trying to determine whether this is a rebound in the bear market before the next downward movement or the beginning of a new bullish market after the adjustment. In the end, only time will tell, but we can weigh the evidence and determine the likely outcomes.
Much of investor uncertainty revolves around out-of-control inflation and the steps central banks must take to curb inflation. Investors are worried that central banks are behind the curve and will have to aggressively raise interest rates over a longer period to slow inflation. So far, inflation data show small signs of decline. As oil prices are above $ 110 a barrel and energy is a major component of inflation, we are likely to see high inflation in May. Will higher inflation and higher interest rates push the economy into a slowdown or recession? Higher inflation will mean that the interest rate debate will not end soon and market uncertainty will continue.
On the other side of the argument are market sentiment. The basics matter, but so do the moods. At the lowest levels in May, sentiment from multiple sources (CNN Fear and Greed, AAII, NAAIM, Smart Money Dumb Money index) showed extreme levels of negative sentiment. No wonder the markets jumped with so much pessimism. Has this pessimism subsided? The number of articles rejecting the rally as a bear market rally has recently reached a level that is twice as high as the previous record in April 2020.
Last week, we saw a significant jump in purchases, with 80% of the NYSE’s volume flowing into rising stocks. In the previous three times, when we had an 80% increase in NYSE volume in five days from a 52-week low (1970, 2016 and 2020), the market was up 100% of the time in two months, three months, six months and one year later.
The evidence is mixed, short-term technical instruments have improved, while long-term ones still need more improvement. As a result, we use a barbell approach with a portfolio. Hold more money, keep some ideas for low volatility and have a higher share of growth in the portfolio.
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TOP CHOICE:
Bruce Campbell’s best election
Bruce Campbell, president and portfolio manager at StoneCastle Investment Management, discusses his best choices: Tidewater Midstream, Viemed Healthcare and Lightspeed Commerce.
Medium tidal water (TWM TSX)
Tidewater is focused on natural gas processing, liquid modernization, storage and transportation in British Columbia and Alberta. TWM also owns 69% of Tidewater Renewables, a green energy platform. Management grows organically and through acquisitions, has strong minimum volume contracts and pays dividends. My last purchase was $ 1.48, my own money, 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 in the home respiratory care industry. They have increased their earnings by 40% CAGR since 2010. The shares are trading at a 50% discount compared to the industry average. Management owns 17% of the company and the company regularly buys back. The last purchase was $ 6.81, my own money, I don’t own it personally and my family doesn’t own it.
Lightspeed Commerce (LSPD TSX)
Lightspeed provides cloud-based systems for payment sales, accounting, reporting and analysis in restaurants and retail. The company has achieved 78% revenue growth and is moving towards EBITDA of profitability in 2024. The return to personal shopping and dining should continue to accelerate the company’s revenue. The last purchase was $ 32.94, own funds, none personally and none of my family’s.
PREVIOUS ELECTED: June 29, 2021
Bruce Campbell’s last election
Bruce Campbell, president and portfolio manager at StoneCastle Investment Management, discusses his previous choices: CloudMD Software, Salona Global Medical Devices and GreenPower Motor Company.
CloudMD Software (DOC TSXV)
- Then: $ 2.19
- Now: $ 0.50
- Return: -77%
- Total return: -77%
Salona Global Medical Devices (SGMD TSXV)
- Then: $ 1.15
- Now: $ 0.78
- Return: -32%
- Total return: -32%
GreenPower Motor Company (GPV TSXV)
- Then: $ 25.79
- Now: $ 5.75
- Return: -78%
- Total return: -78%
Total average return: -62%
DOC TSXV NNN SGMD TSXV YYY GPV TSXV NNN
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