James Hodgins is chief investment officer with Curvature Hedge Strategies. His focus is on market-neutral investing in small and mid-cap stocks.
Top Picks:
Anfield Nickel
Similar to its sister company, Lumina Copper, whose strong resource growth drove its stock higher last year. Now Anfield is drilling out its high-quality nickel project and we believe could increase the measured and indicated resource by up to 30 per cent this year. With a current market cap of less than $200-million, the stock should perform strongly on this and we believe insiders have been buying in advance. Our one-year target is $8.
Westaim
Trades at a 30 per cent to 50 per cent discount to peers like Intact Financial, but its strong growth in book value justifies a premium. We expect an acquisition or large-share repurchase will optimize the capital structure to increase return on equity and drive significant upward re-rating in the stock. Our one-year target is 85 cents.
Optimal Payments (Symbol OPAY on London Stock Exchange)
Pure play on the re-opening of online gaming in the U.S. Neteller and Firepay subsidiaries once held 70 per cent to 80 per cent of that payment processing market. It trades at roughly 4 times forward EBITDA, with strong growth without the U.S., but has significant upside should they recapture the portion of that market as we believe.
Past Picks: March 17, 2011
Hemisphere GPS
Then: $1.39
Now: $0.82
Total return: -41.00%
Versapay
Then: $0.92
Now: $1.01
Total return: +9.78%
Short-pair trade:
Books-a-Million
Then: $4.87
Now: $3.02
Total return: +37.22%
Hastings Entertainment
Then: $5.05
Now: $2.31
Total return: +54.28%
Total Return Average: +20.09%
MARKET OUTLOOK
"In January, Curvature shifted its view to a more positive stance on risk assets, as the European LTRO program added liquidity and breadth and stock markets improved. However, the Economic Cycle Research Institute continues to call for a U.S. recession later in 2012, and we believe recent data out of China as well as geopolitical risk in Iran and Syria - and the end of Operation Twist by the U.S. Fed - puts that negative scenario more likely. The Arrow Curvature Market Neutral fund continues its fully hedged position to protect against this downside scenario."
Compiled by Franklin Cameron, BNN Market Call Tonight
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