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StoneCastle's Bruce Campbell

Bruce Campbell is president and portfolio manager of StoneCastle Investment Management. His focus is Canadian equities.

Top Picks:

Just Energy (JE.TO)

Just Energy provides energy solutions to residential and commercial customers in the electricity, natural gas and solar areas. The company has been growing in the high-single digit range in past years, and this could accelerate as it expands into the solar market in the U.S. and rolls out traditional services in Europe. The stock trades at a reasonable valuation with a well-supported dividend. The last purchase was at $8.18.

Pacific Insight Electronics (PIH.TO)

This company designs and manufactures components for the automotive, heavy truck and marine industry. It provides LED lighting, electronic control modules and wire harnesses. Customers include Ford, Caterpillar, Daimler, and Harley Davidson. The company grew EPS over 30 per cent in the last year and the stock trades at a reasonable valuation of less than 9 times earnings. The stock is not covered by analysts and is now showing up on the radar of many institutional investors due to the market capitalization. The last purchase was at $12.15.

Sleep Country Canada (ZZZ.TO)

Sleep Country is the number one mattress retailer in Canada. The company went public in July 2015 for the second time. The business continues to provide impressive growth with the last eight quarters of same-store sales averaging 10.8 per cent. Sleep Country is adding new stores across the country and can continue to do so to reach their store location goals. The stock trades at a reasonable valuation for the past and future growth. The last purchase was at $24.72.

Past Picks: July 3, 2015

Alimentation Couche-Tard (ATD.B.TO)

Then: $53.80 Now: $59.30 +10.22% Total return: +10.83%

Carmanah Technologies (CMH.TO)

Then: $7.04 Now: $4.01 -43.04% Total return: -43.04%

DIRTT Environmental Solutions (DRT.TO)

Then: $6.86 Now: $5.63 -17.93% Total return: -17.93%

Total Return Average: -16.71%

Market outlook:

The last four weeks have seen an impressive rally in equity markets worldwide. Much of the rally seems to be as a result of improvements in global economic conditions. While many market commentators are debating where the markets will head next, we have witnessed a rare market indicator give a positive signal in the last two weeks. The 2-1 Advance Decline signal (buying thrust) occurs when twice as many shares on the NYSE advance versus decline on average over a 10-day period. This is only the 13th time this signal has occurred since 1950. The last time we experienced one of these buying thrusts was in March, 2009, following the financial crisis. The average 3-month, 6-month and 12-month gain following these buying thrusts is 6.5%, 19.4% and 22.1%.

While the buying thrust has produced fantastic intermediate-term results following signals, the markets have been almost straight up over the last four weeks. Investors would be prudent to buy on pullbacks, as they will inevitably occur over the next couple weeks. It's time to prepare your shopping list and then put the money to work when the market is weaker.

We will continue to monitor the top-down indicators for any changes. As of right now, we continue to be on offence with the indicators. We have just recently seen another interesting change in a relative relationship that we follow. A relative momentum indicator between growth stocks to the S&P/TSX has recently changed in favour of the growth stocks.

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