StoneCastle's Bruce Campbell
Bruce Campbell is president and portfolio manager at StoneCastle Investment Management. His focus is Canadian equities.
Top Picks:
Convalo Health International (CXV.V)
The company operates substance abuse treatments facilities in the U.S. The business is a low-capex and high-margin industry that is extremely fragmented. They continue to build out their locations and expect to have five operations in four locations. The company has a revenue run rate of $40-million and expects to be at a revenue run rate of $100 by year-end 2016. Last purchase was at $0.275.
Yellow Media (Y.TO)
Yellow Media is a company with a strong franchise that is going through a turnaround following near-collapse of the company a few years back. The new management team has instituted a Return to Growth (RTG) plan where they forecast revenue and EBITDA growth in 2018. The company recently released results, and the management team is executing on the goal of growth in 2018. The company is generating cash flow and paying down debt. It trades at 4.5 times EV/EBITDA and generates over $100 million of cash per year. The last purchase was at $19.33.
New Flyer Industries (NFI.TO)
The company manufactures heavy-duty transit buses in Canada and the U.S. The company recently made the acquisition of MCI Motor Coach to diversify their business. They have been growing the bus business and also the parts business in the last few years. The stock trades at reasonable multiple of 16 times 2016 EPS. The last purchase was at $29.83.
Past Picks: April 8, 2015
Vogogo (VGO.V)
Then: $2.80 Now: $0.28 -90.00% TR: -90.00%
Guestlogix (GXI.TO) - Delisted
Then: $0.81 Delist Price: $0.10 -88.27% TR: -88.27%
Convalo Health International (CXV.V)
Then: $0.63 Now: $0.27 -57.94% TR: -57.94%
Total Return Average: -78.74%
Market outlook:
We continue to be watching the economy very closely, both in North America and globally. Recessions and bear markets go hand in hand. Once the economy goes into a recession, the probability of a bear market is close to 100 per cent. One could argue that the last year has seen bear market conditions in the U.S. (hostile environment for stocks) and a confirmed bear market here in Canada. If the recession is confirmed, more price deterioration could occur.
Several of the economic data points have been improving over the last few weeks, but we continue to see some warning flags. Cycle analysis indicates a rebound for the next few months; following this rebound, we should be able to assess the real strength of the recovery.
One by one over the last few weeks, many of the market indicators that we follow have improved. This improvement has occurred while sentiment was pushed to an extreme and remains negatively skewed. We continue to hold a more defensive positioning with our portfolios. We are waiting for a few more market indicators to move positive before we will move to 100-per-cent invested.
So what can reverse this recent market move and derail the recovery? The U.S. dollar is negatively correlated to commodity prices. If we were to experience a rise in the U.S. dollar, this would be negative for U.S. multinational corporations as well as commodity producers and commodity banks.
We are monitoring our top-down indicators, and when we see improvements we'll move from neutral to an offensive strategy with the portfolios and get fully invested. We update these indicators regularly.