StoneCastle's Bruce Campbell
Like many investors, Bruce Campbell is bullish on the markets. And, as with many investors, he's worried about too much of a good thing. It's why the portfolio manager at StoneCastle Investment Management has been building up his cash reserves heading into the new year, getting ready to take advantage of a correction he believes may be coming.
Mr. Campbell oversees more than $100-million in assets, including the Redwood Equity Growth Fund, which is up 35 per cent over the past year as of Dec. 15, and the Redwood Income Growth Fund, which is up about 18 per cent. By comparison, the S&P/TSX composite index advanced about 9 per cent over the same period.
Over the past five years, the equity fund has seen a compound average annual growth rate of 16 per cent, while the income fund has seen a growth rate of 9 per cent over the same period. That compares with a compound average annual growth rate of 5 per cent for the S&P/TSX composite.
The Globe and Mail recently spoke with Mr. Campbell about his outlook for the market, what he has been buying and selling and two high-flying stocks he let get away.
What's your take on where the markets are heading in the short term?
In the short term, there seem to be frothy sectors of the market: the marijuana and cryptocurrency stocks, for example. If you look more broadly, the economic numbers are still strong in general, globally. That said, I wouldn't be surprised if we saw some type of correction in the first part of the new year, driven by a bit of over-exuberance and a bit of disappointment from economic indicators.
What stocks have you been buying lately?
We haven't bought a lot lately since we've been increasing our cash position. One name we had a position in, trimmed back and started to add to again is StorageVault. They've been growing quite rapidly. We also like the management team and the fact their revenue and cash flow numbers have been increasing on the back of acquisition and organic growth.
What stocks have you been selling?
We've trimmed some marijuana stocks, such as [Canopy Growth Corp.] and Aphria, to reduce our weight in the sector. We also cut back some of our energy exposure in October and November, selling our positions in Enerplus [and] Trican Well Service completely. On the base metals side, we sold companies such as Lundin Mining, HudBay Minerals, Capstone Mining and Taseko Mines. With the energy and base metals, we sold when they started to break some technical levels that we watch.
What's the one stock you wish you bought?
We've been in and out of Dollarama. It continues to exceed expectations. We've been in and out of it a ton of times between October, 2012, and June, 2016. Another one is Facebook. We've never owned it. The valuation is hard to wrap your head around. Maybe it's not really understanding how they would monetize to the degree that they have. Obviously, they've done well.
This interview has been edited and condensed.