As North American stock markets continue to rebound from their most recent slump, money manager Bruce Campbell is preparing for what he believes could be a new phase of growth.
“Am I waving the all-clear flag? No,” says Mr. Campbell, founder and portfolio manager at StoneCastle Investment Management Inc. “We could be at the start of the next uptrend … or it could be a bear market rally.”
To prepare for either scenario, Mr. Campbell has started making some incremental changes to his portfolio, including taking a “barbell approach” that includes buying low-risk and high-risk stocks.
“Time will tell which end of the portfolio we start to adjust towards the other end,” says Mr. Campbell, who oversees about $100-million in assets. He has an active management style that focuses on small and medium-sized companies, which he believes have more growth potential.
His portfolio, down about 10 per cent so far this year amid the underperformance of growth stocks, has seen a compound annual growth rate of 15 per cent over the past five years.
The Globe and Mail recently spoke to Mr. Campbell about what he’s been buying and selling and the investing advice he gives friends and family:
Describe your investing style
We have a multi-pronged approach: From a top-down perspective, we’re always trying to figure out if our portfolio should be on offence, neutral or defence. We use quantitative analysis and technical tools to determine which position to be in, through both a market and an economic lens. We’ve been more neutral recently and are just starting to transition more to offence. From a bottom-up perspective, we’re looking for stocks that have catalysts in their business that we believe will accelerate their earnings.
What have you been buying lately?
We didn’t have much technology exposure for the past four or five months and have been adding to that sector lately.
We’re starting to see money flow into the sector again. A couple of companies we’ve bought recently include Converge Technology Solutions CTS-T and Lightspeed Commerce LSPD-T. Both are companies we owned and sold out based on our volatility measures: Converge we sold earlier this year in the $10.40 to $10.25 range, and Lightspeed we started selling back in the fall in the $150 to $110 range. We have just started getting back in both of these names. To us, the business is still strong in both cases, and it looks like there’s an acceleration back into technology. Is that a two-week or two-year thing? We don’t know.
What have you been selling?
We’ve been trimming consumer staples, telecom and utilities like Loblaw L-T, Dollarama DOL-T, BCE BCE-T and Fortis FTS-T. Those stocks weathered the volatility really well, which is what you would expect. They’ve done quite well for us. The positions got oversized in our portfolio, so we trimmed those and then added to other areas like technology.
If we knew for sure that we’re going into an uptrend longer-term, we would sell out of these staples altogether and buy higher-growth companies because they would generate stronger returns, albeit with more volatility. We don’t want to give up on those names just yet because they add stability to the portfolio.
We also trimmed our energy positions across the board, including larger companies like Imperial Oil IMO-T and smaller names like PetroShale PSH-X. They were also getting oversized in our portfolio given the recent runup in oil prices.
Name one stock you wish you’d bought, and why?
We were tracking Verde Agritech NPK-T, an agriculture technology company that produces and sells fertilizers in Brazil. It has really taken off lately with everything happening in Ukraine. Originally we were looking at it around the $2 range; then it shot up with the momentum of fertilizer stocks in recent weeks [and is currently trading around $9].
What investing advice do you give friends and family when they ask?
I tend to not give a lot of advice because we are active investors and most people aren’t. The biggest piece of advice, that constantly gets reinforced, is to have a disciplined selling process. Knowing when to sell is very challenging and emotions can have a big impact. We try to be as disciplined as possible with our process, which provides signals when to sell based on the criteria we’ve set up.
This interview has been edited and condensed.
Be smart with your money. Get the latest investing insights delivered right to your inbox three times a week, with the Globe Investor newsletter. Sign up today.