Bruce Campbell, president and portfolio manager, StoneCastle Investment Management

FOCUS: Canadian stocks 

MARKET OUTLOOK:

After a challenging and humbling 2022, many investors have been surprised by the rebound in 2023.   

During the fourth quarter of 2022, we began to see changes in the long-term indicators we follow. The changes were showing selling pressure beginning to subside across many sectors and market capitalizations. This often happens months before the turn in stock prices. Moving into 2023, we experienced price momentum building in the large capitalization sectors. 

In January we had a rare two-to-one advance decline signal that occurred over a 10-day period. These signals are exceptional and have produced positive results in the past. After the January surge, market breadth diminished and for most of the first quarter was limited to a few sectors and mostly larger capitalization companies. This began to change in May, and we have seen a consistent broadening out of market breadth through June and July. 

We are now seeing breadth in more sectors, industries, market capitalizations and geographic regions. At first glance, it appeared January’s move was only short covering, now we are seeing a transitioning to a much healthier uptrend. In just the last two weeks we have had several of our risk indicators become more constructive, giving us the first positive signals in 36 months. We have also been witnessing price momentum in many more areas including the small and mid cap areas of the markets. 

We host a monthly webinar to review all the economics, sectors and market capitalizations. In the July webinar we showed how our composite box score (which includes economic and market indicators) was rapidly improving over the last two months. These conditions have us cautiously optimistic the new uptrend may last for many more months.      

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TOP PICKS

Avanti Helium (AVN CVE)

The company is focused on the exploration, development and production of helium in Western Canada and the Western U.S.  The management team at Avanti has experience in the oil and gas sector exploring and developing reserves. The team has been moving Avanti step by step from exploration to production and hopes to be producing cash flow in early 2024. Last purchase was $0.57, funds own, personally own and owned by my family. 

Rekor Systems (REKR NASD)

It is an AI-driven technology company in the public safety, urban mobility and transportation sector. Rekor physically collects the data and then uses AI and machine learning to make the information more useful to customers which can include (transportation, law enforcement and private businesses. Last purchase was $2.49, funds own, none owned personally, and none owned by my family.

Copperleaf Technologies (CPLF TSX)

It helps organizations integrate and manage its assets for long-term planning of resources for investment analysis and risk modelling. Its addressable market is projected to be $12 billion and to penetrate this market have recently been focusing on partner relationships. The stock trades at a discount to other SAAS companies in Canada. Last purchase was $6.32, funds own, none owned personally, and none owned by my family. 

PAST PICKS: June 1, 2022

Viemed Healthcare (VMD TSX)

• Then: $6.92
• Now: $12.00
• Return: 73%
• Total Return: 73%

Tidewater Midstream (TWM TSX)

• Then: $1.59
• Now: $1.03
• Return: -35%
• Total Return: -32%

 Lightspeed Commerce (LSPD TSX)

• Then: $31.68
• Now: $22.80
• Return: -28%
• Total Return: -28%

Total Return Average: 4%