Bruce Campbell, president and portfolio manager, StoneCastle Investment Management

FOCUS: Canadian stocks 

MARKET OUTLOOK:

Investors are currently grappling with the perplexing mix of market and economic data. The economy appears to be sending mixed signals, showing both signs of a slowdown and improvements through various data points. This presents a considerable challenge for investors who rely solely on economic indicators to make their investment decisions. 

At our firm, we integrate both economic and market data to provide a more comprehensive understanding. Over the past two months, markets have exhibited heightened volatility, which aligns with historical seasonal trends. August, September, and October are known to be inherently volatile, especially in the third year of a U.S. presidential cycle. 

However, it’s important to note that the choppiness observed in August and September seems more indicative of a correction rather than the initiation of a new downtrend. We remain vigilant, closely monitoring long-term indicators and predefined thresholds to assess the overall market’s health. 

One notable development is the apparent sector rotation underway in the market. Growth sectors continue to exhibit strength, accompanied by pockets of resilience in value-oriented sectors. On the flip side, defensive sectors such as utilities and staples have experienced occasional days of strong performance but still lag. Should this dynamic change, it would prompt us to adopt a more defensive positioning with our portfolios. 

By incorporating both market and economic data, we aim to navigate the current market landscape with greater insight and adaptability.   

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TOP PICKS

Yerbaé Brands (YERB.U CVE)

Last purchase was $1.83, funds own

It is a naturally caffeinated, zero sugar, plant-based energy drink in the $21 billion U.S. energy drink market. Founded in 2017 by entrepreneurs with experience in the energy drink and beverage industry with Coca-Cola, Monster, Nos and Sobe. The team continues to build out its distribution network in the U.S. including the largest names in the sector. This growth has driven a four-year revenue CAGR growth of 58 per cent.

Rekor Systems (REKR NASD)

Last purchase was $2.49

It is an AI-driven technology company in the public safety, urban mobility and transportation sectors. 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. 

Quipt Home Medical (QIPT TSX)

Last purchase was $7.73.

A growing healthcare services company focusing on the management of chronic illness with a specialty focus on home-based respiratory care. The company operates in 26 states with 115 locations. It has been growing via acquisition and organically.  The stock trades at a significant discount to other North American peers.

PAST PICKS: July 4, 2022

Salona Global Medical Device (SGMD CVE)

• Then: $0.80
• Now: $0.17
• Return: -79%
• Total Return: -79%

Verano Holdings (VRNO CSE)

• Then: $7.01
• Now: $6.41
• Return: -9%
• Total Return: -9%

Lightspeed Commerce (LSPD TSX)

• Then: $29.06
• Now: $20.92
• Return: -28%
• Total Return: -28%

Total Return Average: -39%