Bruce Campbell, President & Portfolio Manager, StoneCastle Investment Management
Focus: Canadian stocks
Top picks: Anaergia, Tenaz Energy, MDA Space
MARKET OUTLOOK:
Markets have staged an impressive recovery since the April lows, a rebound that few predicted earlier this year. Corporate earnings have been broadly positive across sectors, and importantly, we’re starting to see strength move beyond large caps into mid- and small-cap companies. In Canada, this is particularly evident in the gold sector, which has been a leader in recent months.
Monetary conditions have also improved. Money supply growth has turned positive again, and interest rates are gradually declining, with expectations of further cuts ahead. This is helping liquidity return to the markets and providing a supportive backdrop for equities.
That said, valuations remain stretched, with price-to-earnings ratios sitting at the higher end of historical ranges. Sentiment indicators paint a mixed picture: individual investors lean cautious, while professional managers are positioned near average exposure levels.
Technology has led much of the rally, but Relative Rotation Graphs suggest that leadership could broaden to other sectors—a healthy sign for market sustainability.
Seasonality is another factor to keep in mind. September and October are often weaker months for equities. Any pullbacks in this period should be viewed as opportunities to add to positions ahead of what has historically been a stronger year-end stretch.
Overall, the outlook remains constructive. Earnings momentum, improving liquidity, and the potential for broader market leadership support higher markets, though near-term caution is warranted.
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TOP PICKS:
Anaergia (ANRG TSX)
Anaergia develops and delivers proprietary anaerobic digestion and resource‑recovery systems that convert organic waste into renewable energy, clean water, and fertilizer across global markets. The company is a turnaround after a near failure back in 2023.
The company was recapitalized and refocused, and the sales pipeline has been accelerating. Revenue backlog has grown from $104 million at the start of the year to $200 million currently. The company could turn cash flow positive later this year as revenue continues to ramp. This presents an opportunity to invest prior to the stock being rerated and institutional ownership increases.
Tenaz Energy (TNZ TSX)
Tenaz is a Calgary‑based energy company focused on sustainably acquiring and developing oil and gas assets. Their assets are in Canada and the Netherlands, including semi‑conventional reservoirs in Alberta and offshore North Sea gas operations.
The company recently completed an acquisition of Dutch North Sea assets that have been neglected by the former owners and offer significant upside potential. In addition, the company has an mergers and acquisitions (M&A) focus and a balance sheet to support their M&A strategy.
MDA Space (MDA TSX)
MDA Space produces components for multiple verticals in the space sector. Positive secular trends will continue to accelerate the business of space and provide strong growth for the sector.
MDA leads the industry in many areas and has been growing at impressive rates in the last several years. Strong company backlog and guidance increase visibility for the future.
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| ANRG TSX | N | N | Y |
| TNZ TSX | N | N | Y |
| MDA TSX | N | N | Y |
PAST PICKS: SEPTEMBER 19, 2024
Enterprise Group (E TSX)
Then: $1.89
Now: $1.41
Return: -25%
Total Return: -25%
Hammond Power (HPS/A TSX)
Then: $141.88
Now: $126.26
Return: -11%
Total Return: -10%
Aecon (ARE TSX)
Then: $20.26
Now: $20.20
Return: -0.3%
Total Return: 4%
Total Return Average: -10%
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| E TSX | N | N | N |
| HPS/A TSX | N | N | N |
| ARE TSX | N | N | N |
