Bruce Campbell, President & Portfolio Manager, StoneCastle Investment Management
Focus: Canadian Stocks
Top Picks: Gran Tierra, Aecon, Eli Lilly
MARKET OUTLOOK:
Our early warning indicators triggered a couple of weeks ago, prompting us to pay closer attention to beadth changes under the market’s surface. These signals have appeared three other times in the past five years, with each occurrence followed by increased market volatility.
Last week’s rotation reinforced that caution. Investors rewarded defensive sectors such as healthcare and consumer staples, with utilities also showing renewed strength, while moving away from higher-beta areas.
We have not shifted to a full out defensive portfolio stance, but we have begun reducing beta and positioning for lower volatility. The signals warrant preparation; they do not, on their own, justify a wholesale retreat from equities.
We see the first quarter of 2027 as a potential period of greater vulnerability, particularly if economic activity begins to weaken. We’re watching for confirmation and adjusting our exposure as conditions evolve.
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TOP PICKS:
Gran Tierra (GTE TSX)
Gran Tierra Energy (GTE) is a Calgary-based energy producer with a catalyst of transforming through the proposed sale of its Colombian and Ecuadorian businesses. Closing would leave it debt-free, with approximately $354 million in cash plus $92 million receivable, supporting growth and potential buybacks.
We see meaningful upside from Alberta’s Clearwater area and applying modern exploration and drilling techniques in Azerbaijan.
Shareholders have approved the sale; regulatory approvals and regular closing conditions remain; closing is targeted for late December to early January.
Aecon (ARE TSX)
Aecon Group (ARE) is one of Canada’s leading construction and infrastructure companies. Management’s multi-year turnaround centres on shifting away from fix price contracts to contracts that better support more predictable profitability.
The improvement is showing: second-quarter adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) doubled, while backlog stood at $10.5 billion, providing substantial visibility into future work.
Canada’s infrastructure investment provides a further tailwind, particularly in nuclear power, utilities, transit and defence. Recent awards include Aecon’s $1.7 billion share of an Alberta power project supporting data centres. We see improving margins and infrastructure demand supporting continued earnings growth, although legacy project claims remain a risk.
Eli Lilly (LLY TSX)
A global pharmaceutical company developing treatments for diabetes, obesity, cancer and other serious diseases. Its key growth drivers are Mounjaro for diabetes and Zepbound for obesity.
Lilly fits our move toward larger companies with less economically sensitive demand, while maintaining strong earnings growth potential. It raised full-year guidance following both its first- and second-quarter results, with second-quarter revenue increasing 48 per cent, primarily driven by Mounjaro and Zepbound.
We believe long-term healthcare demand offers greater resilience if economic activity slows. We are using LLY- TSX in this case with the Canadian Depositary Receipt (CDR) trading on the Canadian exchange.
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| GTE TSX | N | N | Y |
| ARE TSX | N | N | Y |
| LLY TSX | N | N | Y |
PAST PICKS: MARCH 9, 2026
Cavvy Energy (CVVY TSX)
Then: $1.14
Now: $2.65
Return: 133%
Total Return: 133%
Neo Performance Materials (NEO TSX)
Then: $24.60
Now: $26.19
Return: 6%
Total Return: 8%
Kraken Robotics (PNG TSX)
Then: $9.17
Now: $4.12
Return: -55%
Total Return: -55%
Total Return Average: 29%
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| CVVY TSX | N | N | Y |
| NEO TSX | N | N | N |
| PNG TSX | N | N | N |
