James Hodgins is the chief investment officer of Curvature Hedge Strategies. His focus is on market-neutral investing in small and mid-cap stocks.
In the next 12 to 18 months, we expect significant monetary printing by global central banks to offset European and Japanese sovereign debt defaults, as well as recessionary slowdowns in China and the US.
During this period, however, we expect these recessionary conditions and debt problems to cause a major sell off in risk assets, particularly financials and cyclical commodity-related securities.
In Canada, we expect residential real estate prices to fall by more than 20 per cent in the next 24 to 36 months bringing equity to income ratios closer to historical norms as has occurred in most other western markets in the past four years.
Past Picks: July 25, 2011
Sandstorm Metals & Energy
TR: -55.66 per cent
TR: -3.15 per cent
Short Hastings Entertainment (HAST-Q)
TR: +56.89 per cent
Total Return Average: -0.97 per cent
Most Recent Purchase: Two weeks ago at roughly $8.15.
Our research shows that the gold sector is about to move materially higher over the next three months as investors realize that central banks globally are about to embark on greater debt monetization than in 2008/2009.
Sandstorm is an ideal vehicle to play this as it has extreme production and cash flow growth with less operational risk than junior or intermediate producers. The stock will also be listed on the NYSE this quarter, which should be a catalyst for a significant rise in the share price.
Most Recent Purchase: last month at $1.06.
The recent increase in media distribution platforms is about to explode with the introduction of Apple's iTV later this year. Already rising content prices will correspondingly increase as competition increases. Further, we will see another wave of "convergence" as distribution platforms want to purchase content. At less than 5x forward EBITDA and recent growth of 35 to 45 per cent, we can see DHX as an acquisition candidate that could attract a price over $2.00 per share in the next 2 years.
Canadian Western Bank
Most Recent Sale: last week at $26.45.
The western Canadian housing bubble is about to pop, as recent data out of Vancouver highlights. CWB has direct mortgage and consumer exposure but also significant exposure to retail, and housing-related project loans. A 20 to 25 per cent decline in real estate prices and accompanying 40 per cent decline in related capital projects will be very negative for CWB and its share price.