2021
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August 2021
Over the past several months, most small cap sectors such as green energy, cannabis, precious metals, biotech and technology have declined substantially. This provides us further confidence that the next few weeks will provide an attractive entry point for adding to small cap equity exposure prior to the strong seasonality of the winter months. We encourage investors to add small cap equity exposure prior to the next bull run which is likely to begin in Q4/21.
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June 2021
The TSXV has subsequently entered a correction phase, declining by more than 20% over the past five months. It is both time and magnitude of the correction which takes the froth out of stocks. This re-energizes the market in preparation for the net move higher. We believe that we are nearing the end of this correction process.
2020
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September 2020
We believe that significant upside remains for Canadian small caps as the macro environment favours small cap equities. We encourage investors to add exposure to Canadian small cap while it is still early in order to maximize gains.
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April 2020
An explosive small cap rally is likely, creating an environment in which our strategy typically excels. Small caps are long overdue for a bull run.
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February 2020
It is likely that we are now near the lows. Historically, these types of events have presented attractive buying opportunities for patient investors. This occasion will be no different in our view.
2019
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March 2019
Despite the recent uptick in bond yields, equities remain far more attractive from an earnings perspective. In fact, the spread between the earnings yield and bond yield remains well above historical norms at over 3%.
In our view, the recent equity market weakness over the past few months is a normal correction within a powerful bull market. This should be used as a buying opportunity.
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August 2019
The recent investment by Constellation Brands (NYSE:STZ) into Canopy Growth (TSX:WEED) at a large premium has provided a catalyst for the cannabis stocks which have performed well in recent weeks. In our view, the euphoria will not last. When retail investor enthusiasm for cannabis companies wanes, we expect a reallocation of investment capital into non-cannabis sectors. This will likely be prompted by a sharp correction in the cannabis stocks. We view the cannabis sector as a looming “grey rhino”, a term coined by Michele Wucker which refers to a highly likely yet ignored threat. In this case it will be a material correction for the cannabis sector which we believe is on the horizon.
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January 2019
In January equity markets continued their dramatic rebound from the aggressive declines of Q4/18. We noted in last month’s commentary that sentiment indicators were at negative extremes which presented an attractive buying opportunity. This proved to be the case. Despite this strong rally, we believe that equity markets will continue to perform well in 2019.
2018
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ALPHANORTH SMALL-CAP STRATEGY
Click above to download a graph representation of our historical track record.
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January 2018
We have also taken a cautious stance toward the crypto miners as we do not believe many of the companies in this space have a valid business longer term.
2013
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Spring 2013
We have observed that over the past two months, the TSX Composite has outperformed the S&P 500 index. We have previously noted in our commentaries that this was likely to begin in 2013. In addition, the small cap indices notably, the TSX Venture index, have begun to outperform the TSX Composite. Although this outperformance has been modest to date, we expect that this will accelerate over the balance of 2013. We believe that as the economy rebounds and interest rates increase, investors will reallocate funds toward growth equities and smaller cap names will outperform.
In our view, the current prospects are highly skewed in favour of higher prices for small cap equities. There are many indicators which support this: extremely poor investor sentiment, declining volumes, attractive valuations, improving economy, accelerating global growth, rising bond yields and insider buying, to name a few.
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Summer 2013
We have observed that over the past two months, the TSX Composite has outperformed the S&P 500 index. We have previously noted in our commentaries that this was likely to begin in 2013. In addition, the small cap indices notably, the TSX Venture index, have begun to outperform the TSX Composite. Although this outperformance has been modest to date, we expect that this will accelerate over the balance of 2013. We believe that as the economy rebounds and interest rates increase, investors will reallocate funds toward growth equities and smaller cap names will outperform.
2012
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Spring 2012
Although the consolidation which we noted in our January commentary has been more severe than envisioned, we are confident that equities have recently bottomed. European debt concerns hit equities hard as investors piled into U.S. debt resulting in a new all-time low for the 10 year bond yield of 1.44%. The extreme divergence of the earnings yield of 8% for equities compared to current bond yields is unsustainable. Investors should not be fooled by the mirage of safety in bonds. The European crisis will be resolved as are all market events. History has shown that those who capitalize on situations of investor panic such as the financial crisis of 2008, the crash of 1987 and the initial concerns in Europe in 2011 were greatly rewarded. Equity markets performed extremely well as fear dissipated. In our view, this time will be no different. Although, we cannot pick the precise bottom, we do not mind being early as the best performing days in history typically occur around major market bottoms. By calling a bottom early, we ensure that we participate in these “best days” as investors who wait for the smoke to clear will forgo substantial returns. Our current portfolio positioning ensures that we will benefit from these “best days”.
2011
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Winter 2011
Equity valuations and economic data continue to be supportive of stronger equity markets in 2012. Although this continues to be our view, it is not a view that is shared by many. The same applies to our muted view on gold. This brings to mind one of our favourite quotes by the late John Masters, author and army colonel, which reads “You have to recognize that every ‘out-front’ maneuver is going to be lonely. But if you feel entirely comfortable, then you are not far enough ahead to do any good. That warm sense of everything going well is usually the body temperature of the herd. Only if you are far enough ahead to be at risk do you have a chance for large rewards”.
2010
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Spring 2010
As mentioned in previous commentaries, we have been becoming increasingly cautious with respect to the broader equity markets. During April, we locked in gains from a couple of our large winners, raising 10% cash…..We believe that investor enthusiasm will dissipate over the summer months, contributing to a market correction which should be used for adding to equity weightings.
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July 2010
We believe that the odds strongly favour strength in North American equity markets over the next 2-3 quarters which will surprise many investors.
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August 2010
We continue to hold a bullish view for Canadian equity markets over the next several quarters. The Fund is well positioned in securities which offer favourable risk/reward and it should benefit from company specific catalysts and a strong overall equity markets.
2008
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Fall 2008
The majority of industry participants with whom we have recently communicated see tough times ahead for the small cap asset class. We take the contrarian view. The focus of our portfolio is on investments which are well financed with strong management teams. Accordingly, we believe that we will be able to generate significant gains from current levels.
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Spring 2008
We continue to hold a bearish view on equity markets, particularly in view of the recent powerful rally. We believe that equity investors continue to be overly optimistic about the economy and the severity of credit conditions in the U.S. which we believe will ultimately have a negative impact on Canadian markets. We are maintaining our cautious positioning in the near term in anticipation of deteriorating equity markets.