StoneCastle Investment Management Inc.

StoneCastle Investment
Management Inc.
3rd Quarter Update
Overview
• Bear Market Indicators
• Economic Indicators
• Oversold/Overbought Indicators
• Opportunities Ahead
STONECASTLE INVESTMENT MANAGEMENT INC.
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StoneCastle Investment Management
• StoneCastle Investment Management is a quantitativeoriented investment firm focused on the management of
Canadian equities.
• StoneCastle is led by Bruce Campbell, B. Comm., CFA,
CAIA a financial professional with over 22 years experience
in discretionary investment management
• StoneCastle manages two mutual funds for Redwood using
their earnings growth/relative strength focused quantitative
approach:
• StoneCastle Fund – Private Investor Growth Portfolio
• Redwood Income Growth Class – Yielding Equities
• Redwood Equity Growth Class – Growth Equities
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16-18 Year Cycles
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Valuation Low
Jeff Saut – Raymond James
Source: Jeff Saut,
Raymond James
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Structurally Fair Market Vs. Bull Market
Source: Dorsey Wright & Associates
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Bear Market Indicators
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LEI and 18 Month Moving Average
Source: Bloomberg
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Energy
80% Rise in 12 Months
80%
Increase
= $68.85
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Yield Curve
Source: Bloomberg
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Financial Conditions Index
Source: Bloomberg
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Unemployment and 12 Month Moving Average
Source: Bloomberg
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ISM Manufacturing
Source: Bloomberg
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ISM Services
Source: Bloomberg
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Consumer Comfort Index
Source: Bloomberg
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Why does the US Consumer matter?
Source: Business Insider
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Equities - Favored Asset Class
Source: Dorsey Wright
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NYSE Monthly Momentum
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S&P/TSX Monthly Momentum
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NYSE HILO – Oversold Opportunity
Source: Dorsey Wright
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Positive Trend Below 30 = Opportunity
Source: Dorsey Wright
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Positive Trend Below 30 = Opportunity
STONECASTLE INVESTMENT MANAGEMENT INC.
Source: Dorsey Wright, StoneCastle
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AAII Market Sentiment – Oversold Opportunity
Source: Callum Thomas
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Short Positions – Highest in 20 Years
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05/01/2011
23/02/2011
13/04/2011
08/06/2011
27/07/2011
14/09/2011
16/11/2011
04/01/2012
22/02/2012
11/04/2012
30/05/2012
18/07/2012
05/09/2012
24/10/2012
12/12/2012
30/01/2013
20/03/2013
08/05/2013
26/06/2013
14/08/2013
02/10/2013
20/11/2013
08/01/2014
26/02/2014
16/04/2014
04/06/2014
23/07/2014
10/09/2014
29/10/2014
17/12/2014
28/01/2015
18/03/2015
06/05/2015
24/06/2015
12/08/2015
National Association of
Active Investment Managers
S&P 500
2500
NAAIM Exposure Index
5 January, 2011 - 9 September, 2015
S&P 500
STONECASTLE INVESTMENT MANAGEMENT INC.
Source: StoneCastle, NAAIM
NAAIM
120
2000
100
80
1500
60
1000
40
500
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NAAIM 8 Week Moving Average
0
0
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S&P Long Term Oscillator
Source: Dave Harder : RBC
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InvestTech Pressure Factor
Source: InvestTech Research
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S&P TSX Seasonality
3rd Quarter
We are Here
Source: EquityClock.com
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S&P 500 Seasonality
3rd Quarter
We are Here
Source: EquityClock.com
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Fund Attributes
Attribute
S&P TSX
Redwood Income Growth
Beta
1.00
0.72
Expected Yield
3.11%
4.89%
Quarterly EPS Growth
-3.70%
2.70%
NY EPS Growth
13.50%
20.80%
Attribute
S&P TSX
Redwood Equity Growth
ROE
11.70%
16.60%
Quarterly EPS Growth
-3.70%
0.10%
Quarterly Earnings Surprise
1.80%
3.70%
NY ESP Growth
13.50%
30.80%
Source: StoneCastle. Data as of August 31, 2015
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Sector Allocation
Redwood Equity Growth Fund
SECTOR WEIGHTINGS – Q2
Communications
Cash
SECTOR WEIGHTINGS – Q3
Communications
Consumer
Discretionary
Consumer
Staples
Consumer
Discretionary
Consumer
Staples
Energy
Cash
Energy
Technology
Financials
Financials
Materials
Technology
Industrials
Health Care
STONECASTLE INVESTMENT MANAGEMENT INC.
Health Care
Materials
Industrials
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Sector Allocation
Redwood Income Growth Fund
SECTOR WEIGHTINGS – Q2
Consumer
Staples
SECTOR WEIGHTINGS – Q3
Consumer
Discretionary
Capital
Goods
Consumer
Staples
Consumer
Discretionary
Energy
Financials
Energy
Cash
Financials
Utilities
Cash
Health Care
Transportation
Health Care
Technology
Real Estate
Industrials
STONECASTLE INVESTMENT MANAGEMENT INC.
Industrials
Utilities
Real Estate
Technology
Transportation
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The Playbook
• Bear market warning signs are not present
• Indicators are in Neutral
• Seasonally, moving into the strongest period of the year
• Watch indicators for changes
• Put cash back to work
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Back to Offense
September 2010 to February 2011
32.5%
12.8%
Source: GlobeFund
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Back to Offense
September 2012 to January 2014
39.7%
11.2%
Source: GlobeFund
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Questions?
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Contact Info
Bruce Campbell, CFA, CAIA
[email protected]
Jordan Youl, CIM
[email protected]
205-1708 Dolphin Ave
Kelowna, BC
V1Y 9S4
Phone: 250-448-6475
Toll Free: 866-780-6475
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Important Notice & Disclaimers
This presentation reflects the views of the portfolio advisor of the Redwood Equity Growth Class and the Redwood
Income Growth Class. These views are subject to change as market and other conditions warrant. The information and
opinions expressed herein are current as of this document date and Redwood Asset Management Inc. assumes no
obligation to provide updates or advise on further developments
Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund
investments. Mutual funds are not guaranteed, their values change frequently and past performance may not be
repeated. This information and investment themes are subject to change as market and other conditions warrant. It
should not be assumed that any of the strategies, securities, sectors or industries mentioned was or will be profitable.
Views expressed regarding a particular company, security, industry or market sector should not be considered an
indication of trading intent of any investment funds managed by Redwood Asset Management Inc. Any reference to a
particular company is for illustrative purposes only and should not be considered as investment advice or a
recommendation to buy or sell nor should it be considered as an indication of how the portfolio of any investment fund
managed by Redwood Asset Management Inc. is or will be invested. The information should not be regarded by
recipients as a substitute for the exercise of their own judgment.
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