Opinions by James Hodgins | StockChase
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James Hodgins

Chief Investment Officer

ON STOCKCHASE SINCE Oct 2010

Curvature Hedge Strategies


Opinions by James Hodgins


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COMMENT
General Market Comment 

May 15, 2018

Overview. Interest rates are going up gradually in the States. He thinks low rates have supported the bull market in equities and he feels cautious in response to their rise. He expects two more rate hikes from the Fed this year. The Canadian 5-year rate has been dragged up by the US rate increases, and this leads to a strengthening of the dollar, which also has a tightening impact. It can take a year for the effect of an interest-rate rise to play out. For a Canadian family with a variable-rate mortgage, the increased interest rates will cost about $40 per week. Longer-term fixed rates will follow. This will have an effect on the rest of the economy. With so much consumer debt in the Canadian economy, the effect could be significant. He would avoid Canadian consumer stocks at this time.

Overview. Interest rates are going up gradually in the States. He thinks low rates have supported the bull market in equities and he feels cautious in response to their rise. He expects two more rate hikes from the Fed this year. The Canadian 5-year rate has been dragged up by the US rate increases, and this leads to a strengthening of the dollar, which also has a tightening impact. It can take a year for the effect of an interest-rate rise to play out. For a Canadian family with a variable-rate mortgage, the increased interest rates will cost about $40 per week. Longer-term fixed rates will follow. This will have an effect on the rest of the economy. With so much consumer debt in the Canadian economy, the effect could be significant. He would avoid Canadian consumer stocks at this time.

Unknown
James Hodgins

Chief Investment Officer, Curvature Hedge Stra...

PricePrice
$0.020
Owned Owned
_N/A

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COMMENT
General Market Comment 

May 15, 2018

Market-neutral investing. This involves paired trades: going long one stock that he believes will gain, while going short another that should be hurt by the same trends in the market. He believes that the market has entered a stagflationary trend rather than a disinflationary trend. This is not good for equities or for fixed income.

Market-neutral investing. This involves paired trades: going long one stock that he believes will gain, while going short another that should be hurt by the same trends in the market. He believes that the market has entered a stagflationary trend rather than a disinflationary trend. This is not good for equities or for fixed income.

Unknown
James Hodgins

Chief Investment Officer, Curvature Hedge Stra...

PricePrice
$0.020
Owned Owned
_N/A

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COMMENT
General Market Comment 

May 15, 2018

Comment on Cannabis. Cultivators are overvalued, but he sees potential in additional products and services that support the production or sale of cannabis. His is long Hydropothecary Corp. (THCX-V), which makes a spray delivery system. He is interested in the idea of companies that test cannabis products on their way to the market. He is also interested in the U.S. cannabis market because President Trump only recently came out in favour of medical marijuana and of leaving recreational use up to the states. He thinks institutional money in the US will now start to finance cannabis growers. He is long iAnthus Capital Holdings (IAN-CD) and in others just going public.

Comment on Cannabis. Cultivators are overvalued, but he sees potential in additional products and services that support the production or sale of cannabis. His is long Hydropothecary Corp. (THCX-V), which makes a spray delivery system. He is interested in the idea of companies that test cannabis products on their way to the market. He is also interested in the U.S. cannabis market because President Trump only recently came out in favour of medical marijuana and of leaving recreational use up to the states. He thinks institutional money in the US will now start to finance cannabis growers. He is long iAnthus Capital Holdings (IAN-CD) and in others just going public.

Unknown
James Hodgins

Chief Investment Officer, Curvature Hedge Stra...

PricePrice
$0.020
Owned Owned
_N/A

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COMMENT
General Market Comment 

May 15, 2018

People are looking to Shell to spearhead liquid natural gas sales from Canada. However, there are structural problems with pricing of natural gas due to the lack of infrastructure (such as pipelines). He expects Canadian natural gas to continue to be very difficult. The differential between the Alberta price (AECO) and the global price continues to increase, which will make LNG more and more attractive because it can be shipped globally. He think it is too late to short natural gas stocks. He is now looking to go long, but he things that those trades will be on the new generation of companies that rise next year.

People are looking to Shell to spearhead liquid natural gas sales from Canada. However, there are structural problems with pricing of natural gas due to the lack of infrastructure (such as pipelines). He expects Canadian natural gas to continue to be very difficult. The differential between the Alberta price (AECO) and the global price continues to increase, which will make LNG more and more attractive because it can be shipped globally. He think it is too late to short natural gas stocks. He is now looking to go long, but he things that those trades will be on the new generation of companies that rise next year.

Unknown
James Hodgins

Chief Investment Officer, Curvature Hedge Stra...

PricePrice
$0.020
Owned Owned
_N/A

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BUY on WEAKNESS
AutoCanada Inc.(ACQ-T) 

May 15, 2018

He is negative on consumer discretionary in Canada, including automotive. They are diversifying away from being Chrysler driven. He sees the diversity as a positive and it is on his looking-to-buy list. This is the kind of think he might buy at the end of the tax-loss selling season, near the end of the year just because it is down so much.

specialty stores

He is negative on consumer discretionary in Canada, including automotive. They are diversifying away from being Chrysler driven. He sees the diversity as a positive and it is on his looking-to-buy list. This is the kind of think he might buy at the end of the tax-loss selling season, near the end of the year just because it is down so much.

specialty stores
James Hodgins

Chief Investment Officer, Curvature Hedge Stra...

PricePrice
$16.840
Owned Owned
No

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BUY on WEAKNESS

There’s only so many gas stations to buy. Over the past years, they have added tremendous value with prepared food in gas stations, and other services. At some point, there is a limit. The EV/EBIDTA ratio is now near the company’s 5-year low. However, the current weakness in Couche-Tard’s price might be transitory and he is interested in buying at this level. Gas retailers have a hard time when gas prices are rising quickly because it is hard to raise retail prices in line with wholesale. However, these companies make it up as prices go down, lowering rates less quickly than wholesale. He continues to be bullish on energy, which suggests further increases in gas prices and further pressure on Couche-Tard. He is looking for an entry point to buy the stock.

food stores

There’s only so many gas stations to buy. Over the past years, they have added tremendous value with prepared food in gas stations, and other services. At some point, there is a limit. The EV/EBIDTA ratio is now near the company’s 5-year low. However, the current weakness in Couche-Tard’s price might be transitory and he is interested in buying at this level. Gas retailers have a hard time when gas prices are rising quickly because it is hard to raise retail prices in line with wholesale. However, these companies make it up as prices go down, lowering rates less quickly than wholesale. He continues to be bullish on energy, which suggests further increases in gas prices and further pressure on Couche-Tard. He is looking for an entry point to buy the stock.

food stores
James Hodgins

Chief Investment Officer, Curvature Hedge Stra...

PricePrice
$53.850
Owned Owned
No

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DON'T BUY
Chesswood Group(CHW-T) 

May 15, 2018

They are involved in small equipment leasing, which historically has correlated with auto leasing. He is negative on the prospects for auto leasing and is concerned about the prospects for Chesswood’s funding sources. The dividend is high but the payout ratio is around 50% so he thinks the dividend is reasonably safe. However, this could come under pressure in the future.

merchandising/lodging

They are involved in small equipment leasing, which historically has correlated with auto leasing. He is negative on the prospects for auto leasing and is concerned about the prospects for Chesswood’s funding sources. The dividend is high but the payout ratio is around 50% so he thinks the dividend is reasonably safe. However, this could come under pressure in the future.

merchandising/lodging
James Hodgins

Chief Investment Officer, Curvature Hedge Stra...

PricePrice
$10.710
Owned Owned
No

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PAST TOP PICK

(A Top Pick March 26, 2018. Down 16%). This initially popped higher but they preannounced a poor quarter because the market had been stuffed by a promotion. This quarter will be a little weak for the same reason but after that, it will do better. Cipher historically focused on dermatology. With their purchase of Cardiome Pharma Corp’s Canadian assets, they will now also be focused on arrhythmia and other cardiovascular conditions addressed by Cordiome’s drugs. He loves Cipher here. He thinks it is trading at half what specialty pharma companies, like Knight, sell for. He sees this as a good takeover target for Knight and sees it as a potential double.

Healthcare

(A Top Pick March 26, 2018. Down 16%). This initially popped higher but they preannounced a poor quarter because the market had been stuffed by a promotion. This quarter will be a little weak for the same reason but after that, it will do better. Cipher historically focused on dermatology. With their purchase of Cardiome Pharma Corp’s Canadian assets, they will now also be focused on arrhythmia and other cardiovascular conditions addressed by Cordiome’s drugs. He loves Cipher here. He thinks it is trading at half what specialty pharma companies, like Knight, sell for. He sees this as a good takeover target for Knight and sees it as a potential double.

Healthcare
James Hodgins

Chief Investment Officer, Curvature Hedge Stra...

PricePrice
$3.550
Owned Owned
Yes

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BUY

This is one of his top plays in Western Canada. Delphi has done a gone job with its balance sheet. They’ve been moving more to liquids and this will be one of the takeover candidates when LNG exports finally start happening.

oil/gas

This is one of his top plays in Western Canada. Delphi has done a gone job with its balance sheet. They’ve been moving more to liquids and this will be one of the takeover candidates when LNG exports finally start happening.

oil/gas
James Hodgins

Chief Investment Officer, Curvature Hedge Stra...

PricePrice
$0.970
Owned Owned
Yes

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BUY

He has a small long position in it. They had problems with an investment they made a few years ago, but it has turned around, so there is some momentum to the earnings. (Analysts’ price target is 4$)

other services

He has a small long position in it. They had problems with an investment they made a few years ago, but it has turned around, so there is some momentum to the earnings. (Analysts’ price target is 4$)

other services
James Hodgins

Chief Investment Officer, Curvature Hedge Stra...

PricePrice
$3.320
Owned Owned
Yes

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DON'T BUY
Enbridge(ENB-T) 

May 15, 2018

In the U.S., changes in tax law for MLP’s hurt Enbridge’s ability to drop down assets into a more beneficial tax rate. In Canada, the problems of building new pipelines conflict with Enbridge’s planned future infrastructure projects. He is not worried about the dividend yield. The business would have to get a lot worse before it cuts the dividend. However, if the yield gets up to 7%, which will happen if the stock drops another 10%, he thinks the company will have to look at its yield.

oil/gas pipelines

In the U.S., changes in tax law for MLP’s hurt Enbridge’s ability to drop down assets into a more beneficial tax rate. In Canada, the problems of building new pipelines conflict with Enbridge’s planned future infrastructure projects. He is not worried about the dividend yield. The business would have to get a lot worse before it cuts the dividend. However, if the yield gets up to 7%, which will happen if the stock drops another 10%, he thinks the company will have to look at its yield.

oil/gas pipelines
James Hodgins

Chief Investment Officer, Curvature Hedge Stra...

PricePrice
$42.520
Owned Owned
No

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BUY

Half of its market cap is cash. They’ve been slowly building a portfolio of futures in drugs. Knight has been waiting for the prices of companies like Valeant to drop. Knight sold assets to other companies that are struggling, and will probably wait to get them back at lower prices than it sold them for. He prefers Cipher, but likes Knight.

Half of its market cap is cash. They’ve been slowly building a portfolio of futures in drugs. Knight has been waiting for the prices of companies like Valeant to drop. Knight sold assets to other companies that are struggling, and will probably wait to get them back at lower prices than it sold them for. He prefers Cipher, but likes Knight.

0
James Hodgins

Chief Investment Officer, Curvature Hedge Stra...

PricePrice
$8.060
Owned Owned
Unknown

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TOP PICK
Itafos(IFOS-X) 

May 15, 2018

This produces fertilizers based on phosphate rather than potash. This has consolidated three projects including a mine in Brazil and a plant that it purchased very cheaply from Potash before its merger with Agrium. The price of phosphate collapsed but is now coming back. He sees this as a great growth story for the next up-cycle in agriculture. (Analysts’ price target is 3.90$)

Other Agricultural Products

This produces fertilizers based on phosphate rather than potash. This has consolidated three projects including a mine in Brazil and a plant that it purchased very cheaply from Potash before its merger with Agrium. The price of phosphate collapsed but is now coming back. He sees this as a great growth story for the next up-cycle in agriculture. (Analysts’ price target is 3.90$)

Other Agricultural Products
James Hodgins

Chief Investment Officer, Curvature Hedge Stra...

PricePrice
$2.550
Owned Owned
Yes

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SPECULATIVE BUY

This is another company in the cannabis space. This is not a cannabis producer, it is a company that adds value in that space. They are mapping cannabinoids, looking for different formulations to treat different diseases.It is highly speculative, but he thinks there is opportunity for this type of company. He likes the management. In a growth market, as the US opens up, this could do very well. He owns stocks like this in a basket. He is not betting on any one of them; instead he is expecting the overall basket to do well.

This is another company in the cannabis space. This is not a cannabis producer, it is a company that adds value in that space. They are mapping cannabinoids, looking for different formulations to treat different diseases.It is highly speculative, but he thinks there is opportunity for this type of company. He likes the management. In a growth market, as the US opens up, this could do very well. He owns stocks like this in a basket. He is not betting on any one of them; instead he is expecting the overall basket to do well.

0
James Hodgins

Chief Investment Officer, Curvature Hedge Stra...

PricePrice
$1.010
Owned Owned
Yes

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DON'T BUY

This is an organic food player. He owned this for a long time. They did everything they said they were going to do. The stock went up, close to $1.70 and he exited most of it and sold the recent after they announced their recent acquisition of Galaxy Nutrition in the US, which will double their size. He doesn’t see synergies in the acquisitions and thinks they might have overpaid.

food services

This is an organic food player. He owned this for a long time. They did everything they said they were going to do. The stock went up, close to $1.70 and he exited most of it and sold the recent after they announced their recent acquisition of Galaxy Nutrition in the US, which will double their size. He doesn’t see synergies in the acquisitions and thinks they might have overpaid.

food services
James Hodgins

Chief Investment Officer, Curvature Hedge Stra...

PricePrice
$1.190
Owned Owned
No

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