A Little Bit About Bruce:

Bruce Campbell is the founder and portfolio manager of Stone Castle Investment Management Inc., a Canadian investment management firm. He has over 20 years of experience investing in Canadian small and mid-cap growth companies. Bruce is also a principal at Decisive Dividend Corporation, where he helps identify and acquire cash-flow generating private businesses. Through both Stone Castle and Decisive, Bruce has developed a successful track record of helping businesses grow their operations and profitability. He takes a fundamental, research-driven approach to investing and is passionate about finding undervalued companies poised for strong earnings growth. When not working, Bruce enjoys spending time with his family in his hometown of Kelowna, British Columbia.

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TRANSCRIPTION:

JP McAvoy: Hi, and thanks for joining us on today’s show. We’ve got Bruce Campbell who is the Founder and Portfolio Manager of StoneCastle Investment Management Inc, and also a Principal at the Decisive Dividend Corporation. He talks about all things financial throughout the day. Here’s my conversation with Bruce Campbell. 

Hi Bruce, thanks for joining us here today. Can I say sunny Kelowna? What are things like in Kelowna these days?

Bruce Campbell: It’s sunny today. Yeah, we actually have spring, which is nice. I guess it’s the second or third day of spring here now.

JP McAvoy: It’s been amazing as well, I guess in the last six months. You and I were chatting earlier, you were dealing with fires at one point, weren’t you like the smoke from the fires? It’s been pretty incredible the weather we’ve had.

Bruce Campbell: We’ve had a fantastic winter from anyone but a skiers perspective. But that kind of worries us a little bit on what that might bring for fires this year. Hopefully, we get a wet spring, which is funny to ask for. But it’s what we’d like.

JP McAvoy: It’s just the way we’re all talking now, cuz we’re probably going to see something in the summer as well. In any event, that’s beyond our control, what we can control is the way our businesses are functioning. You and I have worked together. And I don’t know if we’ve any common clients, but certainly discussions of business owners as they grow their wealth, what they like to do with it. And perhaps, maybe let’s first speak about the ways that they might be able to exit from their existing businesses. You’ve got a number of interesting businesses on your own front, and it built a couple, when we’re talking about decisively, first, maybe describe decisive. And then we’ll get into the first conversations you have with a business owner in your capacity on behalf of decisive.

Bruce Campbell: Decisive is kind of interesting. A good friend of mine who’s the chairman of Decisive, James Patterson, who’s actually a lawyer as well. He approached me probably, I guess close to 14 years now, and said, there’s going to be this huge exodus of business owners over the next 25 years. Because if you just look at demographics and baby boomers, some of them have succession plans, and some of them don’t. We started up a business where we could go out and raise public equity to buy private businesses that are cash flow generating. This would be kind of neat. So we, myself, and there’s nine of us in total, we started putting together the board. And then we started putting together the shell company. And then we went out and did our first transaction. And in our case, we bought a fireplace and wood stove manufacturer, which was kind of an interesting business. It’s amazing how that works. And it’s been a fantastic transaction. And now, what we do is we continue to operate that business. And then we’re looking for other businesses that are available.

A lot of cases, it’s the president or a founder, in most cases, that’s looking to exit the business. They don’t have any family that wants to carry on, they’re looking for a way out. They really want to look after their staff. One thing that we hear a lot is they don’t want to sell to big strategic companies where perhaps they come in and fire 50% of the staff to be efficient. So they’re worried about their staff. And then what we do is we negotiate on terms we come in by the business. And what we’ve found historically is that in a lot of cases, those businesses have been run pretty lean so they haven’t spent a lot of money on capital. We’re able to inject some capital, and then really grow the business which then starts a whole acceleration phase from there. And now, we’ve actually moved to step 2.0, which is we’ve managed to have a couple of strategic acquisitions where we’ve added in different pieces in different geographic locations. Blaze King was our first transaction. And then last year, we bought a company out of the UK that does the same type of business. So the President from Blaze King oversees both of those two divisions, and we effectively sell worldwide in that market. And then one of our machining businesses, we just recently did a tuck in as well. They’re both in Alberta. So it’s kind of an interesting niche, and kind of interesting how it comes together. And then the last piece is that we pay a dividend. So in a lot of cases, the founders who we buyout take 10% of their purchase price and stock which they get paid a dividend. And some of them are just shocked when they get the dividend checks each quarter because they’re like, wow, what’s this? And all these are dividends. So they have a nice growing dividend. They share prices as well.

JP McAvoy: It’s a nice structure and like you say, good thinking earlier, because there is the wealth transfer as we’ve described. A great deal. I won’t say a litany, but a great deal of these boomer business owners who maybe haven’t done the planning. We’ve talked about that many times on this show, but maybe have not done the planning or don’t have the options. It’s nice to have another option, and at least have these conversations, right? You mentioned that sort of maintain a Rolodex of potential businesses that you could do business with. How are you filling out that Rolodex? How are you finding those companies that you could potentially be doing business with?

Bruce Campbell: It was a lot of blocking and tackling. So it was just cold outreach. For the most part, we’ve always had a few relationships with business brokers. Those haven’t been probably as strong as we would like, and then our internal network. But we found two things. One is that, as we’ve continued to build out that Rolodex and continue to contact people, we might reach out to a business owner. It says, I might want to sell one day. But that day isn’t today. Well, fast forward, we’ve been doing this for over 10 years. And now, some of those business owners have moved or evolved, and got to the place. Well, now’s the time when I wanted to sell. So there’s been some that have moved forward that way. And then the second is, as you prove out what you do, there’s a lot more interest, a lot more sort of trust in what you do. Some of the business owners that we spoke to originally, nobody wants to be first. And so they kind of wait and sit back. And then as you do more deals, they see and can see how it works, and talk to other entrepreneurs who have sold out. And they go, oh, yeah, this really works. And so then they start to do cold outreach to us, which is kind of interesting. And so right now, we’ve gone from where when we were trying to find Blaze King, it was really a mad dash to try to find a business that was going to fit our criteria to do our major transaction with our shell company, to now where it’s the opposite. We have so many coming at us that it’s really a function of, okay, how does it fit with our timeframe? How does it fit with our businesses? And how does it fit with evaluation? So we’re able to kind of be a little bit more choosy on what we look at.

JP McAvoy: Makes for better purchases for the company itself, right? What’s the typical deal range? What size of the business are you looking to purchase?

Bruce Campbell: It kind of varies a lot. We’ve done businesses where they might only have 3, 4 or $5 million worth of revenue. And maybe it’s a million dollars worth the EBITA. We’ve got some businesses that are sort of 7, 8, 9, $10 million of EBITA range, and kind of everything in between. And this is one thing as you kind of evolve, the deals can sometimes get bigger because the access to financing is a little bit easier. We just recently announced that we had upped our line and have a new line of credit with a number of syndicate banks, which is access that we never had before. Plus, we’ve done some bought deal financings as well through the capital markets, so we have more access to capital. So it allows us to have bigger deal sizes as well.

JP McAvoy: It’s interesting. I wanted to ask how you sourced originally, was it a reverse takeover? We mentioned the shell, is that how you originally accessed the public markets?

Bruce Campbell: We went through the Capital Pool Corporation structuring. So we set up that CPC, and then we had to do a major transaction, which was Blaze King. And we had 18 months to do it. And I think we did, it’s probably around 14 or 15. We were certainly getting a little bit concerned, but we got her done in time. And it’s been the jam of the portfolio. It wasn’t like we just had something to do. We were really picky, because we wanted to do it right from the get go. When Blaze came along, we were thrilled. And it’s been phenomenal.

JP McAvoy: I’ve heard from a number of people through the CPC route, where they feel like their backs are up against the wall trying to get that transaction. You’re rolling now. And as you talk of capital injections, you mentioned the lines. Do you have access to the capital markets as well? How else are you raising these days?

Bruce Campbell: We like to keep it about 50/50 debt to equity. We found that that’s a pretty manageable formula. And that’ll vary sort of size by day deal. So some deals will just completely do and get others to use some cash. All the businesses are cash flow generating, so we do build up some cash. And so we’ve done that. And then we also have access to the equity market, the stock trades on the TSX Venture. We’ve got, I believe it’s six investment banks now that follow the company and have research, and they’re all keen to continue to show that to their clients because it’s got an interesting profile. It’s a growth company with a share price that’s done phenomenal. And then it also pays out a dividend. So it kind of fits the bill of what most investors are looking for growth and income.

JP McAvoy: It’s that sweet spot, especially when you talk of growth. I suppose maybe a little bit up the risk profile given the size. And you said smaller, maybe a smaller offering that regardless of the venture is, I don’t know, Venture Exchange? Or where’s it listed if people want to look at it?

Bruce Campbell: It’s as simple as DE on the TSX Venture Exchange. And we’re just worth 200 million market cap right now.

JP McAvoy: There you go. And so what does the future look like? What does five years look like for that?

Bruce Campbell: I mean, it’s really interesting. We brought in a new CEO. I guess it would have been coming up on three years ago now. And he’s done a phenomenal job. Laid out a strategic plan for the next 15 years. It’s really a kind of rinse and repeat formula. We look for the businesses. Find attractive businesses, and buy them. Inject capital, and then continue to operate them. And with any business, there’s always going to be some volatility with that individual business. But having the portfolio of a number of different businesses in different segments really takes that volatility out. So that allows us to have that dividend where we pay a monthly dividend, and we’ve increased it over time. That will be the plan as we continue to grow, both the top and bottom line, and the cash flow. We’ll continue to pay that dividend out over time, and the share price should appreciate.

JP McAvoy: Should follow accordingly. It sounds like the best of both worlds there. Sounds great. First, and obviously gives it a nice, I don’t know if it features the right word. But let’s talk about your day job as well. Obviously, this is something that occupies part of your time. But the reality is, you’re identifying companies on a regular basis to invest. Can you talk a little more about StoneCastle, and what you’re doing with the majority of your time?

Bruce Campbell: My real day job is managing portfolios. And we have a number of different funds that we manage. So we have StoneCastle Fund, which you’re in, and that’s our private fund. And then we manage funds for purpose investments out of Toronto as well, which are available through the advisor, broker portfolio management channel. What we’re doing with the StoneCastle fund, and one of the purpose funds is we’re looking for growth companies, and we found a niche in the neck kind of small mid cap range. And what we’ve found is that over the last 20 years, the Canadian markets really changed. So 20 years ago, if you had an advisor at a major bank owned firm, they could pretty much do anything. But as the world’s got more compliance regulated, what the bank doesn’t want is they don’t want any volatility. They want consistency with revenue, and they don’t want stock prices jumping up and down. So those advisors have really been kind of pushed out of that.

And what we say now is that most portfolios, if you have a big portfolio with one of the bank owned firms, or one of the majors tends to look kind of like the TSX 60 or  S&P 100, maybe outside of that a little bit, but not too much. And we see this huge opportunity in these growth companies, a 100 million or $200 million company that goes to a billion or goes to 5 billion, and it flies under the radar, there’s fewer people doing it, looking at it. And the reality of the situation is because the Canadian market is smaller. We actually get more results that we don’t see, say from even in the US. Because in the US, there’s just so many more investors looking at the stuff that all the rocks get turned over. And in Canada, we tend to see that that’s not the case. And there’s also a lot of hard cap limits on what investors both from the investment firms, but also from the different fun companies, the pension funds can invest in. And so it’s a really interesting niche that we found here. And it creates complete and total diversification for most portfolios, because most investors have that big cap, large cap exposure, and they don’t really have that growth. And so we provide that. And then with our other fund that we manage, for purpose, it’s an Income Fund. And again, it looks very different because we have a lot of companies in the portfolio that have a completely different profile than your standard utilities pipelines type of feel that a lot of income investors have.

JP McAvoy: A lot of Canadian investors, you’re right, you fill a niche that is maybe more untapped for the typical Canadian investor. A lot of people do so through their bank to bank advisors. Going to have them in a lot of the top 60 or top 100 whereas you’re able to dig a bit deeper, find some of those companies that maybe someday, maybe those that are comprising the index, but much early in the stage, how do you define them? How do you find a company like that that you think has got that potential?

Bruce Campbell: So we have a pretty regimented screening process. So to start, we look at probably, I guess, it’s around 3000 companies. We effectively have ranked those companies based on their earnings growth and their earnings acceleration. And that’s really what we’re after is we’re after that accelerated earnings profile that they have, and we effectively rank them any given day from one1 to 3000 so we know where they are, and then we also know what their rate of change is. So over multiple quarters, what we see is that, as that business starts to accelerate, they probably haven’t started at 3000. But say they’re in the 2000s. And the next thing though, they’re in the 1000s. And then as they sort of crest into the 1000s, that really starts to get our interest piqued. And that can happen over a number of years. So there’s examples where we’ll meet a company at a conference and, of course, put a face to the name. We have 3000 companies in our database, it’s hard to know what everyone does. But what we’ll do is we’ll meet them at a conference. 

And there’s a good example. We met a company at a conference. They were rolling out a new bus product that was going to be a shorter, smaller bus than what was traditionally used for the transit authorities. And they just started up the company. Just got their proposal from BC transit, and we watched it. We watched it for close to three years. And then they got to the point where they were going to be cash flow positive, we invested in, went up over 200%. So in the first year that we owned it, there were patients and just kept monitoring. And so we watched those companies that are going to have that accelerated earnings growth, and they rise up the ranks, and then kind of the opposite is how we get out of them as they start to drop down. Then we’re looking for an exit strategy as they drop down and come out. And that can be for a number of different reasons. One, maybe they’ve had disappointing numbers. Maybe they’ve grown too fast or not fast enough. But relatively, we’re always comparing. So if that company is here, and then all of a sudden, they start to drop down because their rate of growth is decelerating. Or even that everyone else is accelerating at a faster rate, then at that point in time, we’ll sell it and move on.

JP McAvoy: Do you have a formal stop loss? Do you sort of sound like it’s more of a modeling kind of way? Or do you have something that’s more formal in terms of how you–

Bruce Campbell: We use a few different approaches. So we do use just based on rank, and we’re looking at that rank from a number of different criteria. So not only were we looking at it from the rate of acceleration, but we’re also looking at it from a number of different technical perspectives. And that really comes down to supply and demand, the way we look at it. And we combine that to build out a rank. And so if it drops down in that rank to a certain level, then we want to sell it and replace it because we know that something else is going to be faster and be growing more. And then just purely from a stop loss perspective, we have a volatility stock program that we use. And that doesn’t mean that we necessarily immediately sell it because the nature of some of our companies is that they tend to be a little bit more volatile. But what we do is we’ll review it when it hits that stop, and then try to determine, why is it down? What happened to it? And should we be selling it? Should we be adding to it, or do we just watch it?

JP McAvoy: Yeah, because that’s part of the rally going back to where we began. You’re investing in smaller companies, so you have to expect, I suppose, some of this greater data, greater ups and downs along the way.

Bruce Campbell: Yeah, for sure. That’s the profile of what we do. And part of what we always say is, if somebody came to us tomorrow and said, I’ve just sold my business for $10 million, here you go. I would say, it doesn’t belong all in the StoneCastle fund because there is a fair bit of volatility that can happen. You’re gonna get higher returns over longer periods of time, but there’s a fair bit of volatility. So you want to have a multi managed approach where you have more than one investment style so that they perform at different times and do different things. And we’re one piece of that.

JP McAvoy: I think that’s a good way to look at it. Everybody should be looking different to have a well rounded investment profile for them. It’s certainly your fill that is needed very well. What are things look like for that in the next five years as well, sort of the same question. I guess it’s market dependent, right? And this is just part of the markets, it will say market cycles.

Bruce Campbell: Yeah. And it’s market dependent. We’re actually super excited about what we see. Because if you kind of go back and look at everything that’s happened over the last five years, we saw rates coming up, and then they went down in 2018. We were starting to see things recover, and then we got hit with COVID. Everyone talks about the Black Swan with investing, but I really do think that was a black swan event because nobody really could handicap what was going to happen. I can’t imagine unless you had a really clear crystal ball, or you were guessing. And you probably wouldn’t have guessed what would have happened out of it. And so we had that Black Swan event. Things started to improve, we saw this huge bump up and inflation. And then in order for this to get control, the central bank started to raise interest rates. And even before that happened, the market started to anticipate that that was going to happen, and we really saw stocks start to come down. If you look at the data, we really have been, even though it’s never been kind of announced as like we’re in a recession, we’ve seen a global manufacturing recession worldwide. And it’s slowed down. And it’s maybe rolled from pocket to pocket from sector to sector. And now we’re actually starting to see that improve. And we saw the US really kind of led by technology bring us out of this. And it started, I guess, close to a year ago now. 

We’ve seen that move up in US technology. And if you remember last year, the talk was The Magnificent Seven, and everyone was talking about these Magnificent Seven. And that was because the rates had come up so much, and it was putting pressure on a lot of companies from an earnings standpoint. Well, now we’re just at the cusp of where that’s starting to change, and we’re starting to see earnings revisions from companies in multiple sectors starting to be moved up. And we haven’t seen that really over 24 months now, and that’s going to start to trickle down into other areas. And the talk last year was that, if we lost any of the leaders of The Magnificent Seven, the market was going to drop. And we’ve seen Apple fall off, we’ve seen Tesla fall off, and yet the markets are hitting all time highs for the S&P.

JP McAvoy: You’re right, there’s been that big risk of that in terms of the breadth.

Bruce Campbell: It’s been some of it, but now we’re starting to see that diversify. Financials are starting to move, industrials are starting to move now. The latest has been some of the commodity sectors as growth starts to re accelerate. So all of that put together, we think that this is kind of starting the next earnings cycle, which is where things get really interesting. Because when we get companies that are increasing their earnings at the same time, especially in that kind of small mid cap area, the valuations have been cut, in a lot of cases, in half. We have companies that are growing their revenue by 50%, growing their earnings by 25% over the last two years, maybe even per year, and the valuation of the stocks down to 50%. And now all of a sudden, they’re going to a sector or they’re going into a time of the cycle where they’re gonna see acceleration in those earnings. Now you get growth from the earnings in the stock price, but you also get multiple expansions. You can get twice the opportunity that you would have had in the past.

JP McAvoy: You see it has a lot more torque, right? We’ve been waiting, obviously, again, a lot of it has gone to what we call The Magnificent Seven. We’re looking for some areas as well that might also benefit. You have been into other areas, how much do you follow the narratives? How influenced are you by the narratives? Is it the type of thing that can give some extra torque as well to some of this? Let’s say we’re talking about AI, that’s the hot topic.

Bruce Campbell: Certainly, it has an impact, right? If you bought Nvidia a year ago, or you own it right now, it’s actually cheaper today from a price earnings multiple than it was a year ago because the fact that their earnings have accelerated at such a high rate. So there are companies that are taking advantage of that. And if they are, their share price is probably going to appreciate, of course, there are always lots of companies that are emerging that have concepts or have ideas in that sector or space that they want to capitalize on. It’s a function of whether or not they capitalize. Again, when we’re looking at our themes, we’ll be able to screen out and say, oh, these are all AI companies, and we watch them. Some of them are real, and some of them have accelerated earnings growth. And some don’t.

JP McAvoy: Let’s steer this in a different direction if we can for a minute. Crypto, I’m sure you’re getting people asking about this. We’ll talk about not Decisive and not StoneCastle. So not your morning or afternoon jobs. But in your evening leisure time, as you look into Crypto. What do you think the future holds for that?

Bruce Campbell: It’s been quite a rise, for sure. And if you go back a number of years ago, I think the camera was 2014 or 15 at that point in time. Tried to open a wallet to buy some Bitcoin, and it was incredibly frustrating. I wished I had sort of persevered a little bit more, because it was such a challenge. Because I think at the time, it was like less than 1000. Even if you bought one now, you know that would have been kind of interesting. But going forward, it’s not a market that I understand completely. But I get the concept for, you have a finite number of coins that are going to be issued as we’re talking specifically Bitcoin. I mean, there’s so many other coins out there that I think you have to be careful with. But just Bitcoin specifically , there’es a finite number of coins. And it certainly seems to be gaining mass adoption. We saw these ETFs get approved in the US, you saw the massive fund flow. So now, it’s allowing for the first time really institutional investors and even retail investors to get access to it in a fairly simple way right before, like I said, you had to open a wallet. There’s a whole lot of jumping through hoops with that. In some cases, a bit of a complicated world. And now, if you can just go online on your stock account, they look after all their custody, and you still participate and the share price moves up and down. Well, that seems like kind of the best of the world.

JP McAvoy: Supply and demand. We’ve got a limited supply. Especially as ETFs are looking to fill their bags and Crypto terms, we see that appreciation. Flipping back to my day job, is it something that you consider? Or was it fit within the investment profile for making purchases with any of the funds?

Bruce Campbell: It’s a little bit more challenging, looking at it just purely from a couple, almost a commodity standpoint. We like to look at earnings, net earnings, acceleration, earnings momentum, and it’s hard to kind of track the commodity from that perspective. And historically, if you were to look at oil, when we don’t invest directly in oil, but what we’ll do is we’ll invest into oil companies, you have a kind of similar situation. Some of these Bitcoin miners fall into that same category, but they are very volatile. They don’t always check the price of the commodity as closely as you’d like. When I say commodity, I’m talking about Bitcoin. So it has been a little bit challenging. From a pure technical standpoint, we could probably trade Bitcoin and trade a Bitcoin ETF, but we haven’t really done it at all to date.

JP McAvoy: It’s just interesting, right? Even as it informs this conversation, people ask, how do I get exposure to it? I think a lot of people anecdotally, I had a number of clients at the time who approached me with different Bitcoin ideas back then as well. And it’s been interesting to watch the evolution of that. Some of them are very good. The majority of them, as you say, on the ramping process itself was so difficult that a lot of them avoided it, but didn’t get involved. And I guess it now, some or majority of them are regretting just that. But who knows? Again, same question five years with that looks like. You have to imagine from the thesis we’ve just described here, that’s supply demand. If people continue to ask for it, it has to be higher, I guess, it’s all need logical or they don’t follow us from that barring some type of hack or something that doesn’t seem like it’s going to occur now. I guess it’s now established, or it’s almost gone mainstream. So it seems like it’s going to be something that will continue to see or will continue to inform conversation. So if people want that type of exposure, you say, now there’s those ETFs, and they’ll probably be other vehicles in the future as well.

Bruce Campbell: The thing that surprises me is it doesn’t have probably the clearest history in the past as far as regulatory issues, some fraud and things like that. And yet, it continues to be adopted. And I think that shows you really what the demand potential is there. That early on, there was lots of negative news about Bitcoin and Blockchain. Not blockchain so much, buy Bitcoins, and that’s really disappeared now. It kind of went away, completely silent.

JP McAvoy: We’re not speaking of the history there. But just as importantly, the Blockchain is there. You can check it. You can see it all now. So the way people were using before, perhaps for improper purposes. But now, people are buying it, and you’re tracking where it is. And to say that this asset, there continues to be a demand for it. And I’ll call it an asset, there’s a demand for you as a commodity, who does it continue to appreciate? I guess, people aren’t questioning that history anymore. Nor are they really questioning, certainly, there’s really very little to no regulation on how it can be used. I mean, I could very easily send you $100 million via Bitcoin, certainly much more easily than I could even wire you $100,000. It’s just fascinating to think how much more practical the technology is than our traditional banking system.

Bruce Campbell: In a lot of countries around the world, it’s used that way because it is more efficient and easier to transact.

JP McAvoy: Certainly. As we’ll continue to watch, it comes up in every conversation I have as well. And it’s interesting, I’m sure more for the ones you have where people want that exposure as well, right? There’s another niche or another area for people, if they’re looking to fill that to go, where would you turn somebody to? If they were actually thinking of that here, I guess saying, you and I’ve discussed, you’ve pointed me to other advisors as well, do you have anybody that you know that you would point to in that direction as well if need to be?

Bruce Campbell: There’s a few that are starting to emerge now that are specific niche coin funds. So they have an expertise in it, they track them, they know them, they’re familiar with them all, and do have a research process to figure out where they think it’s gonna go and then invest in and make money.

JP McAvoy: Purpose may even have one as well.

Bruce Campbell: They actually had the first ETF. So even before the American ones were available, they had the Canadian one. And I mean, it’s a super success. They launched it and immediately brought in a couple of billion dollars. And I think a lot of that fund flow is out of the US. And just from talking to purpose, I know they’ve had some fund flow out of late because you’ve probably seen some people switch over. And then some of the other fund companies have Bitcoin as well. So I know CI has one in Canada. And I think there’s one more of them missing.

JP McAvoy: Interesting. When we speak of narratives where everyone’s been saying, is it that the ETFs have just been approved? Yeah, they’ve just been approved in the US. They had existed in Canada previously, obviously. It’s interesting that you’re even describing flows, as those may be sold from a Canadian perspective for something that wants access to the US version right to the Black Rocks version or any of the versions that are being sold now through US institutions.

Bruce Campbell: Yeah. And imagine what you’ll see they’ll just continue, especially given that the commodity. Price of the ETF itself will just continue to drop. Right.

JP McAvoy: Yeah, it’s interesting. Bruce, I want to steer our interest, we’re getting into this theme, this is a type of conversation you don’t typically have when you’re on BNN or one of the other major forums where you’re able to discuss these things. High Frequency Trading, as we’ve talked about how they might be manipulating Crypto’s, but even the market in general, what’s your take on those things?

Bruce Campbell: It certainly has a niche in the market. It’s growing in some areas, for sure. It doesn’t really factor, well, I shouldn’t say it doesn’t factor into what we do, because it does. We can see it. What has a bigger factor is just kind of pure algorithmic trading. This is an area where people hear the stats that 70% of trading is all algorithmic these days. And I think they think that it’s kind of high frequency like, oh, we’re trying to jump in, but for another order flow or something like that. And certainly, there’s a piece of that, and there’s big firms that are scalping fractions of a cent on a huge scale to make profit over the day. But algorithmic trading is more just really handing off day to day trading to a computer algorithm, and that has AI in it. It tries to get you the best price over the day. And it’s continually measuring, mapping and then figuring out where those orders should be going. And we actually use it for a lot of our own trading. And we find that it works really well over a day. What we’ve done is we have different algorithmic programs that will run and we set a limit, and then just let the system do its thing. And depending on the need or the criteria, lots of times, it gets a better price than you would expect if you just went in there with a straight limit order.

JP McAvoy: Interesting. Again, the level professional. For that person sitting at home, maybe listening right now, the professionals are using tools that the retail will not have at their disposal, and they need to be sensitive to that if they’re looking to do it themselves, or considering why they’re not doing as well as they can be.

Bruce Campbell: That impact cost of just the trading itself can certainly have an effect on your performance if you do it multiple times. It depends how active you are when you trade, but it can certainly have an impact.

JP McAvoy: Yeah, it certainly does. Well, Bruce, this is great. Thanks for taking us through, I say your day, your morning, your afternoon, your evening. I’d like to end the shows with something that people can take with them through the rest of their day or the rest of their evening. I’m going to turn it slightly on its ear with you because you’re so accustomed to giving us a lot. It was described on the business news network top picks, I think is what it is. It is not investment advice, but it’s stocks or companies that you like and think may actually have, I don’t even know what the timeframe is being discussed here. I guess, there’s not really a timeframe being discussed. It’s some picks that you liked that you think may do well between your appearances on the show. Would that be a good way of summarizing it?

Bruce Campbell: Yeah, that’s exactly, yeah. They take a snapshot. They don’t necessarily know what’s happened in between–

JP McAvoy: You don’t know if people are buying or selling it. It was so interesting. As you watch, he’s like, great. Well, going back to what we just talked about in terms of algorithms, and maybe the way people are trading or somebody’s trading. Now, they may have it for three months, and they appear every year and a half, it’s not really the most relevant information. So what are three that you would suggest, probably somebody listening that they might be interested in looking at. And of course, let’s say this, if somebody wants where are we right now, I guess, first quarter through the rest of the year, in any event, given the cycles and the things we’re talking about, and some of the topics that you’ll probably get into on your webcast that you’re going to be discussing in the next few minutes with your investing group at large, give us some data is what I’m saying here. Give us some alpha here.

Bruce Campbell: I guess it depends on your kind of timeframe. I’ll caveat with that.

JP McAvoy: This is your play money, right? This is for fun. Some of your play money for those types of things you say are interesting. And I might not say this otherwise at a national broadcast, but this is something worth interesting looking at.

Bruce Campbell: A few of the ones that we think are really interesting from a profile perspective, the first one is a company called Avanti Helium. And they’re in the helium business. How they started is, some guys that were in the traditional oil and gas business took a look and said, there’s quite a bit of volatility to natural gas, there’s less volatility to helium. People sort of think of helium as like, what your blood balloons for parties, or you’ve put it in your mouth and then you have that funny high pitch Donald Duck voice, right? But it’s actually used in a lot of technology. Something like an MRI machine, it’s used for cooling that. And so what Avanti did is they went out, they raised some money, they started up, they drilled some wells and were very successful finding helium. And now they’re in the process, they’ve tied it all in, they’ve got a pipe in the ground, they’re just working on their production facility, and they’re trucking. And hopefully later this year, they’ll actually move into production and have fairly significant cash flow. And the stock is really under followed and under knowing in the universe out there. So that’s one. 

Another one that we like a lot is a company called Avon Medical. This falls into that sort of demographic aging population area. What they do is they produce a lot of equipment for physio rehab clinics. It’s kind of an interesting story. So the former chairman of this company had done this before he went out and started to make a bunch of acquisitions. So he did a bunch of acquisitions, and then effectively built up the revenue from kind of 0 to $70 million over about an 18 month period, but then realized that it really wasn’t being that effective because he had stuck a bunch of pieces together that didn’t really work together. So they brought in a different management team, and that management team now has been right sizing the business to make it profitable. And at the same time, rolling out new products. So again, it’s really under the radar. They sell into the US and globally. They are kind of like the gold standard. So as Kleenex is to tissue, their bio decks product is to rehab. So that’s another one that I think is kind of interesting. Both of those are on the TSX Venture.

JP McAvoy: I didn’t think of asking that before as well.

Bruce Campbell: Avante is AVN. And AVON is EVMT.

JP McAvoy: Okay, there you go. Alright, and the third of the three that comes to mind, off the top of my head here, you’re putting me on the spot. Again, we’re not going to track this. We may enter the chat, but we’re not going to measure back against what we did here.

Bruce Campbell: Then the other one that’s kind of interesting is a company called Propel. What they do is they do your real financing to people who don’t have the best credit rating, but they’re using AI in their process. This is kind of the second time the CEO built out a company, built up another one and sold it, and he started this one a few years back. And effectively, what they’re doing is you can apply online. They go through a kind of screening process using AI and using a bunch of tools, and then it drops to someone else who actually approves it. There’s a huge spread in the margin there between what they’re borrowing the money at with their lenders, and what they’re lending it out to their clients. And the growth has been phenomenal. This is a really underserved market. If you look at the numbers, they just reported their earnings here probably in the last three weeks, and the company is doing phenomenally well. It pays a dividend as well, which is kind of interesting. I think if you kind of tuck it away, it could be like, it’s very similar just in the US over the next sort of five years, it could have kind of similar type of profile as Goeasy. Goeasy has gone from 10 years ago, probably 12 years ago and a $10 stock. It was a $200 stock at its peak, and it’s trading around 165 now. It’s been a pretty good return over the last 10, 12 years, and I think propel could be similar. If it lasts, I don’t even think the last will probably get taken out.

Bruce Campbell: Somebody takes that as well. And what’s the symbol?

Bruce Campbell: That’s PRL.

JP McAvoy: There you go. So some alpha for the listeners there as well bringing some of Bruce’s day expertise to the show. Bruce, any last thought for somebody listening that has a little bit of play money, right? Is this different than somebody might be talking to no further welfare and looking at overall, but a little bit of play money a little bit. We talked about Bitcoin, we talked about some of these alternative things, are there other spots that are going to be future narratives that just people, I mentioned AI because it seems to be so top of mind for everybody these days. What are the things you think we’re going to be scratching the surface of in the future?

Bruce Campbell: That’s a pretty big one. That whole revolution of what technology will bring and how more efficient we are, both from an AI perspective, but also what we’ll be allowed to do or how we’ll become more efficient using a Blockchain itself. So there’s going to be some kind of interesting things that transpire there. And then if you look at it from a demographic standpoint, the millennial generation that’s coming up knows technology really well. They’re a bigger generation than the baby boomers. And they’re just starting to emerge into their prime years. And so there’ll probably be some really interesting things on the technology side of things there as well.

JP McAvoy: It’s fascinating to watch, we’ll be along for the ride, right? It’s been a pleasure having you here with us today, Bruce. If somebody is interested in knowing more, getting involved, or talking to you on the Decisive or the StoneCastle, what’s the best way to reach you?

Bruce Campbell: Well, the best place to find me is stonecastlefunds.ca. And then if somebody wants to reach out to me, my contact information is there. But you can also send me an email to bruce@stonecastlefunds.ca.

JP McAvoy: We’ll have all that in the show notes as well. Bruce, thanks so much for joining us here today. I look forward to revisiting the picks, not in the next cycle, but perhaps in a couple of years’ time, and we’ll probably have some more alpha for everybody at that time as well. Thanks again. Bruce. We’ll talk to you soon.

Bruce Campbell: Thank you.