Hello everyone and welcome to today’s live chat with Steve Palmer. I’m Darcy Keith with the Globe and Mail. Today, we’re going to be focusing on small caps, and Steve will have some specific suggestions on smaller capitalization stocks that are attractive right now. Please feel free to submit a question at any time.
We should be getting underway shortly.
Hi Steve, thanks for joining us. I think we're all good to go now.
Steve, as you know, small caps have had a rough go of it in recent months, with large caps generally outperforming, especially when looking at the US market. Why do you think that is, and do you see that trend reversing anytime soon?
Yes. Canadian small caps have underperformed....
That is changing as reflected by the recent strong performance of the TSX Venture index which is outperforming all the major US indices on a YTD basis
Why is that changing and where do you see things going from here?
I think that as large cap equities continue to be strong investors will move down the risk spectrum to the smaller cap companies. We are starting to see this. ... I expect continued strength in equity markets and the smaller companies will start to outperform.
Steve, you last joined us just over two years ago. At that time, you had an overweight position in base metals (but were skeptical about gold’s future). What’s your current view on the sector, as well as China, which is so important to base metals demand?
I have a positive outlook for base metals.
accelerating global growth is usually good for the base metal sector.
I believe that the China growth slowdown has already occurred. there is still strong demand from China.
But there are also huge debt problems in China that are threatening to explode. Isn't that a key risk to the Chinese growth story?
That is not a major concern for me. The Chinese government has much more flexibility in dealing with these issues than do North American governments.
What's a top pick of yours in the base metals small cap sector?
Blackbird Energy (TSXV:BBI) has been a top pick of ours in the energy sector.
The company has assembled a significant land package in western Canada which is prospective for in the Montney formation....
There have been several very successful wells drilled in the immediate vicinity of BBI land....
They have 36 sections of core Montney now. There was an acquisition of 12 sections of Montney land last week immediately west of BBI land for $35m. This implies a value significantly higher for BBI market cap
And, getting back to base metals, what stock can you recommend in that sector?
Does Graphite Wall into this category?
I guess that's reasonably close. Please elaborate what you like about the stock.
I don't have any "top picks" in the core base metals right now.....
in the graphite sector I like Canada Carbon (TSXV:CCB) which has been making significant progress on its high grade project near Montreal.
The company owns a former producing mine. They have identified several high grade veins on the property....
Lab results have indicated their material is ultra pure. It has been shown to be better than nuclear grade graphite which sells a large premium. This could be a very profitable small scale mine.
OK, let's get to some questions from our users now. Thanks for submitting these.
I do not follow Denison. I have a positive view on uranium over the long term. That will be good for Denison but I am not familiar with the specific company fundamentals.
This is not a stock I have looked at recently.
What about gold right now Steve? Are you still staying clear of the sector?
I have initiated some small positions recently. In recent years, this is not a sector I have focused on much. I am not a gold bull.
Can you share which gold companies you've recently purchased small positions in?
Mega Precious Metals (TSXV:MGP) and Temex Resources (TSXV:TME).
Both of these companies have built resources already and are currently being undervalued by the market in my opinion.
Thanks Steve. ... This is a bit removed from a chat on small caps, but I’d just like to follow up on this (call it curiosity!). Back in June 2012, during our last chat, you mentioned you were long RIM. Perhaps that was a good call, given the rebound RIM has enjoyed since John Chen took over. What’s your latest view on the company?
We sold it across our portfolios a while ago at a profit. We have not bought it back. Our focus is more on small/mid cap names. ....
several years ago we thought that sentiment was far too bearish on the company so we initiated a position more for a "trade"
Sounds like it all worked out in the end....