James Hodgins is chief investment officer with Curvature Hedge Strategies. His focus is on market-neutral investing in small and mid-cap stocks.
Similar to its sister company, Lumina Copper, whose strong resource growth drove its stock higher last year. Now Anfield is drilling out its high-quality nickel project and we believe could increase the measured and indicated resource by up to 30 per cent this year. With a current market cap of less than $200-million, the stock should perform strongly on this and we believe insiders have been buying in advance. Our one-year target is $8.
Trades at a 30 per cent to 50 per cent discount to peers like Intact Financial, but its strong growth in book value justifies a premium. We expect an acquisition or large-share repurchase will optimize the capital structure to increase return on equity and drive significant upward re-rating in the stock. Our one-year target is 85 cents.
Optimal Payments (Symbol OPAY on London Stock Exchange)
Pure play on the re-opening of online gaming in the U.S. Neteller and Firepay subsidiaries once held 70 per cent to 80 per cent of that payment processing market. It trades at roughly 4 times forward EBITDA, with strong growth without the U.S., but has significant upside should they recapture the portion of that market as we believe.
Past Picks: March 17, 2011
Total return: -41.00%
Total return: +9.78%
Total return: +37.22%
Total return: +54.28%
Total Return Average: +20.09%
"In January, Curvature shifted its view to a more positive stance on risk assets, as the European LTRO program added liquidity and breadth and stock markets improved. However, the Economic Cycle Research Institute continues to call for a U.S. recession later in 2012, and we believe recent data out of China as well as geopolitical risk in Iran and Syria - and the end of Operation Twist by the U.S. Fed - puts that negative scenario more likely. The Arrow Curvature Market Neutral fund continues its fully hedged position to protect against this downside scenario."
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Compiled by Franklin Cameron, BNN Market Call Tonight
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