Salona Global is my Top Pick, this investor says

Now’s a good time to be looking at Salona Global Medical Device (Salona Global Medical Device Stock Quote, Charts, News, Analysts, Financials TSXV:SGMD), according to Bruce Campbell, portfolio manager at StoneCastle Investment Management. Campbell says not only does Salona have the management chops to continue growing the company but its business is recession-proof.

Micro-cap health tech company Salona Global is in the recovery science and physiotherapy market with products such as the recently launched Mio-Guard, a reusable electrode for recovery and physical therapy. Salona is less than two years old as a company but it’s already made a number of acquisitions, showing a penchant for growth through M&A. 

Earlier this fall, Salona bought DaMar Plastics, which is projected to add $6.6 million in annual revenue for Salona, while the company is currently working on a larger acquisition in the orthopaedic and sports medicine market. 

For Campbell, Salona’s focus on the recovery market makes it a comparatively safe bet to do well even during today’s rough macroeconomic environment.

“They have a number of different machines and technologies that help you recover from either an injury or from surgery and those are two things that don’t stop because the economy slows down or we have COVID or anything like that,” said Campbell, speaking on BNN Bloomberg on Monday, where he named Salona Global a top pick for the upcoming 12 months.

Campbell says Salona’s Chief Executive, Lee Cross, has the kind of track record which investors should appreciate.

“They’re profitable and they’re founded by a gentleman who’s done this before — [Cross] had a company that was in a similar space and over a six year period he took it from about $150 million to $1.5 billion and then sold it out to one of the big private equity firms,” Campbell said.

“Now, he’s put his team back together, knowing what he knew from before and doing it all over again,” he said.

So far, Salona’s share price hasn’t really delivered, as the stock is more or less even for the year-to-date — which is not a bad result compared to the damage done this year to most of the healthcare and health tech space. 

But Campbell says investors should buy Salona and wait out the rough patch.   

“This is an example of where the business is doing phenomenal but the stock price isn’t, and it’s an opportunity that exists. I think it allows investors to get in now if you want to be patient,” he said. “Les Cross’s team are going to do exactly what they did before.”