Market Call: Andrey Omelchak's outlook on North American Small & Mid Caps (June 26, 2026)

Key Concepts

• Build Canada Theme: A multi-year structural investment thesis focusing on domestic infrastructure, defense, and natural resource development.
• Modular Housing: A critical component for remote infrastructure projects, data centers, and industrial expansion.
• National Champions: Canadian companies designated by the government as structurally important to national sovereignty and defense.
• Infrastructure Super Cycle: A projected $4 trillion wave of investment in grid modernization, water/wastewater, and semiconductor reshoring.
• K-Shaped Economy: An economic environment where specific segments (e.g., lower-income households) face financial pressure, creating niche growth opportunities for certain service providers.
• Incremental Margins: The profitability gained from additional units of production or service, particularly relevant for companies with existing idle capacity.

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1. Investment Thesis: The "Build Canada" Strategy

Andrey Almarchech (CEO/CIO, LionGuard Capital Management) presents a bullish outlook on Canada, emphasizing that the country is in the "early innings" of a structural transformation.

• Defense & Sovereignty: The government is shifting toward domestic defense spending to reduce reliance on foreign supply chains. This creates a "nascent industry" that will benefit from government-backed "national champion" status.
• Natural Resources: Almarchech argues that Canada should leverage its natural resource wealth to generate trillions in windfall capital, which should then be reinvested into high-tech, biotech, and sustainable industries.
• Macro-Agnostic Investing: Almarchech avoids making macro predictions (interest rates, commodity prices) in favor of identifying structural, predictable growth themes that can compound capital regardless of short-term market volatility.

2. Sector Analysis & Perspectives

• Financials: Canadian banks are viewed as an oligopoly with protected status and strong credit performance. Recent regulatory easing by OSFI (Office of the Superintendent of Financial Institutions) regarding capital stability buffers is seen as a positive catalyst.
• Artificial Intelligence: Almarchech advises a nuanced approach. While AI is a massive trend, he warns against betting solely on chip manufacturers (like Nvidia) due to uncertain long-term unit economics and rising competition. Instead, he suggests investing in the "picks and shovels" of the AI boom—specifically energy infrastructure and data center construction.
• Telecommunications: BCE is noted for its dividend sustainability, but the sector faces significant headwinds due to intense competition in the wireless market, which is pressuring average revenue per user (ARPU).

3. Company-Specific Insights

• Propel Holdings: Bullish. The company is benefiting from a K-shaped economy where its total addressable market is expanding. Almarchech believes the market underestimates their credit quality and earnings potential.
• Black Diamond Group: Bullish. A key player in modular housing. The company has significant room to grow as demand for remote accommodations for data centers and industrial projects surges.
• Kraken Robotics: Cautious. While the defense application is clear, Almarchech expresses concern regarding competitive differentiation and the tendency for nations to favor domestic manufacturers over Canadian-based firms.
• WSP & Stantec: Bullish. Both are well-managed and are successfully integrating AI to improve their business models. He suggests owning both at equal weight to hedge against AI-related disruption.
• Bird Construction: Bullish. A major beneficiary of the "Build Canada" theme, particularly in data center construction and the "Ring of Fire" project.
• Trisura: Bullish. Despite being caught in a "softening insurance cycle" narrative, it is a specialty insurer that does not follow standard P&C (Property & Casualty) cycles. It is viewed as a potential takeout candidate.
• Electrovaya: Bullish. Expanding manufacturing capacity in New York and entering the data center backup power market.
• Premium Brands Holdings: Constructive but cautious. The company is currently filling excess capacity built in the US. While there is significant upside, management execution has been disappointing, requiring investor patience.
• TMX Group: Bullish. Viewed as a defensive, sticky business that is currently experiencing a valuation reset rather than a structural decline.

4. Top Picks (New)

1. Badger Infrastructure: The largest hydrovac company in North America. Positioned to benefit from the $4 trillion infrastructure super cycle.
2. Magellan Aerospace: A defense and aerospace supplier with significant spare capacity, allowing for high incremental margins as new defense contracts are awarded.
3. CVEO (Civeo Corporation): Identified as the cheapest modular housing company in North America. It has an activist investor on the board and is a direct beneficiary of the LNG Canada Phase 2 project.

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Synthesis

The core takeaway from Almarchech’s analysis is a shift toward structural domestic growth. He argues that investors should look past the "macro noise" of interest rates and geopolitical volatility to focus on companies that provide the physical infrastructure—modular housing, construction, and specialized components—required for national sovereignty, energy security, and the AI-driven data center build-out. His strategy prioritizes companies with high insider ownership, clear alignment with government infrastructure goals, and the ability to deploy idle capacity at high incremental margins.