Market Call: Jerome Hass' outlook on Canadian Mid-Cap Stocks (Feb. 23, 2026)

Market Call with Jerome Haas - Summary

Key Concepts:

• Tariffs & Trump: Potential for renewed tariff implementation by a future Trump administration impacting specific sectors.
• Mid-Cap Stocks: Focus on undervalued Canadian mid-cap stocks as offering better investment opportunities than large-cap counterparts.
• Macro vs. Micro Focus: Prioritizing company-specific analysis over broad macroeconomic predictions.
• Valuation Discrepancies: Identifying sectors and companies trading at valuations significantly below historical averages or peers.
• Energy Sector: Positive outlook on oil & gas, particularly oil, despite potential short-term political pressures.
• Interest Rate Outlook: Acknowledging potential for rate cuts but prioritizing individual stock analysis.
• Oligopolies: Concerns regarding limited competition in sectors like telecommunications.
• AI Impact on Software: Caution regarding valuations in the software sector due to AI-related uncertainty.

1. Market Overview & US Political Risk

The discussion began with acknowledging market volatility following a recent Supreme Court decision, interpreted as signaling a potential return to tariff-focused trade policies under a future Trump administration. Jerome Haas emphasized the need to avoid sectors vulnerable to tariffs, specifically highlighting the manufacturing sector as being at risk. He drew parallels to market turbulence experienced in February-April of the previous year, cautioning that similar conditions could re-emerge.

2. Sector Preferences & Energy Focus

Despite broader economic uncertainties, Haas expressed a positive outlook on the oil and gas sector, particularly the oil side. He acknowledged potential short-term downward pressure on gasoline prices due to upcoming US midterm elections and President Trump’s potential intervention, but believes the market is looking beyond this temporary factor. He noted that oil names are structurally undervalued and have been for an extended period. He specifically mentioned the importance of focusing on the Canadian economy, noting cooling inflation and the possibility of future rate cuts, but reiterated a preference for stock-specific analysis over macroeconomic forecasting.

3. Mid-Cap Investment Strategy

A central theme was the investment potential of Canadian mid-cap stocks. Haas argued that institutional portfolios are heavily concentrated in large-cap Canadian companies (like banks), leading to inflated valuations. He believes mid-cap stocks offer more attractive valuations and represent a compelling investment opportunity. He highlighted the high valuations in the broader market and the availability of mid-cap stocks trading at more reasonable multiples.

4. Company-Specific Analysis & Top Picks (February 21, 2025 Review)

The conversation delved into specific company analyses, reviewing past recommendations made on February 21, 2025:

• Main Street Equity (MSE): While underperforming expectations due to lower immigration levels impacting apartment rentals, Haas remains a long-term holder, citing their focus on affordable rentals, strong growth history (18% annually), and counter-cyclical investment strategy.
• Dry Healthcare Trust (DHC): A positive review, highlighting its unique royalty model applied to pharmaceuticals and biotech, diversified portfolio (28 royalties), stable earnings, and attractive valuation (6x EV/EBITDA).
• Secure Waste Infrastructure Corporation (SWIC): A successful pick, benefiting from increased infrastructure spending and a strong focus on industrial waste management.
• Telus (T): Haas expressed a bias against Canadian telecom stocks due to their oligopolistic nature and high prices compared to the UK. He noted lower immigration levels impacting growth and a potential 30% dividend cut.
• Baytex Energy (BTE): Positive outlook following management changes and asset sales, highlighting aggressive share buybacks and a relatively cheap valuation.
• Propel Holdings (PEL): Concerns about rising credit risk in the non-bank financial sector, leading to a cautious stance despite compelling valuation.
• Constellation Software (CSU): Acknowledged as a quality stock but impacted by negative sentiment towards software companies due to AI concerns.
• Nexus REIT (NXR): Positive view due to its focus on industrial properties and strategic location.
• Rock Point Gas Storage (RPT): Strongly recommended, citing its unique position in natural gas storage, strategic infrastructure, and benefits from volatile gas prices.
• Savaria (SVC): A company to watch, with potential for growth in Europe to mitigate tariff risks.
• MDA Space (MDA): Positive outlook driven by increased defense spending and a unique position in the Canadian space sector.
• IA Financial (IAG): Cautionary tale, highlighting a recent earnings miss and potential vulnerability to broader market concerns about financial stability.
• Cineplex (CGX): Potential for a takeover bid, driven by a recent earnings beat and the retirement of the long-serving CEO.
• Superior Plus (SPU): A "show me" story, requiring further evidence of successful implementation of their "Superior Delivers" program.
• Fairfax Financial (FFH): Undervalued compared to peers, offering a compelling investment opportunity.

5. New Top Picks (as of the broadcast date)

Haas presented three new top picks:

• Total Energy Services (TOT): Highlighted its cheap valuation (3x EV/EBITDA, 7x PE), strong balance sheet (zero net debt), and growth potential.
• Surge Energy (SGY): Oil-focused producer with low decline rates, significant drilling inventory, and a decent dividend yield.
• Fairfax Financial (FFH): Undervalued compared to peers, offering a compelling investment opportunity.

6. Notable Quotes

• “Trump is going to continue playing the tariff game…He’ll either come in a sectoral basis or whatever else he comes up with.” – Jerome Haas, on the potential for renewed tariffs.
• “We’re not that focused on the macro…For us it’s, it’s less matter.” – Jerome Haas, emphasizing a bottom-up investment approach.
• “The biggest knock that we have in the market is valuations are high by any stretch of the imagination.” – Jerome Haas, on the overall market environment.
• “It’s a cautionary tale for the banks…If one of them comes up with a hiccup, you could see a double digit fall in the share price.” – Jerome Haas, on the vulnerability of bank stocks.

7. Synthesis & Conclusion

The discussion underscored a preference for a bottom-up investment approach, focusing on undervalued mid-cap stocks in Canada. While acknowledging broader economic and political risks (tariffs, interest rates, AI disruption), Haas emphasized the importance of company-specific analysis and identifying opportunities where valuations are disconnected from fundamentals. The energy sector, particularly oil, was highlighted as a promising area, while caution was advised regarding sectors vulnerable to tariffs and overvalued large-cap stocks. The overall message was to seek out quality companies trading at attractive valuations, prioritizing long-term potential over short-term market noise.