Market Call: Ryan Modesto's outlook on North American Stocks (May 26, 2026)

Key Concepts

• Growth & Momentum Investing: A strategy focusing on companies with strong balance sheets, positive cash flows, and upward price trends (52-week highs).
• AI Infrastructure: The physical and digital ecosystem supporting AI, including data centers, power generation, and specialized hardware (e.g., LiDAR).
• Onshoring/Reshoring: The trend of bringing manufacturing and infrastructure development back to North America.
• Independent Power Producers (IPPs): Companies generating electricity, increasingly vital for the high energy demands of AI data centers.
• Valuation Multiples: Using metrics like Forward P/E (Price-to-Earnings) to identify undervalued growth opportunities.

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Market Outlook and Strategy

Ryan Modesto, CEO of Eye to Eye Capital Management, argues that investors often focus too heavily on "bogeymen" (geopolitical risks, war) while ignoring positive drivers. He highlights earnings growth, AI investment, and infrastructure spending as the primary catalysts currently supporting the market.

• TSX Discernment: Modesto warns that the TSX is heavily concentrated (70%) in financials, energy, and commodities. He advises caution, noting that if commodity prices move sideways, the TSX could lag behind other global markets.
• Investment Framework: His firm uses a "sandbox" approach to narrow down the investment universe:
  1. Strong balance sheets.
  2. Positive momentum (often favoring 52-week highs).
  3. Quality operating history.
  4. Positive cash flows.

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Sector Analysis and Specific Stocks

1. Infrastructure and Engineering

• AtkinsRéalis (formerly SNC-Lavalin): Modesto is cautious due to the company's history of execution issues. While their nuclear engineering business is promising, he prefers other names in the Canadian engineering space.
• Stantec vs. WSP Global: While Stantec has a large backlog, Modesto prefers WSP Global. He notes WSP is trading at a 10-year valuation low (15x forward earnings) and recently made a strategic acquisition in the power sector.

2. Space and Defense

• MDA Space: A favored pick. Unlike many US space companies that have high valuations but weak balance sheets, MDA is profitable, has a strong balance sheet, and benefits from clear tailwinds in satellite and space infrastructure.
• Kraken Robotics: A high-risk, volatile, but attractive play in underwater defense drones. Modesto notes a lack of public-market competition in this niche.
• Kratos Defense & Security Solutions (KATO): A top pick. Modesto highlights their "Loyal Wingman" drone technology, which supports fighter jets. He views the drone sector as essential for future government rearmament.

3. Technology and Software

• Shopify: Despite market volatility and fears that AI will replace software, Modesto views Shopify as an innovative leader that is successfully integrating AI into its offerings. He considers the recent drawdown a buying opportunity.
• Intuit (INTU): Trading at a 20-year valuation trough. Modesto argues that small businesses will not outsource bookkeeping to generic AI tools, making Intuit’s specialized infrastructure highly valuable.
• BlackBerry: Acknowledged for a successful turnaround in automotive security software, though Modesto suggests tempering expectations due to recent price expansion.

4. Energy and Utilities

• Enbridge: Viewed as a reliable, steady utility play with consistent capital allocation. Modesto notes that while it is often seen as defensive, it also benefits from the increased energy demand driven by AI.
• Talen Energy (TLN): A top pick. As an independent power producer, 50% of their new capacity is earmarked for data centers. Modesto views this as a "derived demand" play for those wanting AI exposure without the high multiples of pure-tech stocks.
• Tourmaline (TOU) vs. Tamarack (TVE): Both are liked, but Modesto notes they serve different roles; Tourmaline is more oil-focused, while Tamarack has shown strong recent momentum.

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Notable Quotes

• "We're always so focused on the negatives... and we forget to think about the good things." — Ryan Modesto on market sentiment.
• "It's a game of patience... you've done the work, you've done the research, you know why you own it." — Modesto on holding volatile mid-cap stocks like SoFi.
• "We think you're going to look back in 12 months, maybe two years, and look at these valuations... and people are going to say, 'Oh, that was so obvious.'" — Modesto on the current software sector sell-off.

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Synthesis and Conclusion

The core takeaway from the discussion is that the "AI trade" is not limited to software or chip manufacturers. Modesto emphasizes a "picks and shovels" approach to the AI revolution, focusing on the physical infrastructure (data centers, power producers, and specialized engineering firms) that enables AI to function. He advocates for patience with high-growth, volatile names and suggests that the current market skepticism toward software and engineering stocks provides a significant entry point for long-term investors.