Jordan Zinberg, president and CEO, Bedford Park Capital FOCUS: Canadian small and mid-cap stocks
Top Picks: Goeasy, Mainstreet, Source Energy Services
MARKET OUTLOOK:
Last year was an “easy” year for investors, as the market rally was broad, and the majority of North American equity indices rose by 20 per cent or more. Despite shifting investor expectations surrounding interest rates and geopolitical tensions, markets managed to climb their wall of worry and valuation multiples expanded significantly in 2024.
So far in 2025, stock markets have been drifting lower and volumes have been light. Investor attention has been focused on the relatively high valuations carried by U.S. large cap equities, however there is a significant disparity in earnings multiples between U.S. and Canadian equities. There is also a substantial difference in the valuations of small cap versus large cap stocks in both the U.S. and Canada relative to historical levels.
While we are no longer seeing high quality stocks trading at distressed multiples like they were a year ago, it is still possible to find profitable growth stocks trading at single digit valuations. We continue to find excellent opportunities in the domestic small and mid cap equity market.
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TOP PICKS:
Goeasy (GSY TSX)
Goeasy is a Canadian specialty lender that continues to demonstrate substantial growth in its loan book through expansion of its product offering. The company is now launching a credit card product, a major segment of the Canadian non-prime market that they did not operate in previously. The balance sheet is in great shape, and with a consistent track record of generating at least 20 per cent returns on equity, the current valuation at seven times 2026 earnings represents a great entry point for investors.
Mainstreet (MEQ TSX)
Mainstreet specializes in acquiring and managing mid market rental apartment buildings in Western Canada. The company is in a sweet spot at the moment, as market rents are steadily increasing while vacancy rates are extremely low, leading to stellar operating results. Mainstreet has substantial liquidity to fuel future growth and is currently trading below our estimate of net asset value.
Source Energy Services (SHLE TSX)
Source is a fully integrated oilfield services company based in Calgary and is one of the largest suppliers of frac sand in Canada. Demand for frac sand is very robust and the company will benefit significantly from the LNG Canada project coming online this year. Despite strong operating results and the recent refinancing of their debt at a lower rate, the stock is trading at a very attractive valuation.
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| GSY TSX | Y | Y | Y |
| MEQ TSX | Y | Y | Y |
| SHLE TSX | Y | Y | Y |
PAST PICKS: January 15, 2024
Payfare (PAY TSX)
- Then: $6.67
- Now: $3.91
- Return: -41%
- Total Return: -41%
Foraco International (FAR TSX)
- Then: $2.53
- Now: $2.32
- Return: -8%
- Total Return: -6%
Propel Holdings (PRL TSX)
- Then: $14.48
- Now: $34.72
- Return: 140%
- Total Return: 144%
Total Return Average: 32%
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| PAY TSX | N | N | N |
| FAR TSX | Y | Y | Y |
| PRL TSX | Y | Y | Y |