Andrey Omelchak, president and CIO, LionGuard Capital Management
FOCUS: Canadian stocks
Top Picks: Premium Brands Holdings, Badger Infrastructure Solutions, Mattr Infrastructure
MARKET OUTLOOK:
At LionGuard Capital Management, we focus on investing in high-quality, mispriced businesses. Our disciplined, bottom-up approach prioritizes long-term value creation while deliberately avoiding the volatility of the commodities complex.
The recent U.S. presidential election has provided significant clarity regarding which businesses are likely to benefit under the new administration. With a unified government (Presidency, Congress, and House under Republican control) driving policy, we expect vast changes in the U.S. economic landscape. Policies emphasizing lower taxes, deregulation, and increased domestic investment are broadly positive for equities and are likely to drive economic activity across multiple sectors.
We believe that infrastructure investments, cybersecurity, defence, high-tech computing, semiconductors, robotics, and other innovation-driven industries are particularly well-positioned to benefit from these changes. The administration’s focus on bolstering these areas aligns with the push for enhanced national security, technological leadership, and long-term economic competitiveness.
Canadian-listed equities with substantial U.S. operations, particularly those insulated from potential higher tariffs on Canadian imports, stand to gain significantly. These companies are poised to capitalize on increased U.S. economic activity and domestic investment initiatives while mitigating trade-related risks.
At LionGuard, we remain committed to investing in businesses led by top management teams and that can thrive in any environment, while it helps to get an additional confidence from highly predictable trends.
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TOP PICKS:
Premium Brands Holdings (PBH TSX)
Premium Brands Holdings is on the cusp of a significant transformation driven by its multi-year investments in new manufacturing capacity, which are now beginning to be filled. These investments are setting the stage for highly predictable and much higher profitability, with incremental EBITDA margins on new business around 30 per cent. PBH’s robust U.S. pipeline includes around $700 million in new client programs slated for 2025, with additional opportunities in later stages. As these programs scale, margins are expected to expand significantly, leading to higher free cash flow and reduced leverage throughout 2025 and beyond. The company is trading at multiples that do not reflect benefits of forthcoming higher margins, higher profitability and greatly reduced leverage. Recent high insider buying is another indication of positive unfolding underlying dynamics.
Badger Infrastructure Solutions (BDGI TSX)
Badger Infrastructure Solutions is well-positioned for substantial growth following the clarity brought by the U.S. presidential elections. Historically, election years have caused delays in certain U.S. projects, but with the political landscape now settled, clients are actively securing capacity, driving a notable increase in activity for Badger. Badger is set to benefit significantly from the anticipated surge in U.S. infrastructure investments, supported by strong secular demand across key regions and commitments of incoming republican administration. At current levels, Badger trades at an exceptionally attractive valuation, well below its historical averages. The company’s expanded NCIB (10 per cent of float) and buybacks to date highlight management’s confidence in its long-term trajectory. With its strong market position, improving margins, and a clear growth runway, Badger is a prime takeout candidate for strategic acquirers or private equity buyers.
Mattr Infrastructure (MATR TSX)
Mattr Infrastructure is a standout growth story, driven by a management team that has successfully transformed the business through sales of non-core operations, smart internal investments and recently a disciplined acquisition. Under their leadership, Mattr has focused on very high-return internal projects, such as the new FlexPipe facility in Rockwall, Texas, which showcases scalable, low-cost expansion capabilities and positions the company to meet rising demand. Additionally, the team has proven itself as thoughtful and diligent acquirers with the strategic purchase of AmerCable, completed at an attractive around five times TTM adjusted EBITDA multiple. This acquisition significantly enhances Mattr’s portfolio, strengthens its North American manufacturing footprint, and unlocks substantial cross-selling opportunities. Mattr’s stands to benefit from increased U.S. infrastructure investments and rising demand for transportation solutions, energy infrastructure buildout, data centers boom and other predictable trends. Trading at exceptionally low multiples, Mattr offers compelling value and numerous catalysts to unlock it in the near-term.
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| PBH TSX | N | N | Y |
| BDGI TSX | N | N | Y |
| MATR TSX | N | N | Y |
Past Picks: SEPTEMBER 10, 2024
Lumine (LMN CVE)
- Then: $36.31
- Now: $43.00
- Return: 19%
- Total Return: 19%
Trisura Group (TSU TSX)
- Then: $39.27
- Now: $40.96
- Return: 4%
- Total Return: 4%
Knight Therapeutics (GUD TSX)
- Then: $6.04
- Now: $5.37
- Return: -11%
- Total Return: -11%
Total Return Average: 4%
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| LMN CVE | N | N | Y |
| TSU TSX | N | N | Y |
| GUD TSX | N | N | Y |