It isn’t just the well-known blue-chip stocks that are starting to get some wind at their tail. The mid-cap growth stocks are also participating in the rally. And as the TSX Index’s hot run (it’s up close to 15% year to date, ahead of the S&P 500, which is up 10%) continues, I think Canadian investors may wish to spread some of their bets towards the lesser-appreciated, perhaps cheaper and growthier names that boast market caps well below the $5 billion mark.
Of course, the mid-cap gems may introduce more volatility to a portfolio, but given the macro picture (think about where rates could head from here) and themes in tech (most notably generative artificial intelligence, or AI) and the relative value to be had in the waters of the Canadian stock markets, where many new retail investors don’t care to venture, I see ample reasons to at least think about the mid-caps now that they’ve got some meaningful momentum.
Indeed, younger investors looking for a bit more of a growth jolt without having to venture into the U.S. market may wish to stick with a mid-cap index ETF of sorts to keep things simple. And while there’s certainly nothing wrong with this approach, at least in my view, I think that picking your own names could have far greater upside than settling for the averages.
At the end of the day, the mid-cap universe is full of unprofitable names with business models that may be unsound. Indeed, if you can evaluate businesses and discover the names that can continue their ascent up the market cap leaderboards, perhaps there’s an opportunity to do better than that of your mid-cap benchmark. In any case, let’s get into a mid-cap value stock that looks tempting today.
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Badger Infrastructure Solutions
Badger Infrastructure Solutions (TSX: BDGI) has been a quiet gainer this year, soaring more than 60% year to date. After such a run, supported by robust quarterly showings, the mobile soil excavation service provider is quickly becoming one of my favourite Canadian mid-cap firms.
Indeed, I’ve been fond of Badger for well over a year now, but given recent developments, I’d be inclined to back the stock as it furthers its breakout. If you haven’t checked out the TSX mid-caps as they’ve gone dormant prior to the latest rally, you may be surprised to hear of the name change. I’ll admit that the old name, Badger Daylighting, was far catchier. However, the new name really highlights the opportunity at hand. It’s an infrastructure play in a time when business is booming.
In any case, Badger provides non-destructive hydrovac excavation services, which, in simple terms, means the firm has a fleet of trucks that can do digging via pressurized water so that buried infrastructure (like pipelines) isn’t damaged. Indeed, you probably wouldn’t want to use a mechanical excavator for such! As investment in new infrastructure rises, so too will the workload for Badger.
Personally, I think the most significant growth opportunities moving forward lie in data centre upgrades. It’s a small slice of the pie today, but in a couple of years, perhaps there’s more room to run.
Given management’s ability to maintain margins in the face of challenges, I see Badger as a company worth buying and stashing away for the long haul. It’s a mid-cap that can really boom in this economy. With a $1.95 billion market cap, Badger’s still relatively unknown, but probably not for long, especially if more rate cuts are on the horizon for Canada and the U.S.
