The mid-cap Canadian stocks are a great place to look if you don’t mind the added volatility for a shot at potentially better valuations on growth names that just aren’t as well-covered. In this piece, we’ll check out a pair of worthy mid-cap stocks that I think can give Canadian investors’ Tax-Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP) portfolios a nice boost. Of course, a long-term horizon is recommended to better weather any extra volatility from the mid-cap names that tend to be more exaggerated than their larger-cap counterparts.
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NFI Group
First up, we have NFI Group (TSX: NFI), a bus manufacturer that’s really embraced the movement towards electrification. While it could take a while longer for electric buses to become the new norm, I think that NFI is a very unique spot as public transit looks to shift gears towards electric over the coming decade and beyond. If you’ve taken the bus in the big city, you’re probably familiar with the New Flyer brand, one of NFI’s more impressive bus brands. And while the business of bus making can be rather cyclical, I do think that NFI is a buy for the amount of innovation that’s going on behind the scenes.
Of late, the stock has been taking off, gaining just shy of 25% year to date or more than 63% in the past six months. Indeed, the $2.1 billion company has seen ample margin improvement of late. And with traction picking up in zero-emission buses, I think the clean energy secular trend is starting to work in the mid-cap firm’s favour.
With a more optimistic outlook despite tariff uncertainties, NFI stock is a name worth considering, despite the potential for a choppier ride moving forward. The stock trades at just 0.48 times price to sales, which is incredibly cheap for a firm that’s already been through enough pain. The 88% peak-to-trough implosion in the stock is in the rearview, and it’ll be interesting to see if NFI can claw back to the $20s over the medium term on the back of growing orders.
Sprott
Sprott (TSX: SII) is a $2.5 billion firm behind the line of popular precious metal closed-ended funds (CEFs) and exchange-traded funds (ETFs). As you’d imagine, it’s a good time to be in the business of providing investment products in the realm of precious metals.
Gold has been gaining massively in recent years, and silver joined the party just a few months ago. While there’s no telling where the bull market in gold and silver goes next, I think that all macro forces seem to be pointing to greater demand for the two alternative stores of value. Gold, in particular, stands out as an asset that many retail investors may still be underinvested in.
The sweet spot for gold exposure (it’s 5% for some) ranges, but as the bull run continues, I see demand for Sprott’s products staying robust. Sprott is in the right place at the right time and is itself a great way to play investor demand for the broad basket of precious metals. The shares have already melted up over 73% in a year or 122% in two years. But I think there’s room to run if the gold boom proves far from over. The stock trades at 26.2 times forward price to earnings with a 1.72% dividend yield.
