There’s never been a better time to look at the Canadian mid-cap scene, especially if you believe that the Canadian stock market strength experienced last year will start really broadening out. Of course, there are plenty of major themes and tailwinds to play. While the rise of AI and agents might still be worth going for, even given the rising risks of a bubble (or at least a correction), I still think that it’s vital not to forget about all the other industries out there that can do well.
Whether they benefit from the rise of AI indirectly or if they’re simply not getting enough attention, given their own lesser-recognized tailwinds, I think 2026 could be a great year for investors to start thinking about rotating and diversifying so that one can hold their own if there is a bubble in some parts of the tech sector.
Remember, there’s more to the market than just tech!
So, instead of asking if there is a bubble or not, investors should be ready to ride out whatever curveball the market throws their way. Market crashes and bear markets can happen (in fact, they will happen, likely when you and other investors least expect it), and investors need to know how to navigate them.
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Playing the long game in a pricey market
Diversification and focusing on value are the way to go for long-term thinkers who want to position their portfolios to perform well over time without risking getting wrecked in the next market-wide disturbance.
Though it’s easy to forget past market crashes (notably the 2000–01 bust), it is important to remember that frenzies (and busts) can happen, and it’s smart to temper enthusiasm when momentum gets a bit out of hand while keeping calm when markets eventually do start rolling over. Like it or not, it’s going to happen at some point, whether you’re ready or not.
While I don’t believe an AI bubble is about to burst, I do think that picking undervalued stocks is a way to ensure you’re not within the blast zone if some bubble-bursting were to go off. Whether that means investing in stocks beyond AI or paying more attention to mid-caps, there are options for investors to consider.
Badger stock looks like a high-momentum mid-cap stock worth picking up
Badger Infrastructure Solutions (TSX:BDGI) is a relatively small infrastructure player that has quietly soared by nearly 96% over the past year. Undoubtedly, demand for its non-destructive hydrovac soil excavation services has been on the rise. And as infrastructure spend, especially in energy and utilities, looks to stay hotter for longer, I think Badger has room to the upside, especially given its market leadership. The company has the fleet and, perhaps more importantly, it knows how to run it efficiently, thanks to its exceptional managers.
The stock is getting richly valued, though, now trading at just north of 31 times trailing price-to-earnings (P/E). That’s the priciest I’ve seen it. That said, the earnings growth trajectory may justify the higher price of admission. The forward P/E of around 21 times makes shares of BDGI seem not all too expensive, given the opportunities to come and how well management has been able to execute.
Of course, infrastructure plays can be quite cyclical, so BDGI stock is not a name without risk, especially after a boom period. Given infrastructure spend could stay higher for longer, all while Badger makes moves to improve the margin profile, I see above-average growth ahead, perhaps for years to come.
