Colin Stewart, CEO & Portfolio Manager, JC Clark
Focus: North American equities
Top picks: Mattr Infrastructure Technologies, Fairfax India, Black Diamond
MARKET OUTLOOK:
The economy, particularly in the U.S., has remained resilient thus far in 2025. Nevertheless, we believe there are reasons to be cautious and expect slowing economic growth in the second half. While the ultimate level of U.S. tariffs is not yet known, it appears that a baseline 10 per cent on most nations is likely. Although lower than feared a few months ago, this tariff level will still be punitive and weigh on global growth.
The uncertainty created by U.S. President Donald Trump’s administration and their volatile policy regime policy regime has hurt consumer sentiment and delayed capital spending decisions by corporations around the world. Earnings estimates have moved lower over the last six months, geopolitical risks have risen, and higher tariff-driven inflation remains a possibility in the months ahead.
Despite all of this, the already pricey U.S. equity market has rallied, and equity valuations have expanded to near record levels. Optimism around artificial intelligence seems to be the main driver and while this technology will undoubtedly be significant, it is unclear if the massive capital spending on AI will generate adequate returns on capital and drive corporate profitability higher.
The market, as has been the case in recent years, is taking the most optimistic assessment and running with it. All of this suggests that the risk reward backdrop, particularly for U.S. stocks, is unfavorable.
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TOP PICKS:
Mattr Infrastructure Technologies (MATR TSX)
Mattr is an industrial technology company enabling the renewal and expansion of critical infrastructure such as transportation, communication, water management and energy.
It has two business segments. Connection technologies (specialty wire and cable) and composite technologies (composite pipes and storage tanks). It was a sold pipe coating business a few years ago which reduced reliance on volatile oil and gas industry.
The management team has invested heavily in new facilities to expand capacity and improve margins only beginning to see benefit.
The company is benefiting from electrification and building out of data centers.
FCF and debt repayment will accelerate as major capital projects near completion. It has an attractive valuation – EV/EBITDA (2026E) = 6.2x EV/EBITDA (peers trade at 8x-10x)
The company is repurchasing shares at attractive levels (have bought back 14 per cent of S/O since mid-2022)
Fairfax India (FIH-U TSX)
Fairfax has immense potential in India with the country’s population of 1.4 billion people, the largest democracy on the planet and favourable demographics with a young/growing population.
The Indian subsidiary of Fairfax Financial is focused on investing in public and private businesses in India (FFH owns roughly 42 per cent of s/o)
Investors get the benefit of Fairfax’s investing acumen, deep expertise in India, and team on the ground. Fairfax holds an investment portfolio worth roughly US$3.4 billion comprised of five Indian public companies and eight private businesses across a range of sectors including financial services, industrial, transportation, and infrastructure.
Most of these businesses are growing at 15 to 30 per cent annually, with high margins, high ROE’s and strong balance sheets.
The crown jewel asset is 74 per cent ownership of Bangalore International Airport (India’s third largest airport). It is an incredible asset with 42 million passengers annually, $300 million+ EBITDA, growing at 15 to 20 per cent per year, minimal maintenance capex and deeply undervalued based on current $2.6 billion implied valuation. Fairfax is working to list this business publicly in India which should create catalyst for surfacing value
Fairfax trades at a 15 per cent discount to book value/sh. The book value has huge upside over time as most businesses are growing rapidly (believe in five years, Book value/sh. could be between $60-$70, up from approx. $22/sh. today)
Black Diamond (BDI TSX)
Black Diamond rents and sells modular space and workforce accommodations in Canada, the U.S., and Australia across a diverse range of sectors such as construction, education, power and infrastructure.
The company is benefiting from growing number of infrastructure projects, disaster relief, investment in Canada’s North, and growing needs in the education sector.
The modular space division benefits from contracted future revenues (average of four to five year duration), pricing power, and predictable cash flow.
It owns LodgeLink, a digital platform servicing crew travel (with potential to monetize in future). It has a strong alignment of interests with 26 per cent insider ownership, an attractive free cash flow generation (12 to 13 per cent free cash flow yield). It has a discounted valuation of7.0x EV/EBITDA (2026E)
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| MATR TSX | N | N | Y |
| FIH-U TSX | Y | Y | Y |
| BDI TSX | N | N | Y |
PAST PICKS: FEB. 19, 2025
Pollard Banknote (PBL TSX)
Then: $28.30
Now: $21.93
Return: -22%
Total Return: -22%
Information Services Corp (ISC TSX)
Then: $27.53
Now: $32.50
Return: 18%
Total Return: 20%
Brookfield Business Partners (BBU-U TSX)
Then: $35.96
Now: $35.20
Return: -2%
Total Return: -2%
Total Return Average: -2%
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| PBL TSX | Y | Y | Y |
| ISC TSX | Y | Y | Y |
| BBU-U TSX | Y | N | Y |
