Dennis Mitchell’s Top Picks for Oct. 1, 2026

Dennis Mitchell, CEO & CIO, Starlight Capital

Focus: Infrastructure Stocks

Top Picks: Siemens Energy, Aecon Group, Pembina Pipeline

MARKET OUTLOOK:

Performance: Global listed infrastructure returned about two per cent through September and has been selling off consistently since July. Midstream, electric utilities, liquefied natural gas (LNG) and rails led the gains. Toll roads, airports and communications lagged.

What’s driving it:

• Power demand: U.S. electricity demand is forecast to grow three to five per cent a year through 2030, driven by data centres and grid-reliability spending. That supports regulated utilities, transmission and nuclear operators, which are getting stronger pricing on forward contracts. BlackRock’s fourth quarter (Q4) outlook calls power and grid bottlenecks the most durable way to invest in artificial intelligence (AI).
• Natural gas and midstream: Middle East supply disruptions, including damage to Qatar’s Ras Laffan LNG hub, pushed global gas prices up while US prices stayed low. That favours North American gas pipelines and LNG export assets. Higher crude prices have also helped oil-focused midstream.
• Valuation: Despite the rally, the sector still trades at a significant discount to global equities.

Headwinds:

• Rates: The US 10-year bond yield has risen above five per cent, which hurts long-duration, rate-sensitive assets like regulated utilities, toll roads and towers.
• Inflation: Diesel and jet fuel remain expensive, keeping inflation risk alive and pushing regulators to worry about affordability in utility rate cases.
• Other risks: A de-escalation with Iran could unwind energy gains, policy on permits and trade is uncertain, and hyperscalers could cut capex.

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TOP PICKS:

Siemens Energy (ENR XETRA)

Siemens Energy is a German maker of power generation and grid equipment, and one of the main suppliers of the AI-driven electricity buildout. The two main businesses are gas services (gas turbines and servicing) and grid technologies (transformers, switchgear and high-voltage direct current transmission) while Transformation of Industry will be spun off in a 10 euros (€) billion deal. Third quarter (Q3) fiscal 2026 was a record quarter:

• Orders: 17.9€ billion, a book-to-bill of 1.57.
• Revenue: 11.4€ billion, up 19 per cent year over year.
• Profit margin before special items: 14.2 per cent, also a record.
• Backlog: a record 162€ billion.

Gas Services orders rose 62 per cent, driven by data centres and utilities that need dispatchable power. Grid Technologies earned a margin of about 20%. Year-to-date free cash flow is about 7.2 € billion, and management says pricing is holding. The main risks are the stock’s valuation, tight manufacturing capacity, and any slowdown in hyperscaler capex.

Aecon Group (ARE TSX)

Aecon is one of Canada’s largest construction and infrastructure companies. It works on nuclear refurbishment and new builds, utilities, urban transit and civil projects, and holds a portfolio of concessions. Second quarter (Q2) 2026 results:

• Revenue: a record $1.6 billion, up 25 per cent.
• Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA): $82 million, double the prior year.
• Construction segment margin: 5.5 per cent, up from 3.1 per cent.
• Backlog: $10.5 billion.

Aecon plans to buy Oaktree’s $320 million stake in Aecon Utilities, which would give it full control of a business with more than $1.2 billion in revenue, about 70 per cent of it recurring. Free cash flow over the last 12 months was $301 million, and net debt is 2.2 times EBITDA. The main risk is still its legacy fixed-price contracts, which cost it $36 million over the past year. Management expects double-digit revenue growth in 2026.

Pembina Pipeline (PPL TSX)

Pembina is a Calgary-based midstream company. It owns pipelines, gas processing and NGL fractionation assets in Western Canada, and is expanding into LNG exports (Cedar LNG) and power generation. Q2 2026 results:

• Adjusted EBITDA: C$1.06 billion, up five per cent.
• 2026 guidance: $4.35–4.55 billion, reaffirmed and trending toward the midpoint.
• Dividend: $0.735 per quarter.

Pembina recently approved two projects:

• Greenlight Electricity Centre: a $4.6 billion, 932 MW gas-fired power plant that will supply a Meta data centre.
• Heartland ethane extraction plant: $570 million.

It is also considering a stake in a proposed West Coast oil pipeline. Management targets five to seven per cent annual growth in fee-based EBITDA per share through 2030. The main risks are project execution, commodity-sensitive earnings, and regulatory approvals.

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