Investors are looking to the industrial sector for businesses with durable assets, pricing power and exposure to long-term infrastructure and environmental spending trends.
BNN Bloomberg spoke with Ian Gillies, managing director at Stifel, who highlighted opportunities in waste management, hydrovac services and global engineering, citing strong cash flow generation, consolidation potential and government stimulus as key supports.
Key Takeaways
- Limited competition in specialized waste infrastructure can support steady annual price increases of three to five per cent alongside modest production growth.
- Strong free cash flow conversion allows companies to fund dividends, buybacks and acquisitions without heavy capital reinvestment.
- U.S. infrastructure legislation and data centre expansion are driving demand for non-destructive excavation and utility services.
- Engineering firms tied to public infrastructure may be less exposed to AI disruption than software-focused businesses.
- Government stimulus across OECD countries and ongoing industry consolidation are reinforcing long-term growth prospects in industrials.
Read the full transcript below:
ROGER: Time now for Hot Picks, and we’re zeroing in on three plays in the industrial sector. Our next guest has Secure Waste as his top pick. The leading waste management and energy infrastructure company operates primarily in North America, focusing on sustainable waste solutions and energy services. For more, I’m joined by Ian Gillies, managing director at Stifel. Ian, thanks very much for joining us. Let’s get right to it. Secure Waste is at the top for a reason, I guess.
IAN: Certainly. When you think about where we are in the stock market today, there’s elevated concern around AI disintermediation and how it’s going to impact people-centric businesses, whether blue collar or white collar. We think Secure stands out from that pack because it has what is largely an irreplaceable network of assets in Western Canada that removes and helps clean up oilfield waste.
One of the interesting things about this stock is that there are really only two players that do this in Western Canada. That creates a very strong operating environment for the company. Because of this, it has the ability to move prices up three to five per cent every year, alongside the benefit of higher waste volumes. Western Canada production grows at roughly two to three per cent every year.
The other important aspect for this business is that it is an integral player in water disposal and managing ongoing water production in Western Canada. As a result, the company is growing its EBITDA at roughly seven per cent a year. More importantly for us, it converts roughly 50 per cent of that EBITDA to free cash flow and does not need to invest a significant amount of capital back into the business.
As a result, it is growing its dividend — it recently started doing that again — and is able to buy back a meaningful amount of stock. We think it could repurchase anywhere from three to five per cent of its shares this year. It is also moving through a consolidation strategy, rolling up metals and scrap steel businesses throughout Western Canada. That is important because of the proliferation of electric arc furnaces being built in North America.
The combination of these factors leads us to believe investors may move back toward more traditional businesses, and this is one with the financial characteristics we like to see.
ROGER: Does it have any expansion plans right now? You mentioned Western Canada, but is it looking beyond that or outside North America?
IAN: It is primarily a Western Canadian business. It is adding to its asset base throughout Western Canada, often through small bolt-on projects. There have been looks at U.S. assets in the past, but it is a very different operating environment, and there is more than enough growth to be had in Canada at this time.
ROGER: So you think there is room for it. Any challengers, or does it have a moat?
IAN: There is a very real moat. When you think about the facilities this company has built in Western Canada, the last one was built in 2014. At that time, they cost around $35 million. We think those facilities would cost anywhere from $50 million to $75 million today. We do not believe there is access to capital to build them, nor sufficient demand, so we do not believe they can be replaced in any meaningful way.
ROGER: Let’s get a couple more in here. Badger Infrastructure Solutions — they’re the ones doing the digging.
IAN: Badger is a very interesting business right now. They specialize in non-destructive excavation. If you were digging a hole in your backyard and wanted to avoid a line strike, their trucks would help ensure that does not happen. That said, their focus is largely on large industrial and commercial projects.
They are about 90 per cent U.S.-focused and are benefiting from a number of tailwinds. One is increased infrastructure-related spending through legislation such as the Infrastructure Investment and Jobs Act. There is also benefit from AI and data centre development, which accounts for about eight per cent of their business today. Given the power and utility needs tied to that buildout, and with Badger being the largest hydrovac company in the U.S. with a coast-to-coast network, we believe it is well positioned.
The stock has traded lower over the last month on concerns that first-half margins will not expand as quickly. We think that view misses the point. The company is investing in the business over the next few quarters because it sees a strong growth opportunity emerging in the back half of next year and into 2027. We expect further confirmation through a higher truck build program than the market is anticipating. Looking out 12 months, we think this one performs well.
ROGER: And last but not least, WSP.
IAN: WSP has been a very interesting stock this year. It has suffered as part of the AI disintermediation trade. We believe the market has been overly punitive. Engineering is very different from software. Engineers operate in the real world.
The CEO made an interesting point on the company’s conference call last week, noting that engineering outcomes are deterministic rather than probabilistic, as is the case with AI. When you are building bridges, assessing soil or designing critical infrastructure, you need a deterministic answer. You cannot rely on probabilities because failure is not an option.
It may take time for the market to differentiate between businesses exposed to AI risk and those that are not. However, we believe the company’s long-term consolidation strategy and global government spending trends support solid fundamentals. With the stock trading at roughly 18 times earnings, we think opportunities to buy a business of this quality at that multiple are limited.
ROGER: We’ll wrap it up there. Ian, thank you as always for joining us.
IAN: Thank you.
ROGER: Ian Gillies, managing director at Stifel.
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| SES TSX | N | N | Y |
| BDGI TSX | N | N | Y |
| WSP TSX | N | N | Y |
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This BNN Bloomberg summary and transcript of the March 2, 2026 interview with Ian Gillies are published with the assistance of AI. Original research, interview questions and added context was created by BNN Bloomberg journalists. An editor also reviewed this material before it was published to ensure its accuracy and adherence with BNN Bloomberg editorial policies and standards.
