Hot Picks: Three stocks benefiting from infrastructure growth

The AI investment boom is drawing attention to businesses beyond hyperscalers and chipmakers. Opportunities are emerging across electricity generation, infrastructure manufacturing and international industrial distribution.

BNN Bloomberg spoke with Connor Browne, founder, CEO and portfolio manager at City Different Investments, about Talen Energy, Flex and MonotaRO and the investment cases behind the three stocks.

Key Takeaways

• Talen Energy’s Susquehanna nuclear plant has a long-term agreement to supply Amazon with as much as 1,920 megawatts of electricity.
• Flex plans to spin off its cloud and power infrastructure operations as Axiom in the first quarter of 2027.
• Browne believes Axiom could command a strong valuation while the remaining Flex operations are trading at a discount.
• MonotaRO’s relatively small share of Japan’s maintenance, repair and operations market could provide a long growth runway.
• MonotaRO combines a net cash balance sheet and high returns on equity with near-term spending intended to support future expansion.

Read the full transcript below:

LINDSAY: It’s time now for Hot Picks. When investors think about the AI buildout, they think about the hyperscalers and chipmakers. But our next guest is looking behind the curtain to the energy that powers data centres and the equipment that keeps them running. Let’s bring in Connor Browne, founder, CEO and portfolio manager at City Different Investments. Great to have you join us. Good morning.

CONNOR: Good to be here from a rainy Santa Fe, New Mexico.

LINDSAY: Ah, OK. Well, I mean, that’s not good to hear. It’s sunny over here in Toronto, but this is an interesting idea, right? Like, because a lot of people still are looking at the hyperscalers, the chipmakers. What made you think to look kind of, like, beyond the curtain, as we’re saying?

CONNOR: Yeah, I think investing in the midst of what could be a bubble in AI-related stocks is hard, and we think, actually, the path for allocators can be made sort of easy by investing in some passive indexes that have tons of AI exposure these days, and then pairing it with highly active, very concentrated active strategies that are not investing in the same companies. So, since we founded City Different Investments, we’ve been looking across market cap and in different places that the indexes aren’t invested in. So, it’s part of who we are.

LINDSAY: OK. All right. So, first up is Talen Energy. Then tell us what you like about this company.

CONNOR: Yeah, they’re an independent power producer. The crown jewel of their production fleet is a nuclear facility in Susquehanna, Pennsylvania. They’ve already sold about a gigawatt of the two-plus gigawatts of power production out of that facility to an Amazon data centre. We think Talen has more energy like that to sell. That is indicative of the sort of pricing that they can get, and nuclear, in particular, is carbon-free and provides that 24-hour-on power that data centres are going to need moving forward.

LINDSAY: OK. Next up, Flex. Tell us — this one trades on the Nasdaq — tell us more about why you like this company.

CONNOR: Yeah, we’ve owned — we’ve owned Flex a long time. So, Talen came from our global investment team, led by Vinson Walden. Flex is in our SMID-cap strategy, led by Rob MacDonald. We’ve owned Flex since before we founded City Different. So, at our prior firm, together we own — we own the business. And there’s a long-term thesis there, which is that electronic manufacturing services, where Flex operates, is improving their value-add to their customers. It used to be, you know, making computers for Dell, which was a very low-margin business selling into very large clients. They’ve done a really good job of moving up the value chain for a diversified set of customers, and on top of that, they’ve had awesome capital allocation over the years. We’re heading into a spin of their business that supplies data centres early next year. That business will be called Axiom. This is the second spin since we’ve owned Flex. We had really great success the first time around with a solar-supported spin, where, into the spin, the underlying business we thought was almost for free against the implied value of SpinCo. It looks a bit similar today, headed into the spin of their data-centre-supplying business. So, that business is growing really fast, is in need, high in demand. We think it’s going to garner a big multiple in the marketplace. What’s left, which is about half of Flex’s revenues, looks to us like they’re trading at a big discount today.

LINDSAY: Your third pick is an interesting one because, as we said in the tease to you, it’s across the Pacific. This is MonotaRO, Japan’s leading online distributor of MRO supplies. Tell us more about this company.

CONNOR: Yeah, MonotaRO. I snuck — I snuck this one in, I’ll be honest. While they supply the industrial manufacturing base in Japan, there isn’t yet a lot of data-centre work that they’re doing. But nonetheless, we think it’s a really exciting company. Rolf Kelly, who runs our international strategies, owns MonotaRO. It’s really early stages of the Grainger story in the U.S. In fact, Grainger owns 51 per cent of MonotaRO. The key to the MRO business is being really close to your customers. You’re supplying all of sort of the commodity stuff that a manufacturing plant or a business needs to operate day to day. You need to be close to your customers, and you’ve got to have scale. You’ve got to supply everything that they might need very quickly to keep the manufacturing facilities in business, and this has been a beautiful business, really high-return business in the United States, and we’re way, well, way less penetrated in Japan so far. Only three to four per cent of the market is what MonotaRO currently holds. So, lots of room to run, a net cash balance sheet, 30-per-cent-plus return-on-equity business today. They’re going through a reinvest, lots of capex spend right now, but we think, post the capex spend, a really great normalized free-cash-flow yield for what should be a really excellent, very high-quality business in Japan.

LINDSAY: OK, we’ve got to leave it there. Connor Browne, founder, CEO and portfolio manager at City Different Investments. Appreciate you joining us with those. Thanks so much.

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This BNN Bloomberg summary and transcript of the Sept. 18, 2026 interview with Connor Browne 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.