James Telfser’s Top Picks for October 14, 2025

James Telfser, Partner & Portfolio Manager, Ewing Morris & Co. Investment Partners

Focus: North American Stocks

Top picks: Tourmaline Oil, Driven Brands, Aecon

MARKET OUTLOOK:

As we enter the final quarter of 2025, markets appear to be shifting from a late-cycle slowdown toward a reflationary, more balanced environment.

Growth remains modest but positive, inflation is stabilizing near three per cent, and policy makers are tilting toward easier conditions. Together, these dynamics support a backdrop where risk appetite can broaden beyond the narrow leadership of recent years.

We expect small and mid-caps to outperform as the cycle turns. Their leverage to domestic activity, valuation discounts, and higher operational sensitivity to renewed growth all provide catalysts. Investor engagement in under-owned areas of the market has started to increase, suggesting the early stages of a style rotation towards value and cyclicality.

This setup echoes the post 2000 to 2001 environment, when stretched large-cap growth multiples unwound and capital rotated toward smaller, more reasonably priced companies.

Small-Caps outperformed for several years as investors rediscovered earnings durability and cash-flow discipline – conditions that may re-emerge as the cost of capital normalizes.

While global trade frictions and geopolitical issues still present headwinds, the overall picture globally is not recessionary. Credit spreads are tightening, issuance is robust, and confidence is rebuilding across real economy sectors. Against this backdrop, a diversified, valuation-aware approach favoring smaller companies with tangible catalysts appears well aligned with the evolving macro regime.

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TOP PICKS:

Tourmaline Oil (TOU TSX)

Tourmaline remains our largest position in the Darkhorse Fund and a top pick for its dominant position in North American natural gas. The recent pullback reflects weakening gas prices rather than a change in fundamentals. Management’s decision to ramp up long-term investment surprised a market conditioned for return of capital, setting the stage for outsized returns as sentiment normalizes.

CEO Mike Rose has been a proven value creator over multiple cycles so we’re prone to side with him when he expresses confidence in an improving price environment.

With industry-leading balance sheet strength (2026e Discounted Cash Flow (DCF) valuation multiple of 0.2) and disciplined growth, Tourmaline continues to be our preferred way to gain exposure to Canadian gas and LNG demand growth.

Driven Brands (DRVN NASD)

We believe Driven Brands is materially undervalued, especially given the embedded value in its fast-growing Take 5 quick-lube business. The Board’s recent actions point to a clear path toward becoming a pure play Take 5 operator, which would command a premium multiple.

The business benefits from a large, recurring addressable market (~500 million oil changes annually in the U.S.), strong unit economics, and a differentiated “stay-in-your-car” model that delivers industry-leading convenience and margins. As the transformation unfolds, we expect the market to re-rate the stock materially higher.

Aecon (ARE TSX)

Aecon is on the verge of a meaningful inflection point as legacy project risk fades and its order book shifts toward more predictable, higher-margin infrastructure work. The Eglinton LRT is entering final testing, and with additional major contracts nearing completion, overhangs are moving into the rear-view mirror.

PAST PICKS: April 15, 2024

MDA SPACE (MDA TSX)

Then: $14.31

Now: $36.08

Return: 152%

Total Return: 152%

Microsoft (MSFT NASD)

Then: US$413.64

Now: US$509.33

Return: 23%

Total Return: 24%

Arc Resources (ARX TSX)

Then: $25.19

Now: $25.57

Return: 2%

Total Return: 6%

Total Return Average: 61%