Brian Madden’s Top Picks for Dec. 18, 2025
Brian Madden, Chief Investment Officer, First Avenue Investment Counsel
Focus: North American equities
Top picks: Trican Well Service, McKesson, Intact Financial
MARKET OUTLOOK:
A sector and style leadership tug of war has broken out in U.S. equity markets over the past few weeks.
What was once considered by investors to be an incontrovertible truth – the primacy of the AI thematic leaders in propelling equity indices to ever higher highs has come under close scrutiny in recent weeks.
Important questions are being asked aloud by renowned and well-respected investors about the AI arms race and whether it will ultimately yield an adequate return on investment for those at its forefront. Moreover, investors are increasingly starting to realize the tight interconnectedness of many of the AI businesses and some of the unconventional financing arrangements between themselves.
We are big believers in the transformational impact AI will have on vast swaths of the global economy and have investment exposure to it via semiconductor chip designers and foundries, power producers and upstream of that, producers of natural gas and uranium electric power feedstock.
But a prudent investor doesn’t wear rose colored glasses and ought always to be asking themselves: how might I be wrong? What could go wrong? As such, in recent weeks we have taken partial profits on some of these early AI leaders and have recycled those gains into more “mundane” businesses…a number of whom – ironically - are already using and capturing demonstrable value from large language models, big data, machine learning, robotic process automation and other cutting edge technology….albeit with much less fanfare and hyperbole than the leading cloud titans generate.
TOP PICKS:
Trican Well Service (TCW TSX)
Trican is Canada’s largest pressure pumper, fracking, well completions company with a leading market share in the prolific Montney and Duvernay basins.
Under new management since 2020, the company has structurally improved its margins and returns on invested capital through operating efficiencies (better equipment and personnel utilization) and equipment modernization which has enabled them to flex “some” pricing power on complex jobs in this industry.
Apart from the very strategic and very accretive acquisition of Iron Horse Energy in July, the company generally reinvests cash flows into maintenance capex, buys back its shares prolifically (47 per cent of total outstanding shares retired since 2017) and since reinstating it’s dividend in 2023, has increased it three times – at a compound rate of 14 per cent annually.
With a 3.9 per cent dividend yield, a discounted valuation below 10 times earnings and five times EBITDA, and with synergy opportunities of $15 to $20 million a year to realize via integration of Iron Horse and with leverage to a cyclical - or, perhaps structural - increase in well completions activity with the LNG export terminal now active and an increasingly resource and infrastructure friendly political backdrop, we see compelling income and capital appreciation potential in the shares.
McKesson (MCK NYSE)
McKesson is the largest pharmaceutical drug distributor in the United States. Pharmacy distribution is an oligopoly in the U.S. with the top three players holding a combined 90 per cent market share.
Distributors negotiate bulk purchases of drugs from manufacturers on behalf of pharmacy, hospital, long term care and other end market clients and physically move drugs to their warehouses and then onto retail stores and other primary care endpoints.
McKesson earns a very high return on invested capital in this non-cyclical business with very sticky customer relationships - no major retailer has changed their drug distributor in over a decade. Its smaller medical and surgical equipment, distribution and pharmacy technology solutions and consulting businesses are higher margin and faster growing businesses.
A pending plan to spin off the Medical-Surgical unit via IPO promises to surface hidden value within this unit. Dividends have grown every year for the last 25 years and over the latest five years have grown at a compound rate of 14 per cent.
This month’s 10 per cent pullback in the shares from their late November peak affords new investors an excellent entry point into this market leader that is secularly advantaged by demographics and morbidity trends in the United States.
Intact Financial (IFC TSX)
With an 18 per cent market share, Intact Financial is the largest property and casualty insurer in Canada. Intact underwrites auto, home, commercial and specialty insurance policies and is best known for the efficiency of its operations and its consistent underwriting profitability which enables them to target a return on equity five times higher than its’ rivals and which currently exceeds 20 per cent.
Intact is flexing scale advantages in its home market to invest in machine learning, data science, AI & robotic process automation initiatives as well as digitization of client experience/user experience interfaces to deliver sharper pricing, better risk selection, shorter claims cycle times and peer leading net promoter scores from policy holders.
As a consolidator of the fragmented insurance market, Intact has grown earnings at a 13 per cent compound rate over the last decade and has entered new markets in the U.S., the U.K. & Ireland via platform acquisitions.
PAST PICKS: DEC. 4, 202
Telus (T TSX)
Then: $22.07
Now: $17.48
Return: -21%
Total Return: -11%
1. Operational Focus & Non-Telecom Assets
Madden highlighted that Telus has "more financial strength and optionality" than its rivals because it is less distracted by the integration of massive recent acquisitions.
Telus Health: He continues to see long-term value in their healthcare division (including the former LifeWorks/Morneau Shepell), which provides higher-margin growth than traditional wireless services.
Real Estate Monetization: A unique catalyst Madden mentioned is Telus's plan to monetize roughly $3 billion in surplus urban real estate.
As copper wires become obsolete and technology shrinks, Telus is redeveloping old switching stations into high-rise residential units.
2. Valuation and "Unpriced" Assets
Madden concluded that the current market price does not reflect the "hidden value" of the company. He jokingly mentioned that the scrap value of the copper alone being removed from their network could be worth up to $1 billion, yet the market is treating the company as if it is in a permanent state of decline.
Microsoft (MSFT NASD)
Then: US$437.42
Now: US$481.84
Return: 10%
Total Return: 11%
Allied Properties REIT (AP.UN TSX)
Then: $18.42
Now: $13.09
Return: -29%
Total Return: -19%
Total Return Average: -6%
In his December 18, 2025 appearance, Brian Madden addressed Allied Properties REIT (AP.UN-TSX) as a classic "deep value" play that has tested investor patience.
Here is an expansion on Madden’s commentary regarding Allied Properties:
1. "Trophy" Assets vs. Generic Office Space
Madden distinguished Allied from the broader, struggling office REIT sector. He argued that Allied’s focus on "Class I" urban workspace (brick-and-beam, character-rich buildings in downtown cores like Toronto and Montreal) makes it more resilient than the commodity-grade glass towers.
He noted that while suburban office vacancy is high, Allied’s "trophy" assets continue to attract tech and creative tenants who value unique physical office environments to lure employees back to the desk.
2. Deep Discount to NAV (Net Asset Value)
Madden highlighted a massive disconnect between the stock price and the private market value of the buildings.
The Math: He pointed out that the REIT was trading at approximately 0.33x its book value (or a 65%+ discount).
The Thesis: He believes the market is pricing in a "doomsday scenario" for office real estate that isn't supported by Allied's actual leasing activity. He noted that even if the buildings were sold individually in a "fire sale," they would likely fetch significantly more than what the current stock price implies.
3. Dividend Sustainability & Yield
With the stock price sitting near its 52-week low (~$13.00), the yield had spiked to over 13%.
Madden addressed the "elephant in the room": whether the dividend would be cut. He stated that while the payout ratio is tight, the REIT’s recent asset sales (including non-core data centers and residential interests) have provided enough of a "liquidity runway" to maintain the distribution while they wait for interest rates to stabilize further.
4. De-leveraging as a Catalyst
Madden mentioned that Allied has been one of the most aggressive REITs in terms of cleaning up its balance sheet. By selling off non-core assets to pay down more expensive floating-rate debt, the company is "self-funding" its way through the high-interest-rate environment rather than relying on expensive new equity issues.
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