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Jerome Hass Reveals His Must-Watch Mid-Cap Stocks for 2025

How Jerome Hass is Positioning His Portfolio for Volatility and Uncovering Hidden Mid-Cap Gems

•• 5 Min
Jerome Hass Reveals His Must-Watch Mid-Cap Stocks for 2025

Jerome Hass, portfolio manager at Lightwater Partners, is maintaining a defensive stance on the market while strategically investing in Canadian mid-cap stocks. With growing trade tensions between the U.S. and Canada, particularly the threat of a 25 percent general tariff from President Trump, Hass believes that investors may be underestimating the probability of these tariffs becoming reality. Applying game theory to the situation, he argues that if Trump does not follow through, his credibility in future negotiations will be weakened. As a result, Hass has significantly raised his cash holdings to between 35 and 40 percent, the highest in years, and has reduced net equity exposure to just 30 percent. While many investors remain optimistic about tax cuts and deregulation, Hass remains cautious, believing that markets have surged beyond fundamentals.

Mainstreet Equity (TSX: MEQ) – A Play on Canada’s Rental Market

Mainstreet Equity, a $1.9 billion market cap company, is one of the largest owners and operators of mid-market apartment buildings in Western Canada. Its business model is built around acquiring underperforming rental properties, refurbishing them using in-house crews, and leasing them at higher rates. With Canada’s rental housing crisis intensifying, the demand for affordable units continues to rise. The company has 18,500 units, primarily in Alberta and Saskatchewan, where rent controls do not apply. This allows Mainstreet to adjust rental prices in response to market conditions.

What makes Mainstreet particularly attractive is its ability to acquire properties well below their replacement cost. While new apartment buildings typically cost around $400,000 per unit to develop, Mainstreet acquires existing properties for an average of just $125,000 per unit. This substantial discount enables the company to generate strong returns while maintaining affordability for renters. Another key factor is its CEO, who has managed to grow the company’s free cash flow at an average rate of 18 percent per year since it went public in 2000, all without issuing additional equity. With limited competition from large REITs and pension funds in the mid-market space, Mainstreet is well positioned for continued success.

DRI Healthcare Trust (TSX: DHT.UN) – A Pharmaceutical Royalty Giant

DRI Healthcare Trust applies the royalty business model, commonly used in the mining sector, to the pharmaceutical industry. This $666 million market cap company owns 28 royalty streams across 21 commercialized drugs. Instead of developing new medications, DRI invests in drugs that have already passed regulatory approval or have strong Phase III clinical trial data. The company then collects a percentage of the top-line revenue from these drugs, while the pharmaceutical companies bear all development and marketing costs.

DRI’s business model is both asset-light and high-margin, with EBITDA margins of 85 percent. It also pays a four percent dividend yield and is expected to grow earnings organically by six to nine percent annually. Despite its strong fundamentals, DRI remains undervalued compared to its U.S.-listed peers. While similar companies trade at an average of 3.7 times price-to-book value, DRI trades at just 1.3 times. Similarly, its price-to-earnings ratio stands at 4.3, and its enterprise value-to-EBITDA multiple is 4.1. By comparison, mining royalty companies such as Franco-Nevada trade at much higher valuations despite offering a lower dividend yield. With its unique approach to pharmaceutical royalties, DRI represents an attractive investment in a sector known for stability and high returns.

Secure Waste Infrastructure (TSX: SES) – A Rising Leader in Waste Management

Formerly known as Secure Energy Services, Secure Waste Infrastructure is a $3.5 billion market cap company operating in Western Canada’s industrial waste management sector. The company provides services such as waste processing, landfill operations, and metal recycling, which collectively generate 70 percent of its revenue. The remaining 30 percent comes from energy infrastructure services, including water treatment from oil wells and midstream facilities.

One of the biggest challenges for SES was its previous branding as an energy services company, which led to lower valuation multiples compared to traditional waste management firms. Recognizing this, the company rebranded at the beginning of 2025, and since then, it has gained renewed investor interest. Unlike other companies in the sector, SES generates a high percentage of its revenue from recurring services, making its cash flows highly predictable. It currently trades at eight times enterprise value-to-EBITDA, while waste management peers trade at an average of 17 times. This suggests considerable upside potential.

SES has also demonstrated strong capital discipline, aggressively repurchasing shares to enhance shareholder value. In 2024, it repurchased 19 percent of its shares through a Substantial Issuer Bid (SIB) and another 7.9 percent through a Normal Course Issuer Bid (NCIB). Management has guided an additional 8.2 percent share buyback for 2025, reinforcing its commitment to returning capital to investors. Given its stable cash flows, attractive valuation, and management’s shareholder-friendly approach, SES remains a compelling investment opportunity.

Final Thoughts: Defensive Positioning with Strong Upside Potential

Hass’ latest top picks reflect a cautious but opportunistic approach to the current market environment. With geopolitical uncertainties and the threat of trade tariffs looming, he has positioned his portfolio in companies that offer strong fundamentals, stable cash flow, and attractive valuations. Mainstreet Equity capitalizes on Canada’s housing shortage while maintaining strong operational efficiency. DRI Healthcare Trust provides high-margin, royalty-based revenue in the pharmaceutical sector with minimal risk exposure. Secure Waste Infrastructure, following its recent rebrand, is well on its way to gaining proper market recognition, with significant upside potential.

As investors look for stability in an increasingly volatile market, these mid-cap stocks present attractive opportunities for long-term growth. With a focus on asset-light business models, high recurring revenue streams, and disciplined management, they offer a solid foundation in today’s uncertain economic climate.

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