The question was on mid cap energy stocks in Canada.They have had a bit of a lift and are low in valuation. Service stocks are quite low in valuation on an historical basis.

Company Highlight: VersaBank (VBNK)

VersaBank (VBNK) is a Canadian-based, digital-only bank focused on specialized lending and deposit services. Established as one of the first fully digital banks in Canada, it operates without physical branches, leveraging technology to keep overhead costs low and streamline services for niche markets, including point-of-sale (POS) financing and commercial real estate lending. It mostly operates in Canada, but has recently expanded some services into the US. 

Its stock price has recently seen strong momentum, up 58% year-to-date, and 125% on a one-year basis. It pays a small yield (0.4%), but both sales and earnings growth are expected to be strong in FY2025 and FY2026. Its historical growth rates have been robust, with a five-year sales and earnings CAGR of 16% and 19%, respectively. Net profit margins are expanding and with a market cap of $595.7 million and a reasonable valuation of 11.4X forward earnings, we think VBNK looks interesting here. 

We can see that its net profits have really taken off over the past couple of years, and its outlook is increasingly positive. It has ongoing plans to expand its POS financing offerings in North America, and its cybersecurity segment, DRT cyber, is also expected to see growth in the coming years. 
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The market is complacent, taking its gains for granted, which is something that rarely ends well. The VIX is very low, about 14. He sees worrying signs in the junk bond spreads, based on the ICE BOFA US high-yield index option-adjusted spread. The spread between treasuries and junk bonds has fallen to its lowest level in 5 years, even lower than the spec mania of 2020-1, as low as summer 2007 (not good). He predicts that at the Dec. 18 Fed meeting that if the Fed talks DOWN the number of interest rate cuts for 2025, this will cause a huge sell-off in stocks--which may be buyable.

The Bank of Canada this week is expected to cut interest rates again, likely by 50 points. He expect by the end of 2025 the BOC will cut only another 50-75 points for all of 2025. Next week, the US Fed will cut too, though they are cutting less aggressively, because the US is seeing an uptick in inflation there, though Canada will. If US inflation data this week is hotter than expected, the Fed will pause. The BOC will cut because the Canadian unemployment rate is now at 6.8% because the participation rate has ticked up. Back up to 2023 through much of 2024, Canada saw a decline in that participation rate. He estimates that if the participation rate returns to normal, which is higher, then the unemployment rate will hit 8%, which is the 50-year average. We're quickly returning to those levels. Employment is driving the BOC decision. Therefore, the BOC will seriously slow down rate cuts in 2025. Also, expect more weakness in the CAD. In the US, inflation this week could come in hotter than expected, which will limit the US Fed's rate cuts.