The Death of Canadian Small Caps: What Happens Next?

Canadian small caps have been left for dead. After two decades of disappointing performance, shrinking investor interest, and a steady exodus of institutional capital, is there any reason to believe a comeback is coming? Or has the market fundamentally changed for good? On this episode of In the Money with Amber Kanwar, Jeff Tory, Chair, Partner, Director, Portfolio Manager at Pembroke Management, makes the case that Canadian small caps could be approaching a major turning point. He explains how pension funds and retail investors abandoned the sector, why Canada's pipeline of new public companies has nearly dried up, and what it will take to rebuild a market capable of producing the next Shopify. With valuations deeply discounted, renewed interest in investing in Canada, and the potential for capital to return home, Tory believes the opportunities could be greater than investors realize. But he's also refreshingly candid about the challenges. Small-cap returns have struggled to keep pace with the broader market, and cheap stocks can stay cheap for a long time. So why stick with them? Tory explains why diversification, disciplined capital allocation, and finding growing businesses with strong insider ownership could make all the difference. He also questions whether investors chasing the AI boom are overlooking compelling opportunities in smaller, profitable companies. In the Mailbag, Tory weighs in on Cineplex (CGX) and whether its strategic review and a recovering box office could finally unlock value. He explains why the recent selloff in 5N Plus (VNP) hasn't changed his long-term investment thesis, assesses EQB (EQB) following its acquisition of PC Financial, and discusses whether CAE (CAE) is setting up for a successful turnaround. In Pro Picks, Tory shares three high-conviction Canadian investment ideas. He makes the case for Stingray (RAY.A), a misunderstood media business with growing digital advertising opportunities; AGF Management (AGF.B), where he sees a significant disconnect between the company's valuation and underlying assets; and Western Investment Company (WI), a little-known insurance business he believes has the potential to become a long-term compounder. Are Canadian small caps a dying asset class, or is this exactly the kind of market investors should be paying attention to? Timestamps 0:00 Trailer 1:51 Intro 3:12 Why small caps have struggled for two decades 5:15 Privatizations and the shrinking IPO market 6:46 Why Jeff stayed with small caps 8:25 Could capital and interest return to Canada? 9:39 Small caps vs. private markets 11:35 Building a 60-year investment firm 13:51 Small-cap performance and index concentration 15:10 The Montreal small-cap investing community 16:50 What makes a good small-cap investment? 17:57 Jeff’s biggest wins and losses 19:45 Mailbag: Cineplex and a movie-theater comeback (CGX) 26:43 Mailbag: 5N Plus and the space ETF sell-off (VNP) 30:05 Mailbag: EQB’s growth and credit risks (EQB) 36:02 Mailbag: CAE’s turnaround (CAE) 37:41 Pro picks  38:28 Pro pick: Stingray’s connected-TV opportunity (RAY) 44:15 Pro pick: AGF and its private-asset portfolio (AGF.B) 48:00 Pro pick: Western Investment (WI) 51:54 Fairfax and the power of long-term compounding (FFH) 52:54 Closing Bell: family, sports and travel Sponsors Thanks to our partners at Guardian Capital LP. Following Conviction, Not the Crowd. Contact your advisor today and ask about Guardian Capital’s Funds and ETFs and visit their website for more information at https://guardiancapital.com ATB Cormark Capital Markets is a leading North American investment firm providing holistic corporate and capital markets advice and full-service financial solutions. Visit https://ATB.com/inthemoney for more information. For over 25 years, Raymond James has been helping Canadians achieve their financial goals. Visit https://raymondjames.ca today to discover how you can live a life well planned. Thank you to our partners at Hamilton ETFs. For more information visit https://hamiltonetfs.com All the charts you’ll see today are sponsored by Wealthsimple Trade. The self-directed trading platform built for active traders in Canada. Learn more at  https://app.wealthsimple.com/74rd/83ftma8x Support for this podcast is brought to you by EQB – the company behind EQ Bank, Canada’s Challenger Bank. For more information visit https://www.eqbank.ca/ The Closing Bell is sponsored by The Haliburton Post House: private executive retreats in Ontario's Haliburton Highlands. Reserve your Fall 2026 or Spring 2027 dates at The Haliburton Post House. Mention In the Money for $1000 off your reservation! E-mail [email protected] for more information.  Links https://inthemoneypod.com/  https://instagram.com/inthemoneypod https://facebook.com/profile.php?id=61569721774740  https://twitter.com/inthemoneypod  https://tiktok.com/@inthemoneypod [email protected] DISCLAIMERS  The information provided in this podcast is for informational purposes only and does not constitute financial, investment, or professional advice.The views expressed by the host and guests are their own and do not necessarily reflect the opinions of any organization or company. The host and guests may maintain positions in any securities discussed on the podcast. Always consult with a qualified financial advisor or professional before making any investment decisions. In the Money delivers expert stock picks, actionable ideas, and timely money management tips. Hosted by business journalist Amber Kanwar, each episode features interviews with top portfolio managers who suggest ways to achieve good returns. Covering everything from ETFs and Canadian stocks to global investing trends, dividend strategies, and risk management, this show is made for DIY investors, stock market enthusiasts, and anyone looking to sharpen their financial strategy. Contact: [email protected] #IntheMoney #Investing #StockMarket #CanadianInvesting #FinancialNews