By Kara Lilly, CFA and Jeff Hales, CFA

In the past few months, Canada’s largest trading partner, the United States, has initiated a trade war for, it would seem, no earthly explanation other than the grievances of President Donald Trump. The trade war is merely the latest in a series of actions by the sitting U.S. president that have upended long-standing diplomatic norms and unsettled relationships once thought unassailable. To America’s apparent surprise, however, Canada has not been so easily cowed.

Rather than submit to the bullying, Canadian leadership has rebuffed the affronts to our sovereignty and gone out into the world to make new friends. Prime Minister Carney has set about courting foreign investors and pursuing deeper economic and security ties with new partners. Among his initiatives was the recent invite-only Canada Investment Summit, an idea even former prime minister Stephen Harper reportedly admitted he wished he had thought of himself, and a much deeper relationship with the European Union. European Commission President Ursula von der Leyen has even floated the unprecedented possibility of Canada becoming the EU’s first “associate member.”

Whatever one thinks of these prospects, and we are still in the early days, with few details known, they represent an imaginative response to a world in which old assumptions can no longer be taken for granted. Confronted with the breakdown of the former world order and an increasingly isolationist America, Carney has sought to forge not merely new alliances, but a new conception of Canada’s place in the world. His ambition is to catalyze $1 trillion in new investment over the next five years. The larger project, however, is to redefine what Canada might become.

As investors, we welcome this broader ambition. And we ask: if we are prepared to reconsider our place in the world, to imagine new alliances and pursue investments once thought beyond our reach, might we not also reconsider the rather narrow conception of Canadian enterprise that has come to dominate our own investment portfolios?

Canada is home to a remarkable number of talented people building and running companies that compete successfully far beyond our borders. Yet one would scarcely know it from the attention these businesses receive relative to their peers in banking, energy and mining. Investors have become so accustomed to thinking of Canada through the familiar lens of our banks and natural resources that they risk overlooking the very companies that might help define its economic future.

There is more to Canada than banks and resource stocks.

A market dominated by banks and resources

If an alien were to arrive on Earth and look only at the S&P/TSX Composite Index, they might be forgiven for thinking that the only things Canada produces are items we dig out of the ground and banks. So extraordinarily concentrated is our stock market in financials and resources.

Just how concentrated? As of August 31, financials accounted for 34.0% of the S&P/TSX Composite, materials another 19.0% and energy 16.8%. Put another way, nearly 70 cents of every dollar invested in the broad Canadian index sits in one of those three sectors. By contrast, technology represents just 8.0%, consumer discretionary 2.9%, consumer staples 3.0% and health care a rounding error at 0.3%.

We speak about banks, energy and mining all the time because, quite simply, they dominate all else. The Big Six banks control more than 90% of Canadian banking assets, and five of them currently sit among the ten largest companies in the S&P/TSX Composite. Financials alone occupy nearly three times the weight in the Canadian index that they do in the S&P 500, where the entire sector accounts for 12.3%.

When investors buy a Canadian stock index, they invariably end up heavily exposed to banks, gold and oil and gas.

Now, to be clear, strength in these areas is good for Canada. A country fortunate enough to possess abundant energy and mineral resources should hardly apologize for them, particularly in a world where energy security and access to critical minerals remain matters of national security. Likewise, the stability of the Canadian banking system has considerable value. It is concentrated, heavily regulated and, historically, more conservative than many of its international counterparts. That can make it maddeningly difficult to disrupt, but it also helps explain why Canadian banks have endured periods of considerable financial stress remarkably well. A sturdy foundation is a useful thing.

Yet a sturdy foundation is not the same as a complete house, and investors would do well to look beyond these familiar sectors when investing at home. For two reasons.

The first is that some of the most familiar parts of the Canadian market are no longer obviously good deals. Valuations are, in many pockets, historically high.

Over the past year, each of the Big Six banks has risen by roughly 35% or more, with several considerably higher; over two years, the gains have been more dramatic still. Robust earnings growth, expectations that artificial intelligence will make these institutions leaner and more profitable, and foreign capital flowing into Canadian equities, which tends to benefit the indices and the companies heavily weighted in them, appear to account for at least some of this enthusiasm.

(For clarity, we own RBC and Scotiabank in our portfolios, and both have done well for clients.)

The challenge is that investors are now being asked to pay considerably more for these businesses than they have historically. The Big Six trade at roughly 15 times forward earnings, near multi-decade valuation highs and, unusually, at higher multiples than many of their American peers. Even if AI delivers the productivity gains investors anticipate, much of that optimism may already be reflected in share prices. A good business, after all, is not necessarily a good investment at any price.

The second reason is that many companies trade in Canada beyond the obvious gold, financial and resource names, some of which have arguably stronger business models or global growth profiles. They merit attention, too.

Three Canadian companies worth a closer look

While we could make this argument with any number of Canadian companies, for now, let us consider just three: Jamieson Wellness, WSP Global and CAE. All three are companies we own (or recently did), and each, in its own way, illustrates the breadth of Canadian enterprise beyond the familiar confines of banks and natural resources.

Toronto-based Jamieson Wellness is a name that clients of Focus may recall because we held it in our portfolios for some time and have trotted it out at our annual investor meeting on a few occasions. You might also have some of its vitamins sitting in your medicine cabinet.

Jamieson is a 104-year-old Canadian brand that has quietly built something exceedingly difficult to manufacture: trust. It is the number-one vitamins, minerals and supplements brand in Canada, where it is more than twice the size of its nearest branded competitor. That position has been built over generations through product quality, brand recognition and control over much of its own manufacturing. More recently, Jamieson has demonstrated that these advantages travel. Its products are now sold in more than 50 countries and regions, while the company has established meaningful businesses in China and the United States, the two largest vitamin and supplement markets in the world.

Unsurprisingly to our team, given the quality of the company and the strength of the global wellness theme, someone else eventually noticed. In August, Japanese beverage and health-sciences giant Kirin Holdings announced an agreement to acquire Jamieson for $45.75 per share in cash. The transaction valued the company at approximately $2.0 billion in equity value and $2.5 billion including debt, representing a 37% premium to where it was trading at the beginning of the year.

The news was a welcome development for our clients, even if internally we felt the price tag could be higher. We have now sold out of the position.

By contrast, our second company is one you probably haven’t heard of, although you may well have encountered its work. If you’ve taken the subway to Vaughan, caught the UP Express to Pearson Airport or passed through Toronto’s Union Station, you’ve used infrastructure that Montreal-based WSP Global helped design or engineer. WSP is an engineering and professional-services company whose expertise spans transportation, buildings, energy, water and environmental consulting. It has built an international business through a combination of organic growth and acquisitions, establishing itself in the global market for the engineering and technical expertise required to build and maintain modern infrastructure.

The team at WSP has been growing the company rapidly, with adjusted earnings per share rising 19% in 2025. There is good reason to believe solid growth can continue, as the company is positioned to benefit from several long-term investment themes, from the modernization of aging infrastructure to the expansion of electricity networks (highly relevant in our age of AI) and the construction of increasingly complex industrial facilities. If the “Canadian recovery” story is to be successful, home-grown firms like WSP are sure to participate in that success.

Finally, another company you probably haven’t heard of is Montreal-based CAE, a global leader in aviation training and simulation whose technology is used to train commercial airline pilots and military personnel around the world. CAE operates the world’s largest civil aviation training network and has built a formidable competitive moat around a business in which technical expertise, regulatory requirements, and long-standing customer relationships make it exceedingly difficult for new competitors to gain ground.

Historically, CAE was a company we admired but struggled to justify owning. The stock was simply too expensive, and management had failed to fully capitalize on the strength of the underlying business. Both concerns have begun to change. After nearly five years of the stock going nowhere, CAE brought in a new CEO with an impressive pedigree. Matthew Bromberg, a former naval engineer, with twenty-five years of experience at Goldman Sachs, Raytheon and Northrop Grumman, has set about instituting much-needed change, improving profitability and capital allocation, and extracting more value from CAE’s considerable competitive advantages.

While the market has focused on the next few quarters for CAE, we are focused on the next few years. We believe the combination of operational improvements and favourable structural trends could drive substantial growth in earnings and shareholder value. CAE stands to benefit from two powerful long-term investment themes: the continued expansion of global aviation and a substantial increase in defence spending globally. While commercial aviation has experienced some near-term softness, the longer-term demand for pilots and aviation training remains substantial. Meanwhile, CAE’s defence business is already benefiting from stronger demand, with revenue rising 9% in fiscal 2026.

Jamieson, WSP Global and CAE could scarcely be more different. One manufactures vitamins, another trains pilots and military personnel, and the third helps design and engineer the infrastructure on which economies depend. Yet each has demonstrated that Canadian enterprise can extend well beyond the familiar boundaries of our domestic stock market.

Final thoughts

Until recently, it had become something of a national pastime to lament the composition of the Canadian market while doing precious little to change it. We do not have enough technology companies. We do not produce enough global champions. The familiar refrain was that Canada had little to offer beyond its banks and natural resources, and that investors seeking innovative, internationally competitive businesses would have to look elsewhere.

Yet this was never entirely true. As Jamieson, WSP Global and CAE demonstrate, Canada is already home to companies that have built formidable businesses far beyond our borders. Their success suggests that the problem is not simply a shortage of domestic innovation or talent, but also a shortage of attention paid to the enterprise we already have.

For investors, this is an opportune wake-up call. The composition of the main Canadian stock market indices is not a complete reflection of the opportunities available within Canada, and the companies that command the greatest attention are not necessarily those that offer the most compelling investment prospects. Indeed, the extraordinary concentration of capital in a handful of familiar sectors may leave other businesses comparatively overlooked, even as those companies build attractive competitive advantages, expand internationally and grow their earnings.

As Canada reconsiders its place in the world, investors might do well to reconsider where they look for opportunity at home. There is no shortage of reasons to own Canadian banks and resource companies (at least those resource companies with good teams, capital allocation track records and business models), but there is equally little reason to confine our ambitions to them. The next great Canadian investment may have very little in common with the last.

There is far more to Canadian enterprise than old investment narratives would have us believe.