The Big Five Canadian banks are permanent holdings for any portfolio. It doesn’t matter who you are or what your investment goals are; the Big Five blue chips are the epitome of market-beating stability, so when you’re presented with the opportunity to grab shares at a discount, backing up the truck is usually the best course of action.
At this point, it’s Bank of Nova Scotia’s (TSX:BNS)(NYSE:BNS) turn to sit in the penalty box. Canada’s third-largest bank fell into correction territory (a pullback of at least 10%) this summer, but it has since bounced back slightly and is now down just over 8% from its all-time high.
Get some international diversification into your portfolio
With over 40% of revenues coming from international markets, Bank of Nova Scotia is Canada’s most internationally exposed bank. The bank has made a huge splash in the higher-growth Latin American market, which will be a source of explosive growth for many decades to come. With its deepening roots in the higher-growth Latin American market, investors have the opportunity to obtain amplified growth numbers versus that of a domestic bank.
While emerging markets are a source of more significant growth, they’re also subject to a higher degree of risk. Higher credit losses are to be expected in such an unsteady environment.
Given the bank’s robust risk-management policies and their reputation as an efficient operator, however, I do not doubt that the long-term risk/reward trade-off will continue to be attractive for long-term thinkers looking for an extra jolt of sustainable growth without venturing into foreign exchanges.
Shares appear oversold and undervalued
The stock trades at a 10.5 forward P/E, a 1.6 P/B, and a 3.4 P/S, all of which are lower than the company’s five-year historical average multiples of 11.9, 1.8, and 3.5, respectively. Moreover, Bank of Nova Scotia stock is also trading at a slight discount to the industry average multiples of 12.7, 2.0, and 3.5, respectively.
The bountiful 4.4% dividend yield is also slightly higher than its historical yield of 4%, which is perfect long-term holding for a TFSA portfolio.
Bank of Nova Scotia just came off an unimpressive quarter that paled in comparison to its peers. While the year-ahead outlook may be less favourable, the longer-term international growth story is still intact, and at these depressed multiples, I think prudent investors will do very well for themselves by loading up on shares as they hover around their 52-week lows.
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Fool contributor Joey Frenette has no position in any of the stocks mentioned.