Canadian savers are using their RRSP to build wealth for a comfortable retirement.
One way to grow your investments is to buy top Canadian companies when they are out of favour and undervalued. Let’s take a look at three TSX Index heavyweights that might be attractive picks today.
Barrick Gold
The gold sector is finally regaining some of its glitter after a multi-year slump forced the industry to tighten its belt and focus on investing in quality assets rather than growing for the sake of being big.
Barrick Gold (TSX: ABX)(NYSE: GOLD) appears to have learned an important lesson. The company’s balance sheet is in good shape, and the strategic merger with Randgold Resources has created a gold mining powerhouse with five of the planet’s top 10 sites.
The company is shopping non-core assets and just announced that its production will be at the top end of 2019 guidance.
Barrick trades at $22 per share at writing. At the 2011 peak it was above $50, so there is strong upside potential if gold continues its recent rally.
Bank of Nova Scotia
Bank of Nova Scotia (TSX: BNS)(NYSE: BNS) is betting big on emerging market growth through its aggressive acquisition program in Mexico, Peru, Chile, and Colombia.
The four countries form the core of the Pacific Alliance trade bloc that enables the free movement of capital, goods and labour among the members.
With roughly 6.5 times Canada’s population, the Pacific Alliance market has the potential to drive strong growth in the coming decades.
Bank of Nova Scotia is already seeing solid results from its investments. The international division generates about 30% of the company’s total profits.
Bank of Nova Scotia trades at $69 per share at writing compared to $84 in November 2017. The company is very profitable and continues to increase its dividend. At the time of writing, investors can pick up a 5% yield and a shot at decent gains when sentiment improves.
Suncor Energy
Suncor Energy (TSX: SU)(NYSE: SU) raised its dividend by nearly 17% this year and is spending up to $2 billion to buy back shares. This is a strong signal to investors that management is comfortable with the revenue and earnings outlook, even with WTI oil trading in the US$55-60 range at writing.
The company’s integrated business structure gives Suncor an advantage, as its large refining and retail businesses help offset lower margins on the production side when oil prices fall.
The company has a strong balance sheet, and its significant access to capital gives Suncor the firepower to buy new assets when attractive opportunities come to market.
The stock appears oversold right now, trading at $41 compared to $55 last summer. Investors who buy today can lock in a solid 4% dividend yield.
The bottom line
Barrick Gold, Bank of Nova Scotia, and Suncor are all top players in their respective markets and should be solid picks for a buy-and-hold RRSP portfolio.
If you only buy one, Bank of Nova Scotia is probably the best bargain right now and offers a great dividend yield.
