The Motley Fool

2 TSX Stocks Trading at a 50% Discount

Image source: Getty Images

TSX stocks struggled when the coronavirus hit. The S&P/TSX Composite Index shed 40% of its value in a matter of weeks.

Then something amazing happened: markets rebounded. Today, most indexes are approaching all-time highs. The bargains of March are now quite expensive.

But not all stocks are pricey. Some still trade at huge discounts.

Buy cheap real estate

Property values were hit hard during the coronavirus, but the residential market is bouncing back strongly. The same can’t be said for retail and office properties.

Consider Brookfield Property Partners (TSX:BPY.UN)(NASDAQ:BPY). The company’s real estate portfolio is 40% office space and 40% retail locations. Work-from-home initiatives and rolling shutdowns, not to mention lower consumer confidence, have crushed these properties. At one point, less than 50% of retail tenants paid their monthly bills.

It should be no surprise to learn that the stock trades at a 50% discount to its book value. That book value is pretty close to what the company paid for the assets.

The market is saying that these assets will be permanently impaired. That’s hard to believe considering the company owns some prized assets, including First Canadian Place in Toronto and Canary Wharf in London.

Even company executives believe the stock is too cheap. This summer, the company announced a “substantial issuer bid” to repurchase nearly $1 billion in stock.

If you think real estate still has a future, Brookfield Property should top your buy list. Shares could double based on a valuation reversion alone.

The best TSX stock of 2020

The market is sleeping on Fairfax Financial (TSX:FFH), but you shouldn’t. This is one of the all-time best investments in Canadian history.

Since 1986, shares have returned roughly 14% annually. That’s an incredible multi-decade streak. A $2,000 investment would now be worth $170,000. To make $1 million, you needed to invest just $12,000.

But this stock pick isn’t about the past — it’s about the present. Given the company’s long-term track record, you’d think shares would trade at a premium. Not the case! Right now, Fairfax stock trades at big discount to its book value. What’s the problem?

Fairfax runs the same strategy as Warren Buffett. The company owns a bunch of insurance businesses that generate regular cash. That cash is invested in private and public markets. The insurance profits plus investment gains are what create shareholder value.

Every investor goes through dry spells, especially if the time frame spans multiple decades. But it’s only the long-term performance that matters.

When Buffett has a bad year, Berkshire Hathaway stock often trades at a discount to its historical average. Investors who snap up shares look smart in hindsight.

The same should prove true with Fairfax. The company has a long-term track record that only Buffett can match. As with Berkshire, buying Fairfax whenever shares have gone on sale nearly always resulted in a big profit.

Even Fairfax is betting on itself by repurchasing 13 million shares. That’s roughly 10% of its entire share count!

You need patience for this pick, but it’s a rare chance to buy a proven winner at a discount.

Our top stock to buy RIGHT NOW was just revealed below.

Motley Fool Canada Makes 5G Buy Alert

5G is one of the greatest arrivals in technology since the birth of the internet. We could see plenty of new wealth-building opportunities in 2020 that would potentially dwarf any that came before them.

5G has the potential to radically change our lives and society as we know it, but if you’re an investor, the implications are even greater — and potentially much more lucrative.

To learn more about it and its revolutionary potential to change the industry — and potentially your bank account — click on the link below to get the full scoop.

Learn More Today!

The Motley Fool owns shares of and recommends Berkshire Hathaway (B shares). The Motley Fool recommends Brookfield Property Partners LP and FAIRFAX FINANCIAL HOLDINGS LTD and recommends the following options: long January 2021 $200 calls on Berkshire Hathaway (B shares), short January 2021 $200 puts on Berkshire Hathaway (B shares), and short December 2020 $210 calls on Berkshire Hathaway (B shares). Fool contributor Ryan Vanzo has no position in any stocks mentioned.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss an important event.

Iain Butler and the Stock Advisor Canada team only publish their new “buy alerts” twice a month, and only to an exclusively small group.

This is your chance to get in early on what could prove to be very special investment advice.

Enter your email address below to get started now, and join the other thousands of Canadians who have already signed up for their chance to get the market-beating advice from Stock Advisor Canada.

I consent to receiving information from The Motley Fool via email, direct mail, and occasional special offer phone calls. I understand I can unsubscribe from these updates at any time. Please read the Privacy Statement and Terms of Service for more information.