The Canadian market managed to drive positive returns in 2020 even though a global pandemic created all kinds of chaos in economies across the globe. The market’s 2% return was driven largely by the tech sector, which saw many Canadian stocks soar to all-time highs even amid the pandemic.
Tech investors had a strong year in 2020, but valuations have crept up high enough to make many investors uncomfortable. While I’m as bullish as the next Canadian investor on the growth potential of the tech sector, the high valuations have me looking outside the sector for lower-priced stocks.
I’ve reviewed two top Canadian stocks that are trading below $100 today. Don’t let the low prices of these stocks fool you, though. Together, the companies can provide Canadian investors with stability, market-beating growth, and passive income.
Sun Life Financial
While insurance might not be the most exciting industry, you’d be hard-pressed to find many others that can match its stability over the long-term.
There’s a reason why Warren Buffett and the rest of Berkshire Hathaway have been long-time investors in insurance companies. Buffett has quoted that the insurance business is “the engine that has propelled our expansion since 1967.”
Sun Life Financial (TSX:SLF)(NYSE:SLF) is a global insurance provider that is ranked as the second-largest in Canada. The Canadian stock is known primarily for providing all types of insurance. It also supports its clients with asset and wealth management services, pension solutions, and health programs.
The Canadian market is Sun Life’s top income driver, accounting for more than half of the insurance company’s income. What has investors bullish on this Canadian stock is its strong presence in Asia. The region drives roughly a third of the company’s net income.
The insurance stock is up 50% over the past five years, only slightly higher than what the Canadian market has returned. Market-beating growth is not the main reason you should be looking to own this Canadian stock, though.
Sun Life can provide investors with stability in their portfolios, in addition to a top dividend yield.
The Canadian stock’s annual dividend of $2.20 per share earns investors a yield of 3.6% at today’s stock price.
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Long-term investors would be wise to own at least one renewable energy stock in their portfolio. The growth for the entire sector crushed the broader market’s return in 2020 and I believe the growth is just getting started.
If Canadians are looking for just one green energy stock to own, Northland Power (TSX:NPI) should be seriously considered. The Canadian stock can provide investors with instant diversification to the high-growth sector.
Northland Power operates green energy facilities across the globe, with a strong market position in Canada and Europe. The diversification comes from the Canadian stock’s wide-ranging production of wind, solar, and hydro renewable energy.
The Canadian stock was up nearly 70% in 2020 and is up more than 150% over the past five years. I’m betting that Northland Power will continue to outperform the Canadian market over the next five years with ease.
Not only can this Canadian stock provide investors with market-beating growth, but it also owns a respectable dividend yield of 2.4%.
Foolish bottom line
If you’re a non-risk averse investor and can stomach the volatility, the Canadian market is full of high-flying tech stocks to choose from. I’m a satisfied shareholder of many over-priced tech stocks, but that doesn’t mean I’m adding to all those positions at these valuations.
Canadian investors can invest in both Sun Life and Northland Power for less than $100 a share. Do your portfolio a favour and pick up shares of these undervalued Canadian stocks today.
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This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.
Fool contributor Nicholas Dobroruka has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Berkshire Hathaway (B shares) and recommends the following options: short January 2023 $200 puts on Berkshire Hathaway (B shares), short March 2021 $225 calls on Berkshire Hathaway (B shares), and long January 2023 $200 calls on Berkshire Hathaway (B shares).