Don’t be afraid of the all-time high list when it comes to top TSX stocks. A stock price at a fresh new all-time high may be a symptom of overvaluation, but oftentimes, it can be an indication of a winner that’s slated to keep on winning. As such, even value-conscious investors should be more willing to check out the all-time high list because, in the end, value investing ought to be about paying less to get more.
You’ve probably heard “buy low and sell high” is the strategy to make money in the stock market. By doing so, you could also be vulnerable to buying low and selling even lower, as value traps tend to disguise themselves as bargains. Undoubtedly, the all-time low list may be full of such names that Canadian investors should be wary of.
A better strategy, especially these days, is to buy high and sell higher. And in this piece, we’ll have a look at two top TSX stocks, which, while at or around new highs, actually look undervalued relative to its improving macro backdrop and its long-term growth potential.
TFI is a less-than-load (LTL) trucker that’s come a long way since the self-inflicted 2018 pullback due to operational issues. The company has improved upon its operational efficiency in a big way. And with the tides finally pushing in its favour, TFI is a top TSX stock on the all-time high list that could very well continue making new highs on the back of further strength in demand for transportation of goods.
After soaring over 325% from its March 2020 bottom—a time I urged investors to load up on the stock—shares look more fully valued at just shy of 30 times trailing earnings. Given profound industry tailwinds, though, I think some serious multiple compression could be on the horizon, making shares seem more expensive than they are at this juncture.
The company’s strategic acquisition of UPS freight is a big deal. As we move into the “Roaring 20s” environment that’s more than likely to see booming demand for a wide range of products. The stock trades at 2.2 times sales, which, I believe, still makes TFI stock look a bargain in spite of its incredible run.
TD Bank is another winner that’s poised to keep on winning, possibly for many years to come, as the macro tailwinds finally present themselves. Interest rates are probably headed higher from here, and the Big Six banks are due to have their bottom lines padded.
While TD Bank and the broader basket have been soaring of late, I still view them, especially TD stock, as being undervalued relative to the magnitude of tailwinds on the horizon. At the time of writing, TD trades at 1.8 times book and 11.2 times trailing earnings, making it one of the cheapest Big Six bank stocks right now.
With a high-quality retail banking business and greater U.S. exposure than its peers, TD stock deserves a premium multiple, not a discount one. As such, I view TD stock as one of the best banks for your buck at this juncture and would encourage investors lacking in financials to pick some shares up as they cool down into the summer.