3 Affordable and Promising Stocks to Buy Right Now

There are a lot of affordable yet promising stocks currently available on the TSX. They might make powerful additions to your portfolio.

| More on:
edit Person using calculator next to charts and graphs

Image source: Getty Images.

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn more

Not every investor has access to a decent amount of liquidity during market crashes when a lot of promising stocks are trading at a discount. And when they have access to liquidity, they can’t wait around for a crash or a correction to take full advantage of it, primarily due to the time cost of waiting around.

Another approach is to look for affordable stocks on the market right now. Not all affordable or undervalued stocks might be worth buying, but there are some that can be transformative for your portfolio, given enough time. Three such stocks are Fairfax Financial Holdings (TSX:FFH), iA Financial (TSX:IAG), and ONEX (TSX:ONEX).

A financial holding company

Fairfax has been around for about seven decades. It’s a property and casualty insurance and reinsurance company with a strong investment management wing. It started its corporate journey with a different name, but it has been Fairfax since 1985. From a valuation perspective, the company is a sweet bargain at a price-to-earnings ratio of 5.6 and a price-to-book ratio of 0.9 times.

The balance sheet of the company is strong, and even though its revenues took a serious dip in 2020, they have recovered quite a bit. Compared to the first quarter 2020 numbers, the company almost double its first-quarter 2021 revenues (95%) growth. The stock hasn’t been much of a grower in the last five years, but if we consider its two-decade history, it has modest, long-term growth potential.

An insurance and wealth management group

iAG Financial markets itself as one of the largest insurance and wealth management groups in Canada, and even though its asset base ($201 billion) and four million clients endorse that statement, the market capitalization of $7.25 billion doesn’t. But it’s a stable company with an impressive local and international presence, and it has been eerily consistent in creating value for its investors.

The company is currently trading at a 10% discount to its pre-crash valuation at a price-to-earnings ratio of 9.7 and a price-to-book ratio of 1.2. It’s not undervalued but still at a reasonable price point. The 10-year CAGR of 8.5% is not very impressive, but if you add in the 2.8% yield to the equation, iAG looks like a good value purchase.

An investment management company

Sticking to the spirit of the list is ONEX, a Toronto-based investment management company with a market capitalization of $8.1 billion. The ONEX “platform” has several underlying business segments that cater to different clienteles and different markets. It has a total of $45 billion of assets under management, and only about 15.5% of it is ONEX’s own investing capital; the rest is the client capital.

ONEX was an impressive growth stock between 2009 and 2017, and it grew about 600% (very consistently) in this period. It seems to have lost its growth “edge” in the last three or four years, but if you consider its highly discounted valuation, its last 12-month growth, and the way the general economy is recovering, ONEX might be gaining momentum for another impressive growth bout.

Foolish takeaway

Like discounted items in a supermarket, discounted stocks might look like a great deal, but both are only good for you if they are useful. If you buy something when it’s 70% off, don’t use it, and it goes in the trash can, the “good deal” didn’t get you anything. Similarly, make sure the discounted stock you are buying has more to offer than an attractive price tag.

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 Adam Othman has no position in any of the stocks mentioned. The Motley Fool recommends FAIRFAX FINANCIAL HOLDINGS LTD.

More on Dividend Stocks

funds, money, nest egg
Dividend Stocks

TFSA Passive Income: 2 Great Canadian Dividend Stocks for Retirees to Buy Now

Retirees seeking reliable passive income can now buy top TSX dividend stocks at cheap prices.

Read more »

data analyze research
Dividend Stocks

Earn Monthly Passive Income: 2 Hot Dividend Stocks in Canada to Buy Now and Hold Forever

These two hot dividend stocks could help you to earn stable monthly passive income in Canada.

Read more »

Human Hand Placing A Coin On Increasing Coin Stacks In Front Of House
Dividend Stocks

Be a Landlord: Top 2 REITs (With Monthly Dividends) I’d Buy and Forget

You can be a landlord and earn monthly dividends for the rest of your life. All you need is the…

Read more »

A worker gives a business presentation.
Dividend Stocks

Got $5,000? 3 Stocks to Hold for the Next 20 Years

New investors don’t need tens of thousands to start a portfolio. Here are three stocks to hold for the next…

Read more »

Silver coins fall into a piggy bank.
Dividend Stocks

Earn $370 Every Month with These 3 Dividend Stocks

These three Canadian dividend stocks could boost your passive income.

Read more »

data analytics, chart and graph icons with female hands typing on laptop in background
Dividend Stocks

3 Dividend Stocks to Buy Hand Over Fist

Investing in dividend stocks could help you reach a comfortable retirement. Here are three stocks to start buying hand over…

Read more »

Retirement plan
Dividend Stocks

4 Stocks That Could Turn $100,000 Into $500,000 by the Time You Retire

Companies such as Brookfield Asset Management have the potential to consistently beat the broader markets and deliver stellar returns to…

Read more »

money while you sleep
Dividend Stocks

Need Passive Income? 2 TSX Stocks to Earn $500/Month Without Losing Sleep

By investing in Enbridge and Keyera stock, investors can make $500/month.

Read more »