Thanks to the recovery momentum, the TSX has grown more in the last 12 months than it did in three years preceding the crash. The S&P/TSX Composite Index’s post-pandemic growth of 75% is significantly faster than the post-recession growth between 2009 and 2011.
But the whole market is not on the same page when it comes to recovery-fueled growth. Realistically speaking, the entire market is almost never on the same page, which is a good thing. And it’s because of this ever-present “dissonance” that you can find stocks at bargain prices, despite such a powerful momentum of recovery and growth pushing the TSX ahead.
A residential stock
Tricon Residential (TSX:TCN) is currently trading at a price 33% higher than its pre-pandemic peak and the highest price-point in the stock’s history. Yet, the stock is almost undervalued. It’s trading at a price-to-earnings multiple of eight and a price-to-book multiple of 1.4 times. The company also offers a 1.4% yield, but that’s overshadowed by its recent growth spurt that propelled the stock 44% in the last 12 months.
The attractive valuation can be chalked up to the company’s solid second-quarter results in which the company saw a massive 4.8 times growth in net income compared to the second quarter of 2020. The company already has an impressive presence in Canada and the U.S., and it’s gearing up for even more expansion. It’s expected to receive permission from the securities exchange commission to raise about $1.5 billion from the market.
An insurance giant
Manulife (TSX:MFC)(NYSE:MFC) hasn’t been a decent growth stock for some years now. It has returned about 34% to its investors in the last five years, including the recovery-fueled growth after the 2020 crash. But thanks to its financial stability and the fact that it’s pretty undervalued right now, it makes its 4.5% yield even more attractive.
As one of the largest insurance providers in the country and almost a household name, Manulife offers credibility, and it’s an ideal long-term holding if you are only buying it for dividends. It’s also a Dividend Aristocrat and has been growing its payouts for seven consecutive years.
Any capital appreciation you might get from MFC (if you hold on to it for long enough) might just be the bonus you get from this reliable growth stock currently available at a bargain price.
A business information company
Thomson Reuters (TSX:TRI)(NYSE:TRI) has deep roots in the news and information services. One of its parent companies (Reuters) started in the 1850s and developed a reputation for speed and accuracy using telegraphs and carrier pigeons. It has come a long way from its humble roots and has emerged as one of the most respected leaders in the realm of business information services.
The company also offers a range of tools used by legal, tax, accounting, and compliance professionals around the globe. However, most of the company’s revenue (about 85%) is generated from the Americas. It does have a decent international presence, which gives it a lot of room to grow.
While it’s one of the oldest aristocrats on the TSX, its 10-year CAGR of 21% is a much more compelling reason to consider this stock than its 1% yield.
All three stocks are currently undervalued, but not all three offer the same value to their investors. TCN offers a decent combination of growth and dividends but not the history to back its capital appreciation potential up. MFC has a powerful presence and a juicy yield but minimal growth prospects. TRI has credibility as a growth stock. Combined, the three stocks offer a well-rounded addition to any portfolio.
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 owns shares of and recommends Tricon Capital.