November is here, and with a spooky September and October behind us, all sights are set to the Santa Claus rally! Still, with global supply chain issues taking a toll on even the bluest blue chips out there, the fourth quarter is likely to be muted. Indeed, this period of seasonal strength may be less pronounced than those in the past. Moreover, with Fed surprises that can’t be ruled out, a Santa Claus rally may even be replaced by a correction like the one suffered back in 2018.
Indeed, many of us wish 2021 would close off as a historic year for markets. But after an incredible first three quarters, it’s tough to tell. In any case, investors should continue picking their favourite value names, with less regard for where broader markets are headed. At the end of the day, exogenous factors like the Fed’s next moves remain unpredictable. Although many pundits attempt to predict them, your efforts would be better off in uncovering undervalued stocks and purchasing shares of them with the intention of adding more on further weakness.
Top value picks for November 2021
Bank of Montreal
Bank of Montreal and the broader Big Six Canadian banks are about to raise their dividends again once they’re given the right to do so. Arguably, BMO’s dividend has room to run, and with macro conditions improving, the big bank may very well deliver two years’ worth of dividend hikes in one go. Undoubtedly, such a generous hike would be met with incredible buying, as yield-hungry investors punch their tickets back into the name.
Furthermore, BMO is a great U.S. and Canadian banking play with an enviable wealth management business. And let’s not forget about the firm’s tech edge, with various products helping its customers take control of their own financial futures. Indeed, robo-advisors and all the sort could help BMO bring the fight to the fintech disruptors. At 12.5 times trailing earnings alongside a 3.2% yield that’s ready to roar higher, I’d look to be a buyer now, before a hefty dividend hike excites investors.
Magna International is not the type of stock you’d want to own going into the late stages of an economic expansion. If another recession is on the way, the downside could be huge. Still, given it’s unlikely that we’re in the late cycle, Magna may very well be one of the names to load up on before the next leg higher. Indeed, many pundits think we’re just entering the mid-cycle. Still, recent chip shortages that have affected the auto sector have likely given symptoms of approaching a late cycle and peak auto.
I view Magna as a firm that’s taking a pause rather than one that’s about to implode before the next cyclical upswing. With that, I believe the stock’s latest 22% pullback is unwarranted and would encourage dip buyers to consider shares before the chip shortage resolves and auto supply can meet demand. Moreover, Magna is an incredible innovator and is a dirt-cheap (11.3 times earnings) way to benefit from an EV boom indirectly.