2 Top Stock Picks for New Canadian Investors

CN Rail (TSX:CNR)(NYSE:CNI) and Bank of Montreal (TSX:BMO)(NYSE:BMO) are great stock picks for new Canadian investors in March 2022.

| More on:
edit Businessman using calculator next to laptop

Image source: Getty Images.

2022 has not been kind to new investors, and there are few, if any, reasons to believe that Mr. Market will start to be kinder to the many who opted to chase hot stocks in the back end of 2020 or 2021. Indeed, valuation matters. And if you can resist the urge to chase quick riches, you’ll be in a spot to build real wealth over the long run. I’d imagine that many discouraged investors are feeling pretty bad about markets these days. A lot of hot stocks have turned in a hurry, and some are seeing 20-50% losses in their portfolios following the recent barrage of volatility.

Indeed, blue chips weren’t even spared from this quarter’s pain. Big-cap companies like Shopify have been trading like penny stocks these days. Although Shopify is arguably one of the most innovative companies in the world with one of the best stories and management teams, I’d argue that none of such matters if you can’t get a price that’s half decent.

Top picks for new investors? Keep it simple: Don’t jump into the deep end if you’re not yet comfortable

Indeed, it’s a tough time to be an investor, especially given the trajectory of rates of late! Could rates surge and leave investors behind with shares that will never climb back to their highs? It’s possible. Many bubbles have already burst. Others may still need to deflate further. That’s why it’s so hard to pick the falling knives here. Like during the dot-com bust, many investors got hurt by going against the grain when market momentum accelerated to the downside.

Personally, I think new investors should look to keep things boring! It’s easier to make money in value stocks that shouldn’t be dragged down but have been anyway.

Currently, CN Rail (TSX:CNR)(NYSE:CNI) and Bank of Montreal (TSX:BMO)(NYSE:BMO) are sleep-easy stocks that should be nibbled away at any dips now and in the near future.

CN Rail

CN Rail is a great company that seldom trades at a cheap multiple. At writing, shares of CNR go for 23.1 times trailing earnings alongside a bountiful 1.9% dividend yield. Off around 5% from its all-time high, CN Rail stock isn’t a bargain by any stretch of the imagination, but it is a name that I believe is not getting the respect it deserves through this choppy macro environment. Indeed, 2021 was noisy, with the failed pursuit of KSU, activist investor involvement, and the uncertain future of its CEO.

With a new CEO at the helm and room to improve upon the operating ratio, I couldn’t be more bullish on the firm. CN isn’t cheap, but at the same time, it’s not as expensive as it could be right here. With such a swollen dividend, I’d argue that the stock is a worthy buy for those seeking insulation from volatility.

Bank of Montreal

Bank of Montreal isn’t just another Big Six bank stock. I believe it’s best positioned of the batch to grow its earnings and dividend, as rates rise and the economy continues to thrive. Indeed, it seems as though the Fed or Bank of Canada will not raise rates if it means jeopardizing the economy.

If rates rise gradually and economic growth continues strong, I’d argue that BMO could have way more room to run. The stock remains cheap, despite its new acquisition of Bank of the West and its heavy corporate loan exposure, which could allow BMO to surge over the next five years, all while profitability prospects improve.

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 Joey Frenette owns BANK OF MONTREAL and Canadian National Railway. The Motley Fool owns and recommends Shopify. The Motley Fool recommends Canadian National Railway.

More on Stocks for Beginners

Canadian Dollars
Stocks for Beginners

How a $10,000 TFSA or RRSP Investment Can Become $193,000

Are you looking to build wealth for retirement? Here's one way that turned a $10,000 TFSA or RRSP investment into…

Read more »

You Should Know This
Stocks for Beginners

TFSA 101: How to Use it With Your RRSP

The TFSA is a great way to start saving, but, if used with your RRSP, it is a fantastic way…

Read more »

analyze data
Stocks for Beginners

How to Start Investing With Little Money

ETFs are a great way for beginner investors to start building a portfolio with little capital.

Read more »

A stock price graph showing growth over time
Stocks for Beginners

3 Undervalued Stocks to Triple Your Portfolio

These three undervalued stocks are the perfect choice for those looking for stable but strong growth in the next few…

Read more »

clock time
Stocks for Beginners

Brookfield Asset Management (TSX:BAM.A) Stock Is Down 20%: Time to Buy?

Brookfield Asset Management (TSX:BAM.A) has fallen 20% this year. Is now the time to pick up this top Canadian stock?

Read more »

money cash dividends
Dividend Stocks

Canadian Investors: Where to Put $100 Right Now

Canadians with $100 to invest can put their money to work in three low-priced, dividend-paying TSX stocks.

Read more »

Dice engraved with the words buy and sell
Dividend Stocks

Not Every Cheap Stock has Value: 1 Stock to Buy, 1 to Sell, and 1 to Hold

The market downturn has created an opportunity to buy value stocks at a bargain. Here’s a guide to optimizing your…

Read more »

Credit card, online shopping, retail
Stocks for Beginners

Need Cash? Get a New Credit Card

Canadians can create some savings by simply finding a new credit card that offers more perks and bonuses, and use…

Read more »