RRSP Alert: 2 Top TSX Stocks to Buy on a Pullback

RRSP investors can find some good deals on stocks right now for a self-directed retirement fund.

| More on:
Red siren flashing

Image source: Getty Images.

The recent weakness in the TSX Index is giving RRSP investors a chance to buy top stocks at undervalued prices.

CIBC

CIBC (TSX:CM)(NYSE:CM) trades near $141 per share at the time of writing compared to a 2022 high of $167.50. The stock is now below 9.8 times trailing 12-month earnings. That’s starting to look cheap for RRSP investors who can pick up a 4.5% dividend yield and simply watch the dividend increases continue to roll in over the coming years.

CIBC has done a good job of making strategic investments in the United States to diversify its revenue stream. With a healthy cushion of excess cash, CIBC has the capital to make additional purchases south of the border to boost its U.S. presence, especially in the wealth management segment.

CIBC isn’t without risks. The bank has significant exposure to the Canadian residential real estate market. If mortgage rates move too high and stay elevated for too long, there is a risk that a wave of defaults could trigger a market selloff. In this scenario, CIBC would likely take a larger hit than its peers.

That being said, a housing meltdown is not expected, and prices would have to fall considerably before the impact on CIBC would be meaningful. CIBC has adequate capital to ride out a downturn.

At the current share price, the stock appears undervalued.

Brookfield Asset Management

Brookfield Asset Management (TSX:BAM.A)(NYSE:BAM) trades near $64.50 compared to the 2022 high around $79. The asset management giant has a market capitalization of $100 billion and US$690 billion in assets under management. The firm invests funds on behalf of clients and charges a fee for the service. Brookfield also invests its own cash alongside the customer funds in most purchases.

This is a good stock to buy for people who want to get exposure to infrastructure, renewable energy, real estate, private equity, and credit investments around the globe that would otherwise be out of reach. Brookfield Asset Management has operations in more than 30 countries.

Net income came in at US$12.4 billion 2021. Capital inflows hit US$71 billion during the year. Fee-bearing capital increased by US$53 billion to US$364 billion, resulting in a 33% jump in fee-related earnings. Brookfield Management finished the year with US$40 billion of committed but uninvested capital that will eventually earn about US$400 million in annual fees once deployed.

Brookfield Asset Management also knows when to exit investments. The company sold US$42 billion in assets during the year to book US$16 billion in gross gains, of which US$12 billion was for clients and US$4 billion was for the company.

As of December 31, 2021, Brookfield Asset Management had US$92 billion in capital available for new investments.

The stock can go through some volatile moves, but the long-term trend has been positive for investors.

The bottom line on top RRSP stocks

CIBC and Brookfield Asset Management look undervalued right now and should deliver solid total returns for RRSP investors over the long haul. If you have some cash to put to work in a self-directed RRSP, these stocks deserve to be on your radar.

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.

The Motley Fool recommends Brookfield Asset Management Inc. CL.A LV. Fool contributor Andrew Walker owns shares of Brookfield Asset Management.

More on Investing

A cannabis plant grows.
Cannabis Stocks

Canopy Growth Stock Is Rising But I’m Worried About This One Thing

Canopy Growth stock is soaring as the legalization effort makes real progress in both Germany and the United States.

Read more »

young woman celebrating a victory while working with mobile phone in the office
Investing

3 Roaring Stocks to Hold for the Next 20 Years

These top TSX stocks are excellent long-term buys, given their multi-year growth potential and solid underlying businesses.

Read more »

Two seniors float in a pool.
Dividend Stocks

TFSA: How to Earn $1,890 in Annual Tax-Free Income

Plunk these investments into your TFSA to earn passive income and avoid the taxman.

Read more »

grow dividends
Investing

Here’s My Top 3 TSX Stocks to Buy Right Now

Even though the TSX has been rising, there are still some good bargains out there. Here are three top compounding…

Read more »

Target. Stand out from the crowd
Investing

Prediction: This Canadian Growth Stock Could Double by 2030

Alimentation Couche-Tard (TSX:ATD) is a top growth stock that could do well over the next six or so years.

Read more »

Businessman holding AI cloud
Tech Stocks

Could Investing $20,000 in Nvidia Make You a Millionaire?

Nvidia stock has made investors millionaires in the last 10 years. Is it too late to invest to become a…

Read more »

Engineers walk through a facility.
Dividend Stocks

1 TSX Stock I Wouldn’t Touch With a 10-Foot Pole

AtkinsRéalis (TSX:ATRL) is one TSX stock I'd never invest in.

Read more »

money cash dividends
Stocks for Beginners

Have $500? 3 Absurdly Cheap Stocks Long-Term Investors Should Buy Right Now

If you're looking for cheap stocks, these three have a huge future ahead of them, all while costing far less…

Read more »